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Rush Hour In The Great Indian Online Bazaar
Online marketplaces Amazon, Flipkart, Snapdeal, ShopClues, and others are anticipating bumper sales during the festive season, but that may do precious little to lift the overall sector from its worst-ever slump
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COVID-19 has dealt a debilitating blow on the Indian economy. The pandemic and subsequent lockdowns have caused plant shutdowns, business closures, flattened revenues, salary cuts and job losses across sectors. Even eight months later, business outlook appears grimmer as the virus continues to make more and more people sick. While different sectors have been impacted in varying degrees, e-commerce is not just bucking the downtrend but also helping give a ‘booster shot’ to the economy.
A validation of this trend comes from various online marketplaces such as Amazon, Flipkart, Snapdeal, Shop- Clues, etc. During interactions with BW Businessworld, the online biggies said the number of orders had already reached pre-Covid levels and they were expecting bumper sales during the festive months beginning October. Similarly, a pan-India consumer survey by LocalCircles across 330 districts in the country points to a resurgence — the number of festive shoppers who will primarily use e-commerce will shoot up to 51 per cent, from 27 per cent last year.
“However, overall spending will take a hit of about 33 per cent (the number may get reduced). But 3 per cent of the rich and ultra-rich (spending above Rs 50,000 during festive season) will spend a significant chunk on e-commerce,” says Sachin Taparia, Chairman & CEO, LocalCircles.
“Also, of the 14 per cent of the upper middle class (spending between Rs 10,000 and Rs 50,000) again a sizable portion will spend on e-commerce. Then you have the 44 per cent who are spending between Rs 1,000 and Rs 10,000. Approximately 40 per cent of them will spend via e-commerce sites this year,” Taparia adds.
E-commerce firms have already sold goods worth $4.1 billion, or Rs 29,000 crore, in the first seven days of the first festival season sale event which kicked off on 15th October, according to management consultancy RedSeer. Sales surged 55 per cent over last year’s figures of $2.7 billion. RedSeer, in its pre-festive sale report, predicted that online platforms will clock $4 billion in sales this year. “The e-commerce sector has exceeded the aggressive forecasts we had made a few weeks before the festive season Week One started. This points to a revival of consumption sentiment amongst Indian shoppers, who have been shopping online in big numbers driven by massive selection, great prices and the convenience and safety of shopping from home,” says Mrigank Gutgutia, Director, RedSeer Consulting.
RedSeer in its previous study maintained that festive season sales are expected to almost double in October- November alone and touch $7 billion in gross merchandise value (GMV), compared to $3.8 billion in GMV in the same period last year. The Internet research firm also said the upcoming festive sales are expected to push up the annual GMV of e-commerce companies to around $38 billion, a growth of 40 per cent over the previous year.
Covid as the catalyst
Thanks to the Covid-19 pandemic, many new Indian consumers are now using ecommerce sites or calling or sending a WhatsApp message to local stores and getting merchandise delivered at their homes, so as to reduce exposure to crowded markets and safeguard themselves from the coronavirus. As a result, e-commerce shipments in the country during August-September crossed five million, compared to less than four million before the virus outbreak.
As Kaveri Sachdev, Co-founder & CEO, MyPoojaBox puts it, “Shifting to online shopping is not just a lifestyle choice; it has become a necessity in many ways as more consumers are now willing to shop virtually. Consumers now want to shop with minimum exposure and are quickly adapting to digital solutions, in turn opening up opportunities for online retailers to multiply their audience and gain customer trust. E-commerce has been a blessing in disguise during this pandemic.”
Some of the key factors driving this year’s sales, despite recessionary trends, are affordability, smartphone sales, Tier-2 growth wave, all these resulting in more recovery for brands and sellers. Amitesh Jha, Senior Vice President, Flipkart attributes this to an increase in the number of new customers coming to the platform from newer cities, and an increase in demand for certain product categories. “For example, due to the ‘work from home’ and ‘learn from home’ scenario, the range of available devices and the price mix are witnessing a shift,” he says.
He adds: “Laptops, audio and IT peripherals and accessories have become part of ‘essential’ products for customers and are in great demand. Such product categories are seeing an increased uptake, and we are working with sellers and brands to ensure that consumers get access to all they are looking for, this festive season.”
People tend to shop for new vehicles, consumer electronics, white goods, apparel and gifts as well as spend on long pending home furnishing upgrades during the festive season. This year, besides, fashion, beauty and wellness, mobile phones and laptops, e-tailers are expecting 100 per cent growth in home appliances due to extended ‘work from home’. Within this, products like food processors, coffee machines, kitchen gadgets and vacuum cleaners are seeing their biggest traction.
“The home appliances category is in fact expected to be the second largest this year, after mobile phones and computers and likely to contribute close to 15 per cent of the total festive sales GMV,” says Swati Bhargava, Co-founder, CashKaro.
