Amazon’s flagship India unit beats Flipkart’s in revenue
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Amazon’s flagship unit in India Amazon Seller Services has more than doubled its revenues in the year ended March, leading rival Flipkart’s similar firm in terms of revenues.
Amazon Seller Services’ turnover for the last fiscal rose 116% to Rs 2,217 crore while Flipkart Internet’s sales increased 153% to Rs 1,952 crore during the same period.
Both units earn revenues through commissions, advertisements and shipping fees that they charge to sellers.
While the Amazon unit outpacing Flipkart Internet is a significant development, both companies operate through a complex structure which makes total revenues of their units hard to conclusively interpret.
Flipkart India, which runs the wholesale arm of the Singapore-registered etailer, posted 34% increase in revenues for FY16 with sales of Rs 12,818 crore, compared with Rs 9,351.7 crore a year ago.
Amazon India’s wholesale unit has not filed its numbers for the financial year yet.
Experts feel Flipkart’s retail sales could be at least 15-20% higher than its wholesale revenues after including margins. Flipkart didn’t disclose profit or loss figures. It made a loss of Rs 837 crore in 2014-15.
Doubling of revenues of both the ecommerce giants indicates the rapid pace of growth in the ecommerce market aided by billions of dollars in overseas funding even as brick and mortar peers struggle.
“Experts feel Flipkart’s retail sales could be at least 15-20% higher than its wholesale revenues after including margins.”
Flipkart India’s turnover is now nearly double the country’s organised wholesale market that has players such as Wal-Mart and Metro Cash & Carry. Experts, though, feel the numbers are minuscule compared to other markets.
“Given the potential of the market, the numbers are still not huge and the pace of growth has come down. Even within the overall organised retail market, their contribution is just a fraction despite spending aggressively to gain market share,” said Harminder Sahni, founder of retail consultancy firm Wazir Advisors.
“Flipkart will have a tough time going forward in terms of funding as well as competing with Amazon,” he said.
The financial performance numbers are also reflective of the change of pace in investments by both the etailers. Amazon India has ramped up investment since 2015 as it looks to increase its market share, even as Flipkart has been focused on cutting its cash burn rate.
Flipkart Marketplace, a Singapore-based subsidiary and investment holding company which owns 99.74% stake in Flipkart Internet, received equity infusion of Rs 1,629 crore in fiscal 2016, significantly down from Rs 5,456 crore in the preceding year.
In comparison, Amazon Seller Services received capital infusion of Rs 7,463 crore in fiscal 2016, up from Rs 1,888 crore in the previous year.
The rivalry will only intensify — Amazon has committed $5 billion to the Indian market, and is outspending Flipkart by 3-4 times by investing aggressively in areas like video and grocery delivery. An Amazon India spokesperson said it is now the largest as well as fastest growing online marketplace.
Questions & Answers
Q.What is the primary method by which Amazon Seller Services and Flipkart Internet generate revenue?
What is the primary method by which Amazon Seller Services and Flipkart Internet generate revenue?
Both units earn revenues by charging sellers for commissions, advertisements, and shipping fees. This structure means their income is derived from services provided to third-party sellers on their platforms.
Q.How do the investment strategies of Amazon India and Flipkart differ in the recent fiscal year?
How do the investment strategies of Amazon India and Flipkart differ in the recent fiscal year?
Amazon India significantly increased its capital infusion to Rs 7,463 crore in fiscal 2016, aiming to grow market share. In contrast, Flipkart reduced its equity infusion and focused on cutting its cash burn rate.
Q.Despite their growth, how do experts view the overall size and contribution of these etailers to the Indian market?
Despite their growth, how do experts view the overall size and contribution of these etailers to the Indian market?
Experts believe their numbers are still minuscule compared to other markets, and their contribution to the overall organised retail market is only a fraction, despite aggressive spending to gain market share.
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