Tuesday 11 August 2015

E-comm majors report massive sales spurts, but is it sustainable?

Leading e-retail major Flipkart has sold 150 million products till date this calendar year, reporting a jump of 150% in unit sales so far in 2015, compared with the year-ago period, the company has announced. 

“With a growing base of over 30,000 sellers, customers now have access to a wider range of products available across categories and geographies. New categories like home and furnishing, maternity, etc., teamed with innovative last-mile delivery initiatives have done extremely well since its launch,” Flipkart revelaed in a statement. “The Flipkart seller base is expected to exponentially grow through the on boarding of 1 lakh sellers by the end of 2015.”

Flipkart’s rival Snapdeal also reported an increase of 222% in gross merchandise value (GMV) in the April-June quarter, according to a presentation available on the website of its largest investor, Japan’s SoftBank Group.

Besides catering to buyers, with 10 million visits (hits) daily, the company also provides an e-platform for sellers to reach a wider customer base. “This milestone is testimony to the scale we have built from our selection to technology platform to supply chain capabilities,” platform head Mukesh Bansal asserted.

The company is working on selling a billion products in a year through the digital platform.

Flipkart didn’t disclose its GMV growth for 2015, though GMV growth is typically much higher than the increase in unit sales. GMV refers to the value of goods sold on a site, but does not account for discounts or even sales returns. 

Though an increase of 222% in GMV and a 150% rise in unit sales still represent fast growth, analysts have raised concerns about a slowdown in revenue growth for online retailers. The sales growth at Flipkart and Snapdeal come off much higher bases than last year’s. Still, India’s two most valuable start-ups are under pressure to deliver accelerating sales growth given that their surging valuations are based on that premise.

Reportedly, sales growth at India’s top online retailers slowed in the first quarter of the financial year, increasing pressure on the venture capital-backed companies to increase discounts and improve sales over the rest of the year to support their surging valuations. 

Meanwhile, online fashion retailer Jabong reported sales growth of just 35.9% in the first quarter, according to results published by the company’s parent Rocket Internet. In the first half of last year, Jabong’s sales increased by 187%.

There is now increased pressure on online retailers to deliver record sales in the festive season that includes Diwali. E-commerce firms generate more than half their annual sales in the October-December quarter, the festive season when Indians typically splurge on various products.

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