Festive season sales in India: Consumer insights beyond the hype, hysteria and hoopla
By : Flytxt
The top Indian e-commerce brands recently concluded their 5-day online festive season sales bonanza in the 1st week of October. The event witnessed sales soaring to newer heights. Riding on consumers’ festive-season spirits coupled with better monsoon season and improved GDP growth projections, the e-commerce industry has been able to bring onboard numerous new consumers, reach many unserved locations and truly deliver on the explosive growth promises.
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Decoding the buoyant sales: Thousands of deals, millions of deliveries and countless delights
The festive season sale has turned out to be another blockbuster this year with top e-commerce brands claiming to have shipped 35-40 million units of items cumulatively in this period. The combined sales among the top 3 e-commerce brands during the 5 day sale season was pegged at around Rs. 6,500 -7,700 crores (US $1-1.2 billion) up 20 percent over the previous year, according a report in Financial Express.
Let’s unbox the consumer behaviour exhibited during the 120 hours marathon sale event to decode the drivers beneath such impressive numbers, with a glimpse of the impacts delivered through e-commerce brands’ sales, marketing, distribution and partnership strategy.
No single Numero uno brand across territories: The great Indian diversity in action
There is as much regional diversity in the Indian e-commerce industry as there is in India itself. North eastern states and union territories showed lesser number of e-commerce users during festive season sale. The states with low Per Capita Income (PCI) and literacy rates states such as Bihar, Chhattisgarh and Jharkhand witnessed low e-commerce penetration. However, much to the delight of the e-Commerce brands, among few states with the lowest PCI – Uttar Pradesh, Madhya Pradesh and Orissa surprised with a relatively larger number of consumers purchasing online during festive season sale.
Among the states on the other end of the PCI and literacy rate spectrum – Maharashtra, Tamil Nadu, West Bengal and Gujarat clocked significantly higher share of e-commerce purchase during festive season. The states that performed well during the festive season sales happen to be among the top 10 most populated states in India.
The preference of consumers for e-commerce brands varied considerably across the geographic regions. Specific regions witnessed specific brands taking a decisive lead during the festive season sales – one player reigned in North East region, where as other one swept the central and southern region. Interestingly, North Indian states barring Punjab had no single brand taking a huge lead and witnessed two brands co-owning the pole position.
Consumers are smarter than we think: Planned buyers outshine Impulse buyers
During the festive season sales, brands aggressively promote themselves through a variety of channels and using an array of pricing, promotional and partnership strategies. The primary objective of such festive season sales may appear to influence impulse buyers with heavy discounts and cash-back offers in driving purchase. However, once we dig deeper, the dichotomy of planned buyers and impulse buyers becomes apparent with buyers planning their purchase during the festive season sales much in advance. These planned buyers also tend to consolidate multiple items purchase on one website rather than hopping websites in search of a better deal.
With only 17% of the customers being deal seekers during the festive season sale, even less than the corresponding numbers during normal season, signifies how e-commerce customers have evolved in terms of considering factors other than mere discounts for their online shopping.
Most of these deal seekers hailed from union territories, north eastern states and southern states. The bigger states such as West Bengal, Uttar Pradesh and Andhra Pradesh witnessed consumers’ stickiness to one website during the sale season. Interestingly, Mumbai witnessed a surge in deal seekers while Delhi had a relatively lower share of multi-website shoppers during festive season.
A cornucopia of future growth potential: Festive season sales to continue in coming years
If we dissect the business generated during the festive season sales, there is a healthy participation from new consumers.
With rising internet penetration, smartphone adoption and favorable government initiatives around digital India, the E-commerce industry is at an inflection point for next phase of explosive growth era. India has an internet user base of about 470 million (35% of population) as of September 2016 and is expected to grow at an accelerated pace. Despite being the second-largest user base in world, only behind China (650 million, 48% of population), the penetration of e-commerce is low compared to developed markets like the United States (266 million, 84%). The future growth potential of e-commerce industry in India is undoubtedly a massive one with BCG projecting the e-commerce industry in India to touch $60-70 billion by 2019. E-commerce brands are expected to continue their colossal spend on marketing and logistics for a successful festive season and secure e-commerce future until a steady state is reached.
If one looks across the country, Maharashtra and Gujarat were at the forefront, in terms of new customer acquisition. North east region witnessed miniscule net additions which can be attributed to a below-par distribution infrastructure in the region. It also casts doubts on effectiveness of promotions reaching these remote regions.
For most of the brands the 2nd day of their festive-season sale witnessed the spike in transactions, with one of the players claiming to have received sales worth around USD 200 million on the 2nd day of sales season, the highest ever single-day sale in the company’s history. The reason for this can be attributed to the consumer’s attitude for a wait and watch approach to making purchases. Substantiating the worth of a longer branding campaign, one of the e-commerce brands witnessed the peak on the very first day of their campaign launch where as for other brands, peak happened on 2nd day. Capturing consumers’ attention with an early and effective branding campaign can help brands to pull consumers on the launch day of the festive season sale.
Payment service providers tie-ups galore: The collaborative orbital jump
The growing trend of online shopping is not only good news for e-commerce portals but payment service providers, i.e. banks and credit card companies, are also betting on the online shopping trend. With the growing internet penetration in India the payment solutions offered by payment service providers have an equally impressive growth story. The rise of fin-techs and m-wallet is not just yet life threatening for conventional payment service providers as m-wallet had a miniscule share (< 6%) of transactions towards e-commerce purchase during festive season sales.
In order to grab a larger market, e-commerce brands are also extending additional affiliate discounts to consumers with partnership with payment service providers. The e-commerce brands benefit significantly, as the payment service providers tie up offers payment gateways to e- commerce brands allowing them to offer their goods and services to a large number of people across the country. One of the players witnessed more than 57% of online payment transactions through its partner payment service provider. Another brand’s dominance in the overall festive season sale was due to its ability to put on a better show in smaller cities. The success of this player in the tier II and tier III cities can be attributed to its partnership with a leading bank with strong branch network in rural and semi-urban regions. We can expect more of such partnerships in future to drive new consumer growth from tier II and tier III cities.
The road ahead for e-commerce: Efficiency, Empowerment and Excitement
The massive population in India armed with smart gadgets is hungry for more. Aided by declining broadband subscription prices and launch of 4G services, consumers will script the e-commerce success story in the country. India Post is shaping up a large opportunity in terms of remote location accessibility thus reducing the need for e-commerce brands to ‘own’ last-mile delivery.
The e-commerce brands on their part need to embrace these opportunities and go on a perennial new customer acquisition overdrive with branding and promotion campaigns. With a deep focus on customer, e-commerce brands need to deliver unique and differentiated experience to consumers in terms of product availability, timely delivery and proactive customer care. New vendor acquisition, logistics investments and a broader partnership strategy are on the cards for e-commerce brands to ensure the future of Indian retail is digital and delightful.