E-commerce firms might witness a cash burn of almost $400 Million at the time of festive sales of this year, in comparison with almost $200–250 Million in 2016, a research firm claimed this week to the media in an interview.
The cash burn for the e-tailing segment, which has profound-pocketed sponsors such as Alibaba and SoftBank supporting players, is predicted to cross almost $370–400 Million in 2017 on an anticipated gross merchandise value of $1.5–1.7 Billion.
In 2016, the cash burn was worth almost $200 Million to $250 Million on a gross merchandise value of $1.05 Billion, it further added.
Gross merchandise value is a word used in online segment to show entire value of sales of goods sold via the platform over a particular period of time.
The report claimed that it anticipates there might be an elevation in supply chain expenses and discounting spends as a percentage of gross merchandise value in comparison to 2016.
It further added that with the newest capital firepower, Flipkart, the market leader, might most probably elevate discounting spends to obtain new users as well as to achieve momentum over its rival Amazon (which is also anticipated to increase its investment).
In addition to this, Paytm, with its latest aim on Paytm Mall business, is most probably to elevate its cash back investments to achieve attraction at the time of the sale, it further said.
“As e-tailers aim on providing improved discounts and also providing a faster experience of delivery, comprising to Tier 2+ towns, this year will witness a noteworthy development in cash burn as compared to last year,” claimed the report.
Advertising expenses, the report said, will either stay same or drop down as compared to the festive sale of last year.
E-commerce companies such as Amazon, Flipkart, ShopClues, and Paytm are carrying out festive sales on their marketplace at this moment, providing discounts and deals to users all over the categories such as electronics, fashion, and household items.
These schemes and offers not only elevate the sales volume for the companies but also assist the firms get new users onboard their marketplace.