Summary: Is India’s organized retail sector a profitable business model considering Amazon India suffered a net loss of around $250 million dollars despite 600% increase in sales.
Over the last 15 years, prominent retail consultants in India have painted a rosy picture about opportunities in the Indian retail sector, however, the balance sheets of business houses in the year 2016, who are operating retail chains in India (both offline and even online) reflect otherwise.
Recently Amazon India declared their net loss to Rs 1,724 crore ($250 Million)in the year ended March 2015 despite 600% increase in sales to Rs 1,022 crore ($150 Million) in 2014-15 from Rs 169 crore ($25 Million) a year earlier.
The shocking reality in the organized retail sector is that not only companies such as Walmart (with physical store) are going in severe losses in India but even all the 3 major online retailers such as Amazon, Flipkart and Snapdeal are also absorbing losses combined losses) Rs 5,052 crore ($740 million) as they hunted for buyers by offering deep discounts.
Manish Jain, partner Namanish Advisors, based in Delhi said,” Organized retailing is not a lucrative business model. Companies such as Reliance, Walmart are suffering heavy losses because of high rentals, in addition, shopping malls charge huge maintenance, so business becomes unviable”.
“Massess are not having big disposable income to spend without minding the price so they go for discounts and things with lessor price.”
This raises the fundamental question how long the deep discount model will operate in India and more importantly if the organized retail sector a profitable business model in India?
Make in India Event by UKIBC in London