Snapdeal has confirmed that its eshoppers are showing a high interest in products that help prepare for the festival season at home. This includes kitchen appliances, fitness products and gym essentials, ethnic and everyday wear, and personal care products. Flipkart, which rolled out its Big Billion Day, said new consumers increased 53 per cent in the home category and 50 per cent in large appliances plus BGM (beauty & general merchandise), all from Tier-3 cities. Among all transactions, Flipkart informed that there has been a 75 per cent increase in prepaid transactions.
Leading value-focused e-commerce marketplace Snapdeal, which concluded its “Kum Mein Dum” Diwali sale, announced that 80 per cent of shoppers chose a regional or a local brand for their Diwali purchases compared to 20 per cent who opted for national and international brands. The figures were 65 per cent and 35 per cent respectively during the previous festive season.
“Lights, decor, fragrances and furnishings will be given additional attention as India continues to mostly stay home to stay safe,” said a Snapdeal spokesperson, in response to queries sent by BW Businessworld.
Interestingly, Indian consumers shifted to online buying not just in metros but in smaller cities and beyond. The festive season sales are expected to see 45-50 million customers shop online, recording a growth of 70 per cent. Of this, 30-35 per cent customers are from metro cities, 20-25 per cent from Tier-1 cities and the rest from Tier-2+ cities, according to RedSeer’s “Online Festive Sales 2020 Forecast” report.
“It would be safe to say that e-commerce has never seen the degree of acceptance / demand in India as it does now from Tier-3, Tier-4 and Tier-5 cities where users are showing an inclination to make their festive purchases online. We are witnessing 50 per cent more shoppers from Tier 3-6 cities this year, as compared to the previous year,” says Bhargava of CashKaro.
Walmart-owned Flipkart’s flagship Big Billion Day (BBD) sale, which started from October 16, witnessed major demand from non-metro cites with 50 per cent of new customers coming from Tier-3 cities on the first day of sale. Similarly, for rival Snapdeal, whose “Kum Me Dum” Diwali sale started from the same date, saw nearly 30 per cent of the total orders on day one from first-time users and nearly 90 per cent of orders were from Tier-2 and Tier-3 towns.
Moreover, Flipkart informed that 60 per cent of the sellers on its platform are from Tier-2 cities and beyond and its sellers have been onboarded from 167 new cities for BBD. Rival Snapdeal added 1,300 new pincodes which were previously unserviceable to extend its coverage deeper into Bharat.
Not only is the e-commerce industry a direct contributor to the economy’s recovery but is also a huge enabler for a host of other businesses including warehousing and real estate, transport and logistics, food and hospitality, healthcare, among others. Nearly 3,00,000 permanent and seasonal jobs (direct and indirect) are expected to be generated by e-tail giants in various phases. Of these, Amazon, Flipkart, Myntra, Snapdeal and other platforms are expected to hire 70 per cent.
Moreover, around 60 per cent of the total jobs will be generated in the logistics space, with another 20 per cent being created in warehouses and customer service units. The remaining ones will be created by logistics firms, including Ecom Express, Delhivery, and Shadowfax.
Amazon India has announced that it has created more than one lakh seasonal jobs in the country ahead of the festive season to meet the higher demand it anticipates in the coming weeks. The jobs will cut across a variety of roles across its fulfilment centres and delivery network, including part-time flexible work opportunities as independent contractors with Amazon Flex.
“These seasonal associates have joined more than tens of thousands of regular associates at Amazon’s fulfilment centres and delivery network across the country to help pick, pack, ship and deliver customers’ orders more efficiently. The seasonal hiring this year ahead of festive is higher than 2019,” Amazon India said in a written response to a query.
The way forward
It is safe to assume that the ecommerce industry is among the few industries that have successfully bounced back in the Covid-19 aftermath. With millions of firsttime users from across the country coming online to shop due to the pandemic, India’s e-commerce sector is currently witnessing an unprecedented boom, and giving rise to hundreds of thousands of jobs across adjacent sectors.
According to RedSeer, while India’s retail sector is pegged at about $780 billion this year, the country’s online commerce is expected to grow fourfold to $150 billion and likely to contribute 4 per cent of the GDP by 2022. But the moot question is: will online commerce ultimately help in reviving India’s economy? Industry pundits are not overtly enthused by the scorching growth of the ecommerce sector in the country and would like to see offline retailers also registering positive growth in the long run for the whole sector to emerge from the slump.
As Rajat Wahi, Partner, Deloitte India maintains, “It is important to remember that e-commerce only accounts for 4-5 per cent of total retail in India, and even a doubling of e-commerce this year will not make up for the shortfall that overall retail will face due to reduced footfalls in malls and high streets, and net overall retail may still decline by 20-30 per cent across many categories.”