Diwali festive offers: E-commerce companies' sales seen up 50% on year at $3.3 bn in October
E-tailers are on track to generate highest-ever monthly sales over the course of the festival period this year
E-commerce companies' sales during October this year, the festival month, are expected to be 50 percent higher than a year ago simply because of the attractive offers being lined up for the consumers. The range of products that are on sale and easy-to-purchase schemes devised by the companies are a killer combination that consumers may find difficult to ignore. Sector watchers see online sales beginning from 14 October to generate $700-900 million.
E-tailers are on track to generate highest-ever monthly sales over the course of the festival period this year (20 September-20 October). This period has three mega sale events, according to RedSeer Consulting, a research and advisory firm. The sale during September 20-24 was to the tune of $1.5 billion, October 4-8 $500-600 million, it says.
"If we also add the BAU (business as usual) days falling in this period, we expect that e-tailers would generate $3.3 billion of sales (Rs 20,000 Cr) for the whole 30-day (1-31 October) festival month," it said in a report.
What gives the sector confidence to come out with sales so close to each other? There are three reasons why they bet on festival sales. For one, there has been some key investments in e-commerce. In August, Flipkart raised an estimated $2.5 billion from SoftBank Vision Fund, making the fund created by Japanese conglomerate SoftBank one of the biggest shareholders of India's largest e-commerce player. Paytm also got a boost when parent company after One97Communications Ltd received $1.4 billion funding from SoftBank in May 2017.
Previous sales during this festival season were ‘bumper’ sales and there is no reason why Diwali sales should not follow the trend, says Mrigank Gutgutia, head, consumer internet at RedSeer. Another reason why online sales have become attractive during the festival season is that what offline offers in form of discounts and EMI schemes have been adopted by online retailers making festival offers irresistible for shoppers.
Though the economy is not doing well with job loss across sectors including the IT sector, the sentiment during festivals, especially a big one like Diwali which is looked forward to by consumers across the country and with some firms giving bonuses to employees, is upbeat. The e-commerce players have played into this consumer sentiment by offering discounts and offering EMI schemes. Besides, there are exchange schemes like give back your old phones and get money in exchange which make online shopping irresistible.
The third reason why online is getting increased traction irrespective of only a small percentage shopping of internet-savvy population is because all the major players have an online presence and offer the same products and discounts making shopping an easy experience for the shopper. Also smartphone penetration has gone up making the use of internet accessible to a large number of users across the country. The country’s mobile phone subscriber base reached the one billion users’ mark, according to the Telecom Regulatory Authority of India (TRAI). In 2016, smartphone user base in India grew 18 percent annually in 2016 compared to the global smartphone market which grew only three percent.
Though it may look like sales have been happening in rapid succession, the fact is that the figures of shoppers and sales are going up in every sale unlike in 2016 which was a year of difficulties. "Due to heavy discounting by e-tailers throughout 2015, there was a significant percentage of GMV (gross merchandise volume) which was being driven by retailers and wholesalers buying goods and in turn selling it to end customers. E-tailers started to clean this mess post the completion of the festival season, resulting in an immediate fall in retailer orders and bringing in a much-needed correction for the market," said Anil Kumar, CEO, RedSeer, to The Economic Times.
The most-bought product online irrespective of the festival sales will continue to be mobile phones. It is so during the festival sales too. As was the case during September discount sales. Flipkart claimed it sold 1.3 million smartphones within the first 20 hours of the commencement of the sale.
“When the majority doesn't have a smartphone, the upside for any vendor is to sell aggressively in India simply because the growth story is good,” says IDC’s Navkender Singh, head, mobile devices, India & South.
A smartphone is considered a status symbol. That is why entry level users and those in the mid-level too, wait for the once-in-a-year deep discount sales to upgrade their phones. Smartphone purchases move through a cycle, and they always move ahead. So if a person has used an entry level phone, he is highly unlikely to purchase another phone in that category but would prefer to buy a higher priced phone.
According to Gutgutia, this category will continue to rule the roost as it is still in the growth stage and the penetration gets deeper. In terms of GMV or total sales volume transacting through the platform mobile phones will be at the top followed by fashion and home appliances. Fashion because the category has grown online and there is something for everyone at every price range while home appliances will attract more consumers with low EMI schemes and exchange offers to lure in shoppers.
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