‘Profitability ahoy!’, says Snapdeal, ‘in the next two years.’

We have yet another profitability announcement. It is Snapdeal’s turn to declare that it will hit profitability in the next two years. An enthusiastic Kunal Bahl, who is the company’s CEO, says,

“I see a relatively clear line of sight to (profit) and we’ve been making great progress in that direction.”

The company’s EBIDTA (earnings before interest and taxes) has gone up by 40% in the current financial year compared to the previous year. Bahl also says that Vulcan, the company’s logistics section, will also shortly turn profitable. Vulcan will shortly be servicing other companies as well.

Experts express doubts

Most analysts are sceptical about the possibility of profits. The company’s losses for the year recently grew by 125%, and it had to devalue itself to raise funds. Chinese ecommerce giant Alibaba was in talks with Snapdeal for a possible takeover, but things didn’t work, and the deal was called off.

Angel investor Ajeet Khurana says profitability will be accompanied by a drop in income. He says,

“Turning profitable for any of the e-commerce giants is not difficult. The problem is that, at present, any such initiative will require massive re-budgeting and reallocation of resources. The journey to profitability will be accompanied by a dramatic fall in revenue.”

Arvind Singhal, chairman of retail consultancy Technopak says that the expenses are too great to reduce,

“The salary cost of these companies is very high, and is very difficult to reduce. Advertising expenditure is very risky to reduce as you still have to advertise to draw customers, if your competitor is also advertising.”

So far, Myntra, Zivame, Flipkart, Urban Ladder and Craftsvilla have made profitability announcements. Most of the dates are near 2017 – 18. There are equal announcements of losses as well. We would like to believe the figures that are right before us. Let the profits come, then we will take your word, etailers!