The Indian ecommerce industry is gearing up for the upcoming festive season, which is expected to see robust growth after two pandemic-stricken years. Online sales are expected to rise 28% year-on-year to $11.8 Bn during the upcoming festive season, a report by consulting firm RedSeer Consulting said. During the first week of the festive season, online sales are expected to rise to $5.9 Bn as compared to $4.8 Bn in 2021.
Historically, the festive season has always seen high demand in three categories – fashion, mobile and electronic appliances. However, the last two years witnessed subdued demand in the fashion category due to the pandemic.
With life returning to normalcy gradually, the fashion category is expected to see high growth this year. Mobile and electronics have always driven online festive sales growth and it will continue to grow. In addition, fashion will also see very strong growth as a category, said Vineet Sajit, Partner, Deals, Retail and Consumer PwC India.
According to Rajat Wahi, partner at Deloitte India, the festive sales, coming after 2.5 years of disruption, could see very strong sales across all non-essential categories like electronics, apparel, home products, accessories, and automobiles, among others.
“It is coming on the back of a lot of “revenge” buying already having been done in the last quarter, where we have seen footfalls reach post-covid levels, but there is still an upbeat expectation of a month-on-month growth of 15-20% in October,” Wahi added.
Along with fashion and apparel, consumer electronics, and home decor and furnishings categories, food and beverages category is also expected to be popular this year, Bharati Balakrishnan, country head and director of Shopify India told Inc42. Other trending categories such as fitness accessories, gardening equipment, kitchen accessories, and costume jewellery will be very popular on festive season shopping lists, she added.
“In recent years, there’s been a major change in how and where Indians shop. While most metro consumers regularly shop online, a Shopify research found that half (53%) of Indians from non-metros now strongly prefer online shopping. This creates an opportunity for merchants to accelerate growth over the festive season by reaching consumers that were previously offline or out of reach,” Balakrishnan said.
D2C To Bring Fashion Back As A Lead Category
In 2022, over 165 Mn Indians shopped online, which is expected to grow to 350 Mn by 2025. Analysts believe that many of the online shoppers are expected to start their online journey with fashion as a core category, particularly in cities beyond Tier-2. According to research firm Technavio, the online fashion retail market share in India is expected to increase by $22.97 Bn from 2021 to 2026 at a CAGR of 18.83%.
According to Inc42’s latest report, ‘The State of Indian Ecommerce, Q3 2022. In Focus: D2C’, the online fashion market in India is poised to reach $43 Bn+ in 2025 from the current projection of $22.7 Bn in 2022. Overall, the D2C market in India, which has over 50K+ brands currently active, is projected to become a $300 Bn opportunity by 2030.
With D2C gaining prominence among online shoppers, fashion brands such as FabAlley, Fablestreet, Karagiri, Indya, Lenskart, Zivame, Clovia, Dressberry, Shoerella, Voylla, Melorra among others, have been leading the charts. The D2C fashion brands are being recognised for recall value, ease of shopping, quirky and fashionable designs, and customised offerings, among others.
The report also said that the FMCG segment beat the fashion category among D2C players in terms of funding during Q2 2022. Of the total $0.6 Bn funding raised by D2C startups, 59.7% went to FMCG brands, while fashion brands raised 32.5% of it. The scenario was almost the opposite in Q2 2021, as depicted in the graph below.
This year, analysts expect the fashion category to turn the tables once again due to high customer engagement and enthusiasm.
Impact Of Macroeconomic Factors On Festive Sales Growth
Despite the optimism around the festive season, macroeconomic factors such as inflation can prove to be a damper for ecommerce sales.
“Looking at the K-shaped recovery we are seeing, where urban markets are seeing strong growth but rural markets have seen subdued demand due to inflationary pressures from rising food and fuel prices, along with the global slowdown due to inflation, interest rate hikes and increasing gas prices, we may see consumers holding back consumption in anticipation of some slowdown in India as well,” Deloitte’s Wahi said.
However, people will continue discretionary spending. For instance, the travel segment has been on an upward trend, Sajit said, adding that consumers are spending on discretionary items.
“Considerably, there is always a lag between the real economy and the consumer economy. If the real economy is already showing sluggish signs, the consumer economy will start slowing down after two or three months. So, the impact on the festive season will not be high. Even if there is an impact, it will be on large-ticket items,” he elaborated.
Pre vs Post Pandemic: Growth Of Online Retail In India
According to research firm Statista, ecommerce sales have risen every year since 2016, making India the fastest growing ecommerce market. While in the earlier years, the focus was more on increasing the customer base in Tier-1 cities, by 2019, players with deep pockets started extending their arms towards Tier-2 cities with a focus on local artisans.
For instance, in July 2019, under its program Samarth, Flipkart announced a host of initiatives and benefits for artisans, including dedicated support for onboarding, cataloguing, account management, business insights, dedicated seller support, reduced commission, and warehousing support.
This was followed by the August launch of Amazon Karigar, featuring over 55K products, including more than 270 unique arts and crafts from 20 Indian states. Lowering carbon footprint and experimenting with omnichannel as a strategy were also on the cards for key ecommerce companies.
The onset of the pandemic and the subsequent restrictions led to a rise in online retail, but buying became more need-based. The ecommerce companies also had to ramp up their logistics facilities to meet the demand amid all limitations.
In 2020, ecommerce sales during the first week of the festive season amounted to $3.64 Bn, compared to $2.39 Bn during the festive season in 2019 in India. The GMV during the festive season stood at $7.4 Bn in 2020. However, the focus was more towards mobile/electronic appliances as well as FMCG as categories instead of fashion.
In 2021, the GMV rose to $9 Bn during the festive season, while it is expected to increase 28% to $11.8 Bn in 2022, according to RedSeer.
The ecommerce industry has already begun the preparations to meet the increased demand during the festive season. Flipkart’s fashion brand Myntra is creating over 16,000 jobs for roles in delivery, logistics and warehouse handling, while logistics startup Xpressbees is increasing the capacity and footprint of its warehouses to reduce the overall time for delivery.
While all the players in the ecommerce market are bullish about the festive season, we would have to wait till the end of the festive sales to find out which categories outperformed and drove sales growth.
(With inputs from Meha Agarwal)
The post Online Festive Sales 2022 — Fashion, Smartphones To Drive Festive Season Ecommerce Rush appeared first on Inc42 Media.
The Indian ecommerce industry is gearing up for the upcoming festive season, which is expected to see robust growth after… FeaturesInc42 Media