Combined losses of Flipkart, Amazon and Snapdeal stand at Rs 11, 754 crore; it is the annual budget of Indian space agency

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Combined losses of Flipkart, Amazon and Snapdeal stand at Rs 11, 754 crore; it is the annual budget of Indian space agencyLosses of top three Indian e-commerce players, Flipkart, Amazon and Snapdeal are rising like never before and this due to intense competition.
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The combined losses of the three e-commerce companies stand at whopping Rs 11,754 crore and believe it or not, this is nearly equal to the annual budget of the Indian Space Research Organisation (ISRO).

With this much money, ISRO can send 24 Missions to Mars.

In 2015-16, losses increased due to expansion and competition. The companies also spent money on advertising, discounts, seasonal sales, etc. For 2015-16, Snapdeal posted losses of Rs 2,960 crore, Flipkart Rs 5,223 crore and Amazon Rs 3,571 crore.

"Only two sets of people are winning this e-commerce battle. First are the delivery companies and the second, digital marketing companies like Google and Facebook. As the saying goes, in the gold rush the only people who make money are the pickaxe sellers," a founder and an expert commentator of a leading consultancy told ET on the condition of anonymity.

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Now, the game has changed and there is focus on getting more customers on board. The biggest tool of customer acquisition/retention is advertising and despite mounting losses, the advertising budget of the ecommerce players is only ballooning. In November, Snapdeal announced an overhauling exercise and committed close to Rs 200 crore for the same. Amazon India increased its ad budget to Rs 946 crore in 2016 from Rs 766 crore in 2015.

"There is no place for five to six companies with the same model to exist in India. They are all slugging it out by giving greater discounts, which is only resulting in making bigger losses for them. Amazon has got deep pockets and Indian companies like Flipkart and Snapdeal need to depend on other strategies to fight it," Mohandas Pai, Chairman, Manipal Global Education Services and Aarin Capita, told ET.

The colossal loss figure may take us back to the debate of e-commerce bubble.

"India is probably the only market in the world where we are seeing so many players. Most of the other markets have just one player. But, eventually, it could come down to two players - Amazon and one more. Funding becomes crucial here. Amazon does not have to go from boardroom to boardroom with PowerPoint presentations when they are running out of money, whereas a player like Flipkart will have to keep convincing investors. So that is one major advantage that Amazon has. And that has been the primary reason they have not been distracted by valuations and mark downs, etc. In my view, that has been a major distraction for Flipkart," Vikram Gupta, founder and managing partner, IvyCap Ventures, told ET.

As per experts, the three players should give push to retain and get more customers on board as well as venture in new product categories.

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"Unless you reach a particular point in a particular product category where people come to you mostly without going elsewhere, there is always a risk that customers could shift to another source, say if they get small discounts elsewhere. If Flipkart wants to be profitable over the next, say two years, all they have to do is to decide what products they need to stop investing too much on. Their revenues will probably come down for some time, but they could hit profits as well - that is if this is what they decide to do. Those profits at least will then give you a clear picture of what kind of value they can create from there," asserts Gupta.