Digital India sinking: Online sites burn ₹10,000 crore in losses
- Amazon India, Paytm, and Flipkart share 70% of the total amount of the losses.
- Paytm and Flipkart spent ₹1,115 crore and ₹923 crore respectively on advertising and promotions.
- The 35 million shoppers are driven by discounts, offers and free gifts.
Despite digital push and more and more people are turning towards online shopping, it is not all hunky dory for these websites. The good news is that in 2016 revenues did increase for online shopping sites but the bad news is discounts, promotion and advertisement costs and hiring spree and cost of employees caused some serious issues on their balance sheet.
Kotak Institutional Equities disclosed that 14 digital companies including e-retailers, travel portals, furniture sellers, food ordering and delivery players suffered losses amounting to ₹10,670 crores. Amazon India, Paytm, and Flipkart share 70% of the total amount of the losses.
In advertising, Amazon India invested a whooping ₹2,163 crore, and in their quest to gain substantial market share, this company will be spending $5 billion in India.
Paytm and Flipkart spent ₹1,115 crore and ₹923 crore respectively, and Paytm suffered fourfold losses in the financial year of 2016.
At present, the number of online shoppers is approximately 35 million, and according to trends, this population is driven by discounts, offers and free gifts.
This year's figures will impact the investors' mindset making it difficult for the companies to raise funds.
This year also witnessed mergers and acquisitions that will lessen their losses but following a number of recent changes including demonetisation and government's push to the digital economy will also have its impact on e-commerce marketplace.
Also, there are regulations imposed by Department of Industrial Policy and Promotion on FDI funded companies such as marketplaces are not allowed to influence prices on e-commerce sites and a single seller should not contribute more than 25% of total sale on any site will also increase the difficulty for the websites.
In short, 2017 will also be a tough year for the e-commerce marketplace.