Top 27 Indian Ecommerce Startups Spent Over $1 Bn On Employees In FY22

Just like other convenience economy-focussed sectors, startups operating in the ecommerce domain, too, witnessed exponential growth during the peak pandemic years, and what further boosted their ambitions was an influx of investor funds.

It is this very anomaly, largely positive, that made many startups complacent, convincing them to hire indiscriminately to give a boost to their future endeavours. 

For context, Indian ecommerce startups raked in a total of $12.45 Bn between April 2021 and March 2022, the highest funding amount raised by any sector during the year. 

But then, the pandemic subsided and the world returned to business as usual. It was at this time when the post-pandemic world embraced the reopening of brick-and-mortar retail setups, many ecommerce startups found themselves enveloped in the after-effects of overhiring, including humongous wage bills to clear every month amid falling revenues and mounting losses.

However, by then, it was already too late to negate the impact on their balance sheets, which had already been bloated by expenses incurred towards employees in the financial year 2021-22 (FY22).    

According to the data compiled by Inc42, India’s top 27 ecommerce startups, including 17 unicorns and 10 soonicorns, recorded INR 8,386.53 Cr ($1.02 Bn) in employee expenses in FY22.

As highlighted above, the unprecedented funding influx made way for an uptick in spending on advertising (over $875 Mn in FY22), and employee expenses followed suit.

Further, top ecommerce startups in India spent an average of around INR 310.61 Cr (around $37.73 Mn) on their employees in FY22.

However, if you take Flipkart and Udaan out of the equation, which together spent a total of INR 4,938.70 Cr, the average spending on employees stood at INR 137.91 Cr (around $16.75 Mn) in FY22.

It is pertinent to mention that the founders of some of these ecommerce startups also drew hefty salaries during the period under review. According to the data collated by Inc42, 32 founders of India’s 17 major ecommerce startups received a total of INR 49.83 Cr in annual remunerations in FY22.

Incidentally, among ecommerce unicorns, only OfBusiness and Mamaearth were profitable during FY22, while boAt was the only profitable ecommerce soonicorn. In other words, only 10% of the companies taken in this analysis were profitable in FY22.

Overall, the 27 ecommerce startups posted a loss of INR 16,529.84 Cr (around $2.02 Bn) against revenues of INR 59,904.65 Cr (around $7.33 Bn) in FY22.

The financial year that followed was fraught with a funding crunch. As a result, many ecommerce startups have resorted to layoffs since the beginning of FY23 (April 2022) to cut large wage bills initiated in FY22.

Of the 27 ecommerce startups, five ventures, including the likes of Meesho, Cars24 and Udaan, have fired 2,111 employees since the start of FY23.

Flipkart, Udaan & Cars24: Ecommerce Unicorns Go Gaga Over Employees

Before going further into the details as to which ecommerce unicorn spent how much on employees in FY22, let us talk about Flipkart and Udaan, the bravest of the lot when it comes to splurging on employees. The two companies incurred more than 56% of the total employee expenses amassed by all 27 startups considered in this report.

Notably, these companies are comparable in scale to the likes of Meesho, Cars24 and other large-scale ecommerce unicorns considered for the analysis.

Further, used cars marketplace Cars24 took the third spot, having paid INR 548.40 Cr to its employees in FY22.

Interestingly, B2B unicorns managed to keep their employee expenses lower than their marketplace counterparts. While OfBusiness recorded an employee expense of INR 121.96 Cr, Infra.Market and Elasticrun spent INR 140.40 Cr and INR 202 Cr, respectively, on employees in FY22.

Some of the D2C unicorns, too, coughed up significantly in wages. The two D2C behemoths, Lenskart and Mamaearth, recorded employee expenses of over INR 200 Cr each.

Further, when considering the share of employee expenses against the total expenses, D2C unicorns and marketplaces startups performed poorly.

While used cars marketplace Spinny saw its employee expenses accounting for 41.14% of its total expenses, Snapdeal had the highest ratio with employee expenses accounting for 52.73% of the marketplace’s total expenses. 

On the contrary, B2B ecommerce unicorns were seen performing surprisingly well on this metric. While OfBusiness’ employee expenses accounted for 1.74% of its total expenses, Infra.Market and Elasticrun’s employee spending contributed 2.32% and 4.82%, respectively, to their total expenses.

This reflects the way these business models work. B2B ecommerce platforms are dealing with businesses, so the number of customers is small. 

In the case of D2C unicorns and ecommerce marketplaces, the number of customers can go into millions, hence higher workforce expenditure.

Ecommerce Soonicorns: Bira91 Tops The Employee Benefits Charts

Among the 10 ecommerce soonicorns considered for this analysis, Bira91 employee expenses stood at INR 93.57 Cr, followed by the furniture and mattresses startup Wakefit, which spent INR 91.60 Cr on employees in FY22. Personal care startup mCaffeine spent INR 74.88 Cr on employees in FY22 and took the third spot.

Overall, the 10 soonicorns spent INR 583.04 Cr on employees in FY22 against their total revenues of INR 5,883.20 Cr. It is pertinent to mention here that all these startups sat on a cumulative loss of INR 2,381.73 Cr during the year, with boAt being the only profitable venture.

boAt’s employee expenses accounted for only 2.01% of its total expenses in FY22.

Interestingly, even though Bluestone’s employee expenses accounted for 2.40% of its total expenses, its losses were the highest among ecommerce soonicorns at INR 1,268.40 Cr.

The metric was led by mCaffeine and Chaayos, whose employee expenses accounted for 38.91% and 24.12%, respectively, of their total FY22 expenses.

How Does FY23 Look?

Even though the ecommerce sector has seen significant layoffs in the last two months, employee expenses are expected to account for a significant portion of total expenses incurred by startups in the segment in FY23.

This is because only five out of the 27 startups, considered in this analysis, have fired employees so far.

Only the likes of Cars24, Meesho, Udaan, Dealshare and Furlenco could see some rationalisation under their employee expense head come FY23, while the rest of the companies might have struggled to reduce the wage bill.

The financial year ended March 31, 2023, was also a year that saw notable changes in how these ecommerce companies now operate. Increased stress on profitability has seen ecommerce companies cut down on multiple expenses.

The key stakeholders in the sector are diversifying to survive the funding winter, mostly moving towards an omnichannel business model.

With the likes of Mamaearth and boAt moving to an omnichannel business to increase profitability, the trend picked up steam in FY23, and we might see several D2C startups put up better revenue numbers compared to FY22.

As of now, it will be interesting to see how these companies performed during a year full of uncertainty and market corrections.

Update | May 15, 2023, 1:40 PM

An earlier version of the story showed erroneous details for Spinny and WOW Skin Science. The same has been corrected.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.