Cash burn by e-tailers may double in festivals

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During this year’s festival season, which has already started, e-commerce companies operating in India
may see a cash burn of up to $400 million on an expected gross merchandise value (GMV) of $1.5-1.7 billion compared to around $200-250 million on a GMV of $1.05 billion during the same period last year, says research firm RedSeer Consulting.

GMV indicates the total sales value of merchandise sold over a certain period. An increase in discounting spending and supply chain expenses as a percentage of GMV is expected compared to last year. Market lead er Flipkart would most likely increase discounting spends to acquire new customers and to gain momentum over rival Amazon, a news agency reported quoting the RedSeer study.

Paytm, with its Paytm Mall, is most likely to raise its cashback spends to gain customers and increase revenue during the sale. Advertising expenses will either remain same or decrease compared to the last year’s festive sale season, the RedSeer study added.