Festive sale slowdown: Ecommerce sales fall nearly 10% as smartphone prices rise

Amazon and Flipkart, both e-commerce giants, have officially commenced their biggest festive sales of the year, bringing exciting deals and offers across electronic products and categories. However, the sales faced a slow start, with a 7-10% year-on-year decline in gross merchandise value (GMV) during the first four days of the festive shopping season, according to Datum Intelligence data reported by the Economic Times.

Must read: Amazon GIF, Flipkart BBD sale: 5 QLED TVs from Samsung, Xiaomi and more starting from ₹31,000

Why are festive sales facing a decline?

Reportedly, online marketplaces recorded gross merchandise value (GMV) of around Rs 29,800 crore to Rs 30,900 crore in the first four days of the festive sale season, compared with Rs 33,200 crore during the same period last year. The ET report stated three reasons behind the slowdown:

• Higher smartphone prices: Smartphone brands have significantly increased prices of their device due to growing pressure on component costs and memory chip shortages. 
• No GST-cut boost: Last year's festive season benefited from a demand boost following GST cuts. That additional stimulus is missing this year.
• Quick commerce rise: The majority of festive spending is said to be diverted towards quick-commerce platforms.

Must read: Amazon, Flipkart Festive Sale: 7 best phones to watch under ₹30,000 from Samsung, Motorola, and others

Despite the slowdown, Amazon and Flipkart have highlighted growing demand for the premium electronics segment. Amazon’s Android smartphone sales in the first two days is said to be 20 times higher than on a regular day. Whereas Flipkart also stated that premium and flagship smartphones saw demand on the first day, with the help of product exchange schemes and no-cost EMI offers.

According to Datum Intelligence, mobile phones are expected to contribute 30% of total festive sales this year, down from 35% last year. On the other hand, Counterpoint research also predicts that India’s smartphone market is expected to witness a 12% decline this festive season.  For this reason, retailers continue to expect record sales over the full festive season.