Losses surge for Walmart and Ikea due to higher spending on advertising and deliveries

Sprawling retail stores were expected to pop up across Indian cities when Walmart announced its much-awaited entry into Indian markets back in 2007. But that vision wasn’t translated into reality, and it acquired Indian e-commerce startup Flipkart for $16 billion a decade later, and also added Myntra to its basket. Today the American retail giant is still making losses in India, as expenses have shot up.

Hurt by losses despite higher revenues

Losses for Walmart India’s properties Flipkart, Myntra and Walmart India have gone up by as much as 50 per cent, despite a revenue growth of 45 per cent. Among other global retail chains, home decor giant Ikea also reported a 12 per cent spike in losses, although its revenue also went up by 77 per cent. Although the losses for both brands can be attributed to higher spending on consumer acquisition, Ikea had entered India with its first store in 2018, a decade after Walmart.

Walmart’s setbacks and big switch

Walmart had switched from its ambitious push to open stores across India to plans in the e-commerce space riding on Flipkart, after its involvement in illegal lobbying in India. The firm now cites expenditure for deliveries, advertisements and promotional activities, for the losses which are rising almost in tandem with revenues. As competition intensified during the post-covid recovery, Indian markets have been tough for both global names.

Flipkart lagging behind Amazon?

Despite being one of the top e-commerce platforms in India with a Rs 10,659 crore revenue in FY22, Flipkart reported a Rs 4,362 crore loss in the fiscal year. It spent more than Rs 5,000 crore on delivering orders, while spent twice on advertisement at almost Rs 2,000 crore, and a similar uptick was registered in promotional expenses.

On the other hand, Flipkart’s main competitor Amazon India managed to reduce its losses by 23 per cent, and increased revenue by 32 per cent, despite regulatory issues.