Flipkart pays for heavy discounts with loss of Rs2,000 cr

Trying to stay ahead in the ecommerce discount wars has cost Flipkart heavily, as the company reported a loss of about Rs2,000 crore in the year ended March. The huge loss amounts to a fifth of Flipkart's rising sales.

According to a Registrar of Companies filing, Flipkart Internet, which runs the consumer-facing portal, suffered a net loss of Rs1,096.4 crore, while that of Flipkart India, the wholesale arm, was Rs836.5 crore. This is steeply up from a year ago, when both the units had a combined loss of Rs715 crore.

Flipkart, which has raised $2.6 billion over the past 18 months, has been spending huge amounts of money on discounts, marketing, boosting technology and building warehouses to stay ahead of its rivals Snapdeal and Amazon India.

''The current model of Flipkart doesn't make any economic sense as any company selling goods below cost without any margin will always attract customers. But a sustainable business can't run like this and Flipkart needs to look for alternate revenue models such as advertising and data selling to make money,'' a chief executive of a leading firm was quoted as saying by The Economic Times.

Flipkart sources goods from manufacturers, sells those goods to WS Retail Pvt Ltd, a company with which it is closely linked, which in turn sells it to shoppers. Besides that, the ecommerce site also has more than 50,000 third-party sellers. It also provides the technology platform and logistics services to sellers and takes a commission on every sale on its site.

Flipkart was founded in 2007 by Sachin Bansal and Binny Bansal, both alumni of the Indian Institute of Technology Delhi. The company currently employs more than 33,000 people.