In the race to outdo each other and fund their growth, India’s leading e-commerce firms — Flipkart, Amazon and Snapdeal— have somehow managed to increase their losses by a whopping 51% in just one year to Rs 11,754 crore.

The losses of the top three ecommerce companies is a big figure by every measure. In fact, according to some reports, the government’s cost to print new notes post the demonetisation announcement was estimated at Rs 11,000 crore, which is still 745 crores less than the losses incurred by the three ecommerce giants.

According to database company Howindialives.com, the two-way printing cost comes at Rs 5,932 crore for the old lot of demonetised notes, and Rs 4,929 crore for the new notes.

For the financial year 2015-16, Flipkart incurred a loss of Rs 5,223 crore, Amazon’s losses stood at Rs 3,571 crore, and Snapdeal posted a loss of Rs 2,960 crore. Their combined losses stood at Rs 11,754 crore, a figure which is drastically more than the 2014-15 figure of Rs 6,031 crore.


These growing figures, combined with falling valuation, paint the picture of the dwindling business model in the Indian e-commerce sector. The year 2016 wasn’t a good one for a majority of Indian startups. Funding dried, demonetisation happened, many startups shut their shop, and many of them are still struggling to keep their head above waters.

Experts predict the situation is only going to worsen in the coming months. According to a statement given by Sanchit Vir Gogia, chief analyst and founder, Greyhound Research to a national daily Hindustan Times, “This has deeply hurt the sentiment of investors who were expecting big bang returns in near term. This change can only be expected to intensify in the coming January to March quarter.”

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However, Indian e-commerce startups know about the crisis heading towards them. While Flipkart’s valuation has dropped by a whopping two-third from its peak valuation to $5.5 billion., Snapdeal, on the other hand is scouting for another pivot. According to Kunal Bahl, co-founder and CEO of Snapdeal, the company is now looking to shift its focus from gross merchandise value to unit economics.

There is an urgent need for top companies to bring in a change in their business model. If they keep progressing the way they are currently, none of them will be able to make profits.

Recently, Flipkart announced about the appointment its new CEO, Kalyan Krishnamurthy, who replaced co-founder Binny Bansal, who was promoted to Flipkart Group’s CEO. According to sources, with Krishnamurthy now at the top position, the company is most likely not to see anymore exits.

Increased competition, multiple rounds of devaluation and frequent leadership changes have only made things worse for the Indian startup ecosystem. While startups shifting the focus to tangible outcomes like revenue, cash flow among others is going to cheer up the investor community, it is surely going to hurt the consumer community who have now become used to heavy discounts and offers.

The growing marketing and advertising spending is only expected to increase the losses by several hundred crores. Snapdeal recently went for a major image makeover, and the marketing campaign for the same costed the company a whopping Rs 200 crore. Amazon, too, has increased its advertising budget by a good 23 percent to Rs 946 crore in the year 2016.

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The e-commerce business also took a major hit during the post-demonetisation phase as almost 60% to 70% of their business was dependent on cash-on-delivery orders. Since the first two months of demonetisation announcement, ecommerce sales have dropped by about 25%, according to RedSeer Consultancy

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