While the internet generation has accepted online shopping as a default means for making purchases, e-commerce firms continue to amass huge losses including big players like Amazon, Flipkart and Paytm. The strategy of offering deep discounts to woo customers, ensured that firms losses are up by six percent in the financial year 2017-18.
The perpetual sale seasons and frequent discount events that e-commerce firms launch every year indicate that customers need constant pampering from these e-retailers in order to stick to them. Even while revenues are surging, e-retailers are keeping a tab on their spending on marketing and employee maintenance to plug cash leakage, as per reports by Financial Express.
The estimated loss incurred by 12 companies across all verticals shot up by 6% in year 2016-17 whereas their revenues strengthened. Industry experts point to blame the attractive discounts offered during 2017 as the prime reason behind such a significant loss. While the established players in their respective segments will flourish, small businesses might fail to survive the doom. Sreedhar Prasad, partner, KPMG, said some consolidations have been made on this front, but more is on the way. companies are now shaping new strategies to stay in the game.
Meanwhile, e-commerce and start-up investments slumped by 35.5% to $3.59 billion in the January-June period; Fintech managed to bag 50% less investment at $908 million while e-retail investments fell by a whopping 624% to a mere $627million.