In recent months, as Indian consumers shifted to online buying not just in metros but in smaller cities and beyond, e-tailers have sharply expanded customer base, onboarded thousands of new sellers, set up dark stores and warehousing spaces, stepped up hiring in the run-up to the festive season.
Festive season sales are expected to almost double in the next two months alone and touch $7 billion in gross merchandise value (GMV), compared to $3.8 billion in GMV sales in the same period last year, according to estimates from Internet research firm RedSeer.
This year’s e-commerce festive sales will see more than half of the purchases coming from Tier-2 towns and cities with participation from 45 to 50 million users. This is a 70% year-on-year growth in seasonal online shoppers when compared to the same period last year, according to RedSeer’s annual ‘Online Festive Sales 2020 Forecast’ report.
Rajesh Sawhney, founder, GSF Accelerator said the spurt in festive sales is a result of pent- up demand due to suppressed spending in the last six months, and consumers still not willing to go to physical retail shops for festive shopping.
“There is a decent economic recovery especially in rural economy and small towns that link up with rural areas as feeder towns. More consumers are online now than last year and finally, on the supply side both merchants and (online) platforms will step up on the offers and new launches,” Sawhney said.
In 2019, festive season sales growth was comparatively lower due to a tough macro-economic environment and decreased overall consumer spending. The penetration of online retail also stood at just 3% in 2019, with around 135 million online shoppers, according to RedSeer’s estimates.
2020 festival sales will however portray a different picture for e-commerce. Apart from growing participation from users in smaller cities, shoppers from metros and Tier-1 cities are expected to contribute 35% and 25% of the sales over the next two months.
“Apart from high consumer demand, a lot of unsold inventory of offline retailers will be sold on e-commerce platforms this time because of better prices, with add-on advantages like EMI-based payment, free installation of products and of course, free delivery to pincodes across the country,” said an executive at an e-commerce firm.
Both Flipkart and Amazon have got a taste of what the festive sales could bring with their recent sales events, as they head towards ‘Big Billion Days’ and “Great Indian Festival” soon.
Covid has not just driven massive online adoption of Bharat customers, it has also led to the rise of new shopping models including video-based and WhatsApp based commerce to catch the changing customer demographic.
Not surprisingly, social commerce firms are gearing up to grab a pie of e-commerce.
“The good thing about social media is that users are generally inclined to watch content, and interact on these apps while they open e-commerce apps only when they want to buy something. So social media apps already have the user’s desire to spend time on the platform,” Mitron co-founder Shivank Agarwal recently said in interview.
With schools and educational institutions adopting e-learning, experts believe that there might also be a rise in gadgets like smartphones, laptops, routers, and tablets, as parents and families look to ramp up their infrastructure at homes.
Mobile phones and home appliances category will contribute to a majority (40-45%) of sales this festive season but not as large as previous year’s demand since these verticals have somewhat satiated with strong demand post unlocking in the months of June, July, and August.
Analysts also predict that there will be strong retention of first-time customers new to online shopping in 2020, as many of them view online commerce as a primary source of purchasing goods.
“The pandemic is a first of its kind event and it would be very difficult to predict how it will pan out. But we expect strong retention of the consumers who have shifted to online for the first time, given that consumers are now used to seeing digital as a mainstream channel instead of an alternative to offline, and the shift is not just limited to commerce but across a wide spectrum of use cases including health, education and payments,” said Ujjwal Chaudhry, Director, Redseer.
Food delivery firms are also betting on the upcoming Indian Premier League (IPL) season, that coincides with the festive season to get back dormant customers.
“With IPL, people would like to focus on the match and order in food. Hence, we are hinging our hopes on this quarter, to get users back on to Swiggy, as we expect order frequencies to go up. IPL and other festivities could accelerate recovery by a quarter. We are already planning a new advertisement series to restore consumer confidence and will experiment with new constructs of deals, discounts, and gamification,” said Swiggy’s chief operating officer, Vivek Sunder.