Myntra’s largest seller clocks loss of Rs 8.7 crore, but sales up 40%

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BENGALURU: Myntra’s largest seller Vector E-Commerce posted a 40% jump in revenue at Rs 1,747 crore for the fiscal year ended March 2016, overtaking apparel brand Westside and country’s third-largest ecommerce player Snapdeal. However, the seven-year-old company posted a loss of Rs 8.7 crore last fiscal due to expansion and deep discounting. It had clocked a Rs 6.5-lakh profit in FY15.

“The increase in operational cost is primarily attributable to increase in inventories and promotional discounts among others, which has resulted in a net loss. With a view to enhance its margins and profitability, the company (Vector) is actively engaged in tying up with emerging brands, which yield better margins in the retail segment when compared to established brands,” the company said in its filings with the Registrar of Companies.

Since there is a ban on foreign direct investment (FDI) in direct online retail, Myntra sources products from brands and sells them to Vector, which in turn sells them to consumers. Similar model is practiced by other foreign-funded online companies such as Flipkart, Snapdeal and Big Basket.

The exact percentage of sales contribution by Vector in Myntra is not known. The sales growth of Vector, however, has tapered off compared to the past two years when it had doubled its revenues and made a nominal profit as Myntra shifted to the app-only model, hurting demand. The Bengaluru-based seller’s revenue grew 128% and 110%, respectively, in fiscal 2015 and 2014.

“The results or revenues of any single seller do not represent the company’s growth. Myntra has been growing steadily year on year at 65% and is on course to achieving its target $2-billion GMV and profitability by the end of FY18,” said a Myntra spokesperson without mentioning details on the percentage of sales contributed by Vector.

WS Retail posted a 33% increase in sales at Rs 13,921 crore for the year ended March 2016, underscoring its dominance as Flipkart’s largest vendor. Cloudtail, a joint venture between Amazon Asia and Infosys founder Narayan Murthy’s personal investment vehicle Catamaran, posted over 300% jump in revenue at Rs 4,591 crore in FY16.

Now, Amazon has also expanded its vendor list by tying up with sellers such as Cart2India Online, Amiable Electronics, Apptronics Retail, E-Mobiles, Okay Enterprises, GreenMobiles and S&S Company. “During that period (FY16) competition got tougher. Players such as Amazon and Flipkart also got very aggressive in the fashion category. Also brands had started reacting to heavy discounting, which forced them to discount from their pocket,” said Harminder Sahni, founder of Wazir Advisors.