Revenue Decline Amid Tough Market Conditions
ShopKirana, a B2B e-commerce platform catering to retailers and brands, has faced significant challenges in scaling its operations during the fiscal year 2024. According to its financial results, the company’s gross revenue dropped by over 6%, signaling tough times in a competitive market. However, despite these struggles, the Info Edge-funded firm managed to reduce its losses by more than 30% in FY24, a sign of progress amid adversity.
For the fiscal year 2024, ShopKirana reported a decline of 6.26% in gross revenue, falling from Rs 681.81 crore in FY23 to Rs 639.16 crore. This downturn reflects the difficulties the company faced as it tried to expand its footprint in a space dominated by larger players such as Udaan and Jumbotail.
ShopKirana’s platform enables businesses to place orders, manage inventory, optimize delivery routes, and access financial services like banking and loans. The company derives most of its revenue from product sales, which totaled Rs 637.32 crore, accounting for 99.71% of its operational income. The revenue from product sales fell by 6.3% from Rs 680 crore in FY23, contributing to the overall revenue decline.
Reducing Losses Through Expense Control
While ShopKirana struggled to grow revenue, the company took significant steps to manage its expenses, resulting in a 30.5% reduction in its losses for the fiscal year. ShopKirana’s total expenses dropped by 8.81%, down to Rs 698.63 crore in FY24 from Rs 765.77 crore in FY23. Key areas of cost reduction included materials, employee benefits, transportation, and other expenses.
- Cost of materials decreased by 7.14% to Rs 627.3 crore.
- Employee benefit expenses saw a significant decline of 17.65%, bringing the total to Rs 35 crore.
- Transportation costs fell by 23.57%, and other expenses reduced by 24.95%.
Despite these cuts, ShopKirana still faced challenges with its profitability. The company’s loss for FY24 amounted to Rs 55.25 crore, but its ability to narrow losses shows potential for improving operational efficiency moving forward.
In terms of profitability metrics, the company’s return on capital employed (ROCE) stood at -69.6%, while its EBITDA margin was at a negative 7.85%. These figures indicate the difficulty of achieving profitability in the B2B e-commerce space, particularly with the high costs involved in scaling operations.
Competing in a Challenging Market
ShopKirana faces stiff competition from other B2B platforms such as Udaan, which has emerged as the largest player in the space. Udaan posted a gross merchandise value (GMV) of Rs 5,706.6 crore for FY24, overshadowing ShopKirana’s revenue figures. Additionally, Jumbotail, another key player, reported Rs 850 crore in revenue for FY23, though it has yet to file its FY24 report.
Despite the competition, none of these players have reached breakeven, highlighting the tough nature of the B2B e-commerce market. The segment is characterized by thin margins, and the pressure to cut losses often results in slower growth. Furthermore, most of these companies lack the kind of financial backing that has propelled some other tech firms, with backers like SoftBank or Tiger Global offering significant investment in other sectors.
In addition to the competitive pressures, ShopKirana is also grappling with challenges from the quick commerce industry, which offers faster delivery times and increasing consumer demand for rapid access to goods. The B2B sector’s struggle to balance growth and profitability is exacerbated by the rise of quick commerce, making it harder for platforms like ShopKirana to stand out.
The Road Ahead: Pivot or New Revenue Streams?
As the company looks ahead, it faces a critical decision on how to adjust its strategy. The B2B e-commerce space is clearly fraught with challenges, and while ShopKirana has made strides in reducing its losses, it may need to pivot its business model or explore new revenue streams to maintain its position in the market.
The company could potentially focus on enhancing its financial services offering, which saw an 85.29% increase in revenue, or seek additional partnerships and collaborations to expand its reach. The ongoing pressure from competition and changing market dynamics might prompt a shift in strategy as ShopKirana continues to navigate this tough segment.
With funding from investors such as Info Edge, Sixth Sense Ventures, and the Oman India Joint Investment Fund, the company has the backing needed to explore new opportunities, but whether these can drive sustainable growth remains to be seen.
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