E-commerce retailers are expected to garner sales worth Rs 90,000 crore this festive season, 18-20 per cent higher than last year, according to a report by Redseer Strategy Consultants.
“We project the 2023 festive season GMV (gross merchandise value) for the entire festive month for India e-tailing to be around Rs 90,000 crore, up 18-20 per cent from last year’s festive month sales,” said Redseer in the report. “This will be driven by about 140 million shoppers who are expected to be transacting online at least once during this festive month.”
This is the 10th year of the festive season sales for online retailers in India. The first ever Indian e-tailing festive season sales happened in 2014. Over these 10 years, Indian e-tailing has transformed almost entirely as the annual GMV (gross merchandise value) for overall e-tailing industry has grown almost 20 times in the period. In 2014, the industry clocked a GMV of Rs 27,000 crores in the whole year. Redseer said this year (2023) the same is expected to be approximately Rs 5,25,000 crore. In the process, the number of annual transacting users has jumped 15x.
“Over the last several quarters, we are seeing enhanced GMV contributions from categories beyond electronics,” said Mrigank Gutgutia, Partner at Redseer Strategy Consultants. “While electronics sell a lot in the festive period, looking at the bigger picture and comparing the festive sale periods over the last several years, there is a clear trend of category diversification.”
Indian e-tailing has increasingly become the litmus test for consumer demand in India. The 10th festive season sale period is even more significant this year considering the recent slowdown in consumption and the almost 3 years of external shocks on the economy.
Large e-commerce companies such as Amazon and Flipkart are gearing up to host their mega festive sale events. Flipkart is expected to conduct its The Big Big Billion Days (TBBD) festive sale in October. Amazon is also expected to host its flagship festive sale event Great Indian Festival around the same time. Flipkart said it has achieved a significant milestone of over 1.4 million sellers on its platform, a growth of over 27 per cent of sellers on the platform since last year.
Pre-Covid, the year-over-year growth rates of nominal private final consumption expenditure (PFCE) used to be around 8-9 per cent. However, due to continuous external shocks like the Covid-19 pandemic and the Russia-Ukraine conflict, there was significant flux in the market. In the last couple of quarters of FY23, there was material consumption slowdown due to tightening liquidity conditions.
However, Redseer said the year-over-year growth for PFCE has bounced back to 9 per cent and several stabilizing factors are kicking- in. For instance, interest rates are maxing out, countries aiming to resolve the Russia-Ukraine conflict, and the Indian economic growth numbers are coming in strong. “So, there are meaningful tailwinds to support a relatively strong festive period this year,” said Redseer.
In this macro context, there was significant flux in e-tailing sales as well. While growth was strong after Covid, the last two quarters have been relatively muted. The e-tailing industry recorded approximately 10 per cent year-over-year GMV growth (Jan – Jul 2023 vs. Jan- Jul 2022). However, with the broader economy coming back to business-as-usual levels, this festive season is likely to catalyze online consumption demand.
Further, this year’s festive season will see increasing contributions from higher margin categories like beauty and personal care (BPC), home and general merchandise and fashion.
“This is good for the ecosystem as it shows consumers’ willingness to purchase multiple categories online and more brands coming to cater to their needs,” said Gutgutia. “We expect increasing GMV contributions from non-electronics categories like fashion, beauty and personal care, home and general merchandise this festive period.”
Also, there may be persistent premiumisation leading to rising average selling prices (ASP) and increasing ads and promotion revenues. This will possibly make this year’s festive season the most efficient from a margin perspective.
Beyond category diversification, Redseer expects multiple other sub-themes to play out. For example, D2C (direct to consumer) brands are expected to be more prominent this festive season. “Projecting these to the long term, we expect D2C brands to grow 1.6x as fast as the broader eTailing market (CAGR 2022-27),” said Redseer.
In terms of city-tier-wise growth, metros have been growing faster than Tier 1 and Tier 2+ in the last few quarters. There was a growth of over 10 per cent for metros compared to over 8 per cent for other city tiers. However, Redseer expects robust growth across city tiers this festive season.
Additionally, new-age technology solutions like generative AI are being more widely adopted in multiple use cases during the sale period. Redseer said this will also lead to better and novel consumer experiences and drive stronger growth momentum.
Companies such as Walmart-owned Flipkart, Amazon, Meesho, Reliance’s JioMart and Tata Group are competing with each other to tap the booming Indian e-commerce market. India’s ‘mass’ segment consumers, with an average annual income ranging from Rs 2.5-10 lakhs, are projected to drive around $135 billion in e-commerce gross merchandise value (GMV) of the total $300 billion e-commerce opportunity by 2030, according to earlier Redseer report.
As of 2022, India has 65-70 million households transacting on e-commerce platforms monthly, which is projected to go up to 120-130 million by 2030. Of this, mass consumers are expected to contribute to over 80 per cent of the incremental transacting households.
· 2023 online festive sales will catalyze consumption demand as the economy emerges from the turbulence of the last 3 years
· This festive season can potentially be the most efficient one ever in terms of margins, with evolving category mix and higher ads & promotion revenues