Tier II+ cities drive India’s festive e-commerce sales

India’s e-commerce sector powered through the festive season, achieving a gross merchandise value (GMV) of approximately $14 billion—a 12% rise over last year—according to Redseer Strategy Consultants’ analysis of the 2024 festive season, which spanned from September 15 to October 31.

This growth reflects a resilient consumer sentiment across categories, as quick commerce, electronics, fashion, beauty and personal care (BPC), home furnishings, and groceries all experienced heightened demand. Notably, tier II+ cities emerged as key contributors, with shoppers showing increased willingness to spend.

A closer look at consumer behaviour this year reveals a dynamic trend. While overall shopper growth plateaued, there was a marked increase in per-shopper spending. This shift underscores a trend toward both premium products and budget-friendly items, creating a balanced demand across price points.

High- Average Selling Price (ASP) products, like large appliances and premium electronics, attracted strong demand in metro areas, while affordable fashion and BPC items drove growth in other regions, keeping the festive momentum alive throughout the country.

Analysing the report, Kushal Bhatnagar, Associate Partner of Redseer Strategy Consultants says, “The 2024 festive season reassures us of Bharat’s (tier II+ customers’) spending potential. With these customers further cementing their trust in e-commerce and bringing a larger share of wallet online, we are ready to witness a continued spell of e-commerce growth in the next few years. On the other hand, it is heartening to see how metro customers continue to embrace quick-commerce for almost everything they need, at any time of the year (festive or non-festive). As the quick-commerce wave expands materially beyond the Top 3 cities, we are likely to witness a large chunk of the Indian population receiving products at their doorstep within 10 minutes—which will be truly transformative.”
 
Key trends that shaped e-commerce festive season 2024
 
> Smaller cities displayed the highest growth rate in spends. Availability of discounts enabled tier II+ customers to afford high-ASP products across categories.

> There was a market rise in prepaid transactions which enhanced the shopping experience in the smaller towns.

> Although new shopper growth slowed, per-shopper spending rose by 5-6%, signalling a potential long-term trend. With around 250 million annual shoppers, e-commerce may be nearing its shopper base potential, yet significant room remains for deeper wallet penetration.

> Fashion-led festive growth registered a 3X surge over business-as-usual months, driven by ethnic wear and accessories. Tier II+ cities saw high demand for unbranded ethnic items, jewellery, and women’s accessories, while Tier I markets favoured premium and international brands. D2C brands also thrived, benefitting from increased digital visibility.

> Premium electronics, including air conditioners and large appliances, experienced significant demand due to prolonged summer conditions.\

> The quick commerce sector also extended its offerings to include electronics and home appliances, meeting festive demand through expanded delivery hours. Non-grocery sales spiked on key festive days, with Delhi, Mumbai and Bangalore being the top-performing cities.