The online retail industry is expecting strong growth in sales during the upcoming festive season, riding on the back of a surge in first-time shoppers from smaller towns, according to analysts and industry executives who expect the sector to also gain from the pandemic-induced slowdown in offline retail.
The season will be dominated by a fight for market share among three big online platforms — Amazon, Walmart-owned Flipkart and new entrant Reliance JioMart. Also expected to gain from the boom in online buying are e-grocers BigBasket and Grofers, furniture etailers like Pepperfry, beauty and grooming platform Nykaa, as well as baby care platform FirstCry.
“Ecommerce has seen a sharp revival from the lockdown days, trading at 1.8 times of January,” said Anil Kumar, CEO at RedSeer Consulting. “This has largely come at the cost of organised trade and offline grocery buying. This trend is expected to have significant long-term impact, providing tailwinds to online buying behaviour,” he said. According to RedSeer, gross industry sales could grow by as much as 50% to about $4 billion during the main sales days that are dominated by Flipkart’s Big Billion Days and Amazon’s Great Indian Festival Sale.
Through the entire month leading up to Diwali in November, gross sales for the online retail industry could touch $7 billion, up from $3.8 billion in 2019, said RedSeer Consulting.
However, others such as Satish Meena of Forrester Research estimate the growth in the sector to be 20-25% over last year’s $4.8 billion gross sales during the festive period.
“A 20-25% growth is healthy in this period. People who have kept their jobs, and have also saved much more by curbing transportation, eating out, entertainment and holiday spends would like to spend this festive period,” Meena told ET.
A senior executive at a leading online marketplace told ET that while ecommerce will certainly cannibalise some offline sales, sales growth is forecast to be 20-25%. Shipment volumes could grow by 50% year-on-year during the upcoming festive season, the person said. Flipkart and Amazon did not respond to ET’s queries on festive sale estimates.
Offline goes online
Eager to benefit from the anticipated boom in festive sales, several offline retailers have established an online presence. “Just like the SARS virus led to the growth of China’s nascent internet sector in 2003, the Covid-19 pandemic has boosted India’s internet sector,” said Samir Sood, a partner at Venture Highway.
“We typically see a 60-90% jump in sales during the festive season. This time we are expecting a 100% jump at least, given the current trajectory of demand,” Ashish Shah, cofounder of Pepperfry told ET.
Other high-growth categories include fashion, which is expected to contribute 15-20% of gross sales during the main sale period, compared with 17% last year.
Fashion portal Myntra said it expects sales to double during the festive period, while Nykaa anticipates a spike of 50% in omnichannel sales, compared with last year.
Logistics companies are ramping up operations. “Most brands have adopted digital strategies and have moved from organised offline to online, either directly or through ecommerce platforms, to make up for the lost opportunity. So, we are seeing a surge in demand for logistics from these players also, besides our ecommerce clients,” said TA Krishnan, CEO, Ecom Express.
However, the share of mobiles in online retail sales could drop to 40-45% compared with 47% last year, said RedSeer, as first-time shoppers from tier II and III cities will primarily splurge on low-cost items.
Over 50% of online shoppers this festive season will come from beyond the metros, boosting sales and stoking expectations of the Indian online retail industry ending fiscal 2021 with gross sales growth of 40% at $38 billion.