Lowering Logistics Cost Can Help Increase Ecommerce Penetration In India: Flipkart CEO

Logistics cost is one of the biggest challenges for the ecommerce sector in India and lowering this cost can help increase the ecommerce penetration in the country, Flipkart chief executive officer Kalyan Krishnamurthy said.

Addressing Walmart Growth Summit, Krishnamurthy said solving the cost structure of logistics is among the biggest challenges for the ecommerce segment, news agency PTI reported. 

“India, in general, is a low ticket price market. Whenever we are able to get to further (lower logistics) cost structure, is when we will be able to further increase the penetration in commerce,” he said. 

As per the CEO of the Walmart-backed company, ecommerce has been able to penetrate only 7-8% of India’s retail market. However, he pointed out that this penetration is higher for some categories like electronics. 

Krishnamurthy said simplification of taxes by the Indian government, along with the focus on ease of doing business, has helped the ecommerce sector grow in India.

“Tax simplification used to be one of the biggest challenges. Like I said before, the government has just done a tremendous job in all of these things. Ease of doing business as a concept has been taken by the government as a strategy. Technology enablement has been a big part of ease of doing business as well,” he said.

It is pertinent to mention that Flipkart has been involved in a number of tax disputes in the country in the past. However, the startup got relief in some of the cases last year.

In March last year, the Bengaluru bench of the Income Tax Appellate Tribunal permitted Flipkart to take tax deductions on its ESOP and marketing expenses, thereby granting a tax relief of INR 1,700 Cr.

Later in July, the Delhi High Court stayed the reassessment proceedings initiated by the Income Tax Department against Flipkart’s marketplace arm.

The Walmart-owned company competes with the likes of Amazon and Meesho in the fast-growing Indian ecommerce market. As per an Inc42 report, the Indian ecommerce market is expected to grow to a size of $400 Bn by 2030 from $100 Bn in 2022.

However, Flipkart continues to make losses. Flipkart India, the B2B arm of the company, saw its standalone net loss widen over 42% year-on-year to INR 4,845.7 Cr in FY23. In FY23, Flipkart Internet, the ecommerce giant’s B2C arm, reported a net loss of INR 4,026.5 Cr in FY23, 9% lesser than the FY22’s INR 4,026.5 Cr.

However, Krishnamurthy last month told Flipkart employees that the ecommerce giant is approaching profitability on the back of a significant reduction in monthly cash burn.