Festive sales to revive e-commerce demand, expand margins and grow 20% to Rs 90,000 crore: Redseer

The upcoming festive season is expected to see a minimum of 140 million shoppers doing transactions online

Online retailers could see their festive season sales rise up to 20 percent to over Rs 90,000 crore this year as a result of consumer spending gradually normalising after several quarters of tepid growth in the sector and better margins due to rising ticket sizes of purchases and higher ad spends by brands, according to market research firm Redseer.

“Pre-COVID, the  year-on-year growth rates of nominal Private Final Consumption Expenditure (PFCE) used to be around 8-9%. However, due to continuous external shocks like COVID- 19 and Russia-Ukraine conflict, there was significant flux in the market. And in the last couple of quarters of FY23, there was a material consumption slowdown due to tightening liquidity conditions,” the report by Redseer said.

“However, the year-on-year growth for PFCE has bounced back to 9% and several stabilising factors are kicking- in. For instance, interest rates are maxing out, countries aiming to resolve the Russia Ukraine conflict, and the Indian economic growth numbers are coming in strong. So, there are meaningful tailwinds to support a relatively strong festive period this year,” it added.

The first ever Indian online festive season sales happened in 2014. As such, this year’s sales is the 10th year of the festive season sales. Over these 10 years, the Indian e-commerce market has grown almost 20 times — from a gross merchandise value (GMV) of Rs 27,000 crores in the whole year in 2014 to an expected level of approx. Rs 5,25,000 crores in 2023.

In the meanwhile, the number of annual transacting users has jumped 15 times to hit 230 million this year. The upcoming festive season is expected to see a minimum of 140 million shoppers doing transactions online.

Further, this year’s festive season will see increasing contributions from higher margin categories like beauty & personal care (BPC), home & general merchandise, fashion etc, according to Redseer. Also, premiumisation is expectedly going to lift Average Selling Prices (ASP) and increasing ads and promotion revenues will possibly make this year’s festive season the most efficient from a margin perspective.

“Over the last several quarters, we are seeing enhanced GMV contributions from categories beyond electronics. While electronics sell a lot in the festive period, looking at the bigger picture and comparing the festive sale periods over the last several years, there is a clear trend of category diversification”, said Mrigank Gutgutia, Partner at Redseer Strategy Consultants.

Beyond category diversification, Redseer expects multiple other sub-themes to play out. For example, D2C brands are likely to be more prominent this festive season.

Projecting these to the long term, Redseer expects D2C brands to grow 1.6 tmes as fast as the broader e-commerce market between 2022 and 2027.

“In terms of city-tier wise growth, metros have been growing faster than the Tier 1 and Tier 2+ in the last few quarters (10%+ for metros vs ~8% for other city tiers. However, we expect robust growth across city tiers this festive season,” the report said.

Additionally, new-age technology solutions like generative AI being more widely adopted in multiple use-cases during the sale period will also lead to better and novel consumer experiences and drive stronger growth momentum, according to Redseer.