Supply creates its own demand. This law of markets by French economist Jean-Baptiste Say might partly sum up e-commerce festive sales this season. With top e-commerce companies such as Amazon, Flipkart and Snapdeal steadily making inroads into Tier III regions and beyond, small cities and towns including Alwar (Rajasthan), Anantapur (Andhra Pradesh), Visakhapatnam (Andhra Pradesh), Silchar (Assam), Patna (Bihar) and Tinsukia (Assam), drove online sales during the festive month (October) this year.
While the online shopper base expanded by 20 per cent this year, estimates suggest that Tier II and beyond cities accounted for more than 60 per cent of online orders. Doubling of orders from smaller cities vis-à-vis last year also signals a broad-based economic recovery post the pandemic, with significant increase in income and employment levels reported by rural India in September. Data by the Centre for Monitoring Indian Economy (CMIE) shows that the increase in employment ahead of the festive season was disproportionately higher in rural India, with 6.5 million of the 8.5 million jobs added in September coming from rural regions.
An improved vaccination rate, buoyant rabi harvest, good kharif prospects, government transfers and the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) have provided impetus to rural demand, according to the October monthly bulletin of the Reserve Bank of India (RBI).
Reverse migration from larger cities due to Covid-19 is also attributed to the behavioural shift, which saw smaller towns experimenting with online shopping. While the pandemic led to faster adoption of digital channels by both buyers and sellers, factors like steep discounts, and additional deals through banks and credit cards attracted buyers.
Strengthening of supply chains and widening of logistics networks by e-commerce players also ensured that the average delivery timelines were cut by an average of five hours, according to a recent report by consulting firm RedSeer. Amit Agarwal-led Amazon India enabled one-day delivery in remote towns, including Mangaldoi (Assam), Mohanur (Tamil Nadu) and Dehra Gopipur (Himachal Pradesh). Walmart-owned Flipkart strengthened its kirana delivery programme, adding more than 100,000 kirana partners ahead of the festive season. Kunal Bahl’s Snapdeal also opened 130 logistics hubs across the country, allowing rapid pickups from sellers and faster deliveries to buyers.
While the smartphone category remained a big seller with Rs 68 crore worth of devices selling every hour, according to a RedSeer report, the fashion category also made big gains with people now ready to step out of their homes post the pandemic (see The Numbers Game). The segment accounted for 17 per cent of total sales this year during the peak festive sale period (October 2-10), up from 14 per cent last year.
Even though the e-commerce sector in India comprises barely 4 per cent of the total retail consumption, more than 60 per cent of total smartphone sales took place online, up from 55 per cent last year, according to Counterpoint Research. This is significantly higher compared to the UK (35 per cent), China (31 per cent), the US (25 per cent) and South-East Asia (20 per cent).
The number of premium smartphones sold during Flipkart’s Big Billion Days doubled compared with last year, with 41.78 per cent of these purchased by customers in Tier III cities, reflecting increasing incomes and aspirations. In fact, the consumer electronics segment, including smartwatches and fitness bands, saw a 100 per cent jump compared with last year. With the ongoing work-from-home trend, the home improvement category also grew by about 80 per cent year-on-year. As per cashback and coupons site CashKaro (which helps users shop on e-commerce sites), people preferred LG and Whirlpool for air conditioners, while Samsung, Bosch and Whirlpool saw the highest demand in the washing machines segment. As for laptops, Asus A15, Dell Inspiron, Asus Vivobook and HP 14 saw sweeping demand throughout the sale period.
RBI data showed a 30 per cent month-on-month jump in digital transactions between October 1 and 11 in value terms at Rs 53,431 crore. Of this, 54 per cent was through e-commerce platforms. According to RedSeer, Bengaluru-based Flipkart emerged as a leader with its Big Billion Days, occupying an impressive 64 per cent market share during this period, followed by Amazon accounting for 28 per cent sales through its Great Indian Festival (a month-long event). The decade-old homegrown platform Snapdeal reported 98 per cent growth in sales volumes compared with last year during its Toofani Sale.
“The festive season this year has been driven by the larger theme of affordability. Constructs were built carefully by the platforms through buy-now-pay-later (BNPL) schemes and bank tie-ups, as well as seller-driven discounts to serve up the most competitive prices of top leading brands and serve the aspiring customer,” says Ujjwal Chaudhry, associate partner, RedSeer.
Site traffic of CashKaro increased by eight times year-on-year and sales were up five times compared with last year in the first week of sale (October 3-10). The platform saw 45 per cent sales coming from Tier II-VI cities. “It has become clear that users are keen on making their festive purchases online as opposed to offline. Over the last year, we have seen a gradual and steady uptake in the number of orders from Tier III+ cities,” says Swati Bhargava, Co-Founder, CashKaro and EarnKaro (CashKaro’s social cashback app). Over the last year, users have become accustomed to the fact that branded products can be purchased at a great discount online, adds Bhargava. “There has been a behavioural shift that has familiarised the user and made online shopping a habit. Hence, targeting Tier III and beyond cities is key when it comes to driving sales,” she says.
For Snapdeal, too, nearly 60 per cent of the total orders came from Tier III towns, with those from Alwar (Rajasthan), Anantapur (Andhra Pradesh), Shimoga (Karnataka), Chital (Gujarat), Dhanbad (Jharkhand), Imphal (Manipur), Silchar and Tinsukia (both Assam) nearly doubling compared with last year. Other small cities like Senapati (Manipur), Reckong Peo (Himachal Pradesh), Kupwara (Kashmir Valley), Roing (Arunachal Pradesh), Sirmapur (Himachal Pradesh) and Someshwar (Uttarakhand) also joined the e-commerce frenzy this year.
