Limeroad shrinks losses to Rs 59 Cr while aiming at sustainable growth

The e-commerce industry has been through a lot of upheavals in recent times. Amidst the FDI crisis, a smaller player has revealed its financial performance in the last fiscal, and it’s a refreshing treat.

Limeroad, a fashion retail brand, has reported a 78.5 per cent increase in revenue from Rs 89.73 crore in FY17 to Rs 160.2 crore in FY18. Approx, 98.5 per cent of this was contributed by basic operations of the company - Sale of services.

This turnover itself saw a 92.2 per cent hike from Rs 82.13 crore to Rs 157.81 crore.

At the same time, the company had managed to control the growth in expenses to 20 per cent. The amount stood at Rs 219.67 crore in FY18 taking a hike from Rs 183 crore in FY17.

The highest expense was miscellaneous standing at Rs 95.34 crore occupying a 43.4 per cent share. Advertisement and promotions also called in for 36 per cent of the expenses at Rs 79.12 crore, 17.1 per cent up from Rs 67.54 crore in the previous fiscal.

Consequently, the company was able to shrink its losses by 36.2 per cent, from Rs 93.26 crore to Rs 59.47 crore.

This sustainable growth is the result of the company’s prioritizing of profitability over the scale.

Co-founder of the company Suchishree Mukherjee, in an interview with ET, had gone on to explain how the company leverages profit margins achieved from the onboarding of Small and Micro Enterprises (SMEs) as sellers on the platform.

The aim behind the same is to tap into the market that informally sells 98 per cent of the clothing apparells via 20 million SMEs.

To make the experience of these SMEs better, the company keeps a tight working capital schedule and settles payment within 24 hours.

Further, to make the consumer base loyal and regular, the platform formed a community of over 40K women that upload more than 2-3k stories of how they would style their products and earn money on the sale of every self-designed outfit.

These smaller platforms have been called “distribution channels” more than e-comm marketplaces, and in the words of Mukherjee, Limeroad “delivers dopamine” in form of online shopping that suit the requirement of women who instead of brands look for apt design and affordability.

This allows these startups to stay small but have a loyal customer and supplier base that take them towards profitability via sustained growth.

But how long will the company remain to thrive without accelerating scale? E-commerce is usually a segment that consumes a lot of money in commissions and logistics, and these costs are generally taken care of by scale.

Having received a total of Rs 70.75 crore in December 2017, how long will Limeroad sustain if the losses aren’t turned into profits?