How is Flipkart making profit?

Currently Flipkart is in complete loss.
Flipkart and many other websites are selling quite a few items at very low margins OR at a loss. Also they are surviving on all the VC / investments.
 
I don't think the losses are due to selling a product at low margins or at loss. In fact I am pretty sure that these sites always sell at a profit.
From what I remember when I read about the Amazon.com model six months ago was that they re-invest the money in the company and hence are able to show these big losses.
I may be completely wrong but the losses are due to the fact that they maintain such huge stocks of so many varied products. So let us say they bought stuff worth $500 mn and are only able to sell stuff worth $250 mn. Let us suppose they made $300 mn by selling off that stuff worth $250 mn. In essence they made a profit of $50 mn but for the record books they can show a loss of $200 mn.
Again they re-invest this $300 mn into the company by buying new stock worth $280 mn and using the $20 mn for salaries/running costs.
This way they are making money and still not paying taxes as they never show any profit. This is what I got from reading the article on Amazon's policies. All they need is the go ahead from shareholders. Even Apple was accused of following the same policies a year ago IIRC and some of their major shareholders spoke against them at that time.
 
m-jeri said:
I wasnt talking about your usage. But in General sense
Click to expand...
I agree with the COD. It's a godsend for people faced with the choice of not getting something & FK. This should be a good enough incentive for FK to continue. Question is how long for ? They're fine for the current round. let's see the next round. OP's question will be more pertinent then. Should money continue to be advnaced to FK ? if so why if profit seems to be low. I've not looked at the figures, i've taken it to be a given.

I posted regarding amazon buying FK. I don't think that's in the books any time soon unless laws become more attractive for foreign internet vendors. That is the key. Indian ones don't have the smae hurdles just financing problems.

There is a powerful lobby in place to protect brick & mortar shops. We had a rather agitated thread about this earlier. Just think how much trouble it was to pass FDI in retail, govt almost fell. Why ? these guys are not afraid of indian internet vendors they are more afraid of foreign ones with deep pockets. So what was past was a stiff compromoise between having something or nothing.[DOUBLEPOST=1389140403][/DOUBLEPOST]
rdst_1 said:
This way they are making money and still not paying taxes as they never show any profit.
Click to expand...
Bingo!
 
Last edited:
Funny thing is one of the founders of Myntra is also named Bansal and both the Flipkart founders are Bansals and none of them are related :)
Infact majority of the investors in Flipkart and Myntra are the same ....
All this is to plan ahead and give Amazon/ebay a tough fight. More Amazon.
 
I don't mind consolidation in the online e-commerce sector, too many small players and too much overcrowding IMO. Difficult to tell genuine deals from fakes.
 
letmein said:
I don't mind consolidation in the online e-commerce sector, too many small players and too much overcrowding IMO. Difficult to tell genuine deals from fakes.
Click to expand...
But that is only true if you even consider buying from the small players. After mergers you'll just have to be content with whatever deals the big players push your way. Just look at most of the deals on Flipkart.
 
^^According to the article Flipkart will keep Myntra as it is, but the investors wouldn't have to invest in two different companies. That's the main reason as both have common investors.
 
ATleast for now with premji intervention the deal is off for time being.[DOUBLEPOST=1391314713][/DOUBLEPOST]
asingh said:
I think they will do the same with Myntra. It was rumored they would let LetsBuy, live. But it was neutered off, pronto..!
Click to expand...
Flipkart is planning to enter myntra territory fully now.ANd myntra also knows this will surely hit its business to some extent hence they too needs funds to expand or mitigate the loss .
 
Back
Top