For Flipkart, nearly half of all orders came from Tier III cities and beyond. Amazon, too, reported 21 per cent increase in the number of sellers receiving an order from Tier II/III cities. “Nearly 65 per cent of customer orders and over 85 per cent of new customers on Amazon.in are from Tier II and below geographies… Prime subscription continues to be a customer favourite across India, with two out of three new Prime signups coming from Tier II and III cities, and customers shopping in eight Indian languages,” says Manish Tiwary, Vice President, Amazon India. The platform launched shopping experiences in regional languages such as Tamil, Telugu, Kannada, Malayalam, Bengali and Marathi.
Tarun Pathak, Research Director of Counterpoint Research, attributes the trend to reverse migration due to Covid-19. “People returning home from large cities post Covid-19 have introduced online shopping to their family and friends. Earlier, there were apprehensions over security of financial details, quality of products being delivered, etc. Now, they are increasingly finding online shopping more convenient,” points out Pathak.
Tier III cities accounted for a big chunk of online sales due to Covid-19-related restrictions last year, too, but the growth is higher this year as people have become more comfortable buying online, says Satish Meena, an independent analyst.
To be sure, the pandemic didn’t just affect buyer behaviour, but seller behaviour as well, with many from smaller cities logging on to e-commerce marketplaces. Flipkart had more than 55 per cent new sellers this season, with 57 per cent of these hailing from Tier II, III and beyond cities such as Tirupur (Tamil Nadu), Panipat (Haryana), etc. It also added kiranas from regions, including Khammam (Telangana), Bareilly (Uttar Pradesh) and Junagarh (Odisha), ensuring timely deliveries.
The platform connected with more than 100,000 kirana partners from across the country. Snapdeal, too, onboarded first-time sellers from many small cities such as Balasore (Odisha), Suri (West Bengal), Anupgarh (Rajasthan), Bharuch (Gujarat), Dhule (Maharashtra), Kalol (Gujarat), Malerkotla (Punjab), Sirsi (Karnataka) and Thodupuzha (Kerala).
Delivery time is a distinguishing factor for small cities, says Pathak of Counterpoint. “Smaller cities wouldn’t like to shop online if the order takes seven days to deliver. Faster deliveries due to the expanding network of e-commerce players are bringing more shoppers onboard,” he says.
Not surprisingly, Amazon created more than 110,000 seasonal job opportunities across its operations network ahead of its Great Indian Festival. It tied up with nearly 150,000 Amazon-enabled local shops, kiranas and neighbourhood stores across the country. The Seattle-based e-commerce player also expanded its fulfillment network by increasing its storage capacity by 40 per cent, with more than 60 fulfillment centres in 15 states offering 43 million cubic feet to sellers. The expansion and launch of new and exclusive fulfillment centres for large appliances and furniture categories in cities such as Gurugram, Patna, Ahmedabad, Coimbatore, Lucknow and Hyderabad ensures faster deliveries to close to 15,500 pin codes.
“We have ramped up the delivery infrastructure and have close to 1,850 Amazon-owned and partner delivery stations,” says Tiwary. Amazon is also expanding its 1-day, Same Day and Sub-Same Day network to reach smaller towns, and has seen four times year-on-year increase in its Same Day deliveries and three times increase in Sub-Same Day (two-hour) deliveries.
Snapdeal, which added 130 new logistical hubs this year, can now ship 60 per cent of the orders within 24 hours of receipt.
Days ahead of its Big Billion Days sale, Flipkart connected with over 5,000 offline branded retail stores from more than 300 cities, and plans to get another 5,000 by the end of the year. It onboarded around 75,000 small and medium enterpreneurs ahead of the festive season. “Flipkart has invested heavily in setting up a tech-enabled supply chain to help lakhs of sellers and has been pivotal to pathbreaking customer experience offerings that helped build trust in e-commerce,” says Hemant Badri, Senior Vice President, Supply Chain, Flipkart. This year, it also started contactless online onboarding, inviting kirana partners to upload their details along with required documentation. “Post a detailed verification check, kirana partners were brought on and imparted training through specially created technology tools, including app-based dashboards and digital payments,” says Nandita Sinha, Vice President, Customer and Growth, Flipkart.
The Walmart deal helped, too, as its strong wholesale cash-and-carry B2B network supplemented Flipkart’s efforts to widen its reach. “The retail ecosystem saw a 1.3X jump in the number of kirana and retail members onboarding the platform this Big Billion Days. Indicating a shift in trend to digital commerce for B2B, over 45 per cent of Flipkart Wholesale’s customer base transacted online and 35 per cent of them opted for self-service,” says Sinha.
Strengthening last-mile reach, Flipkart added more than a thousand new delivery hubs across the country, as well as 66 new large-scale fulfillment and sortation centres in states such as Assam, Chhattisgarh, Haryana, Gujarat, Karnataka, etc.
So, what’s driving this demand? The second wave of the pandemic was seen to hit the rural section harder, denting consumption demand. The recovery, however, has been swift. As per CMIE data, in September, right before the festive season, most of the jobs were added in rural India. Driven by the construction and manufacturing sectors, rural India, in fact, accounted for 69 per cent jobs in the month.
The overall unemployment rate also declined sharply from 8.3 per cent in August to 6.9 per cent in September, according to CMIE. In its latest monthly bulletin for October, the RBI noted that the accelerated pace of vaccination and the plateauing of new infections are facilitating faster resumption of contact-intensive services and giving a fillip to private consumption.
Household credit is also improving gradually, driven by credit card transactions and personal loans, supporting consumer durables financing. “…The digital payment ecosystem is poised for stronger growth on the back of the growing footprint of e-commerce in lower-tier cities and rising awareness about digital modes,” the RBI said in its report.
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