Despite macro headwinds, Redseer expects e-commerce festive sales to grow 28%

Amid concerns of inflation hurting private consumption and the return of offline sales, e-commerce sales during the festive season in India will grow 28 percent to hit $11.8 billion,  according to a report by research firm RedSeer Consulting.

Meanwhile, e-commerce players such as Flipkart, Amazon and Meesho are gearing up for the upcoming festive sales with efforts to make quicker deliveries, facilitate easy credit for purchases, newer shopping formats such as live commerce and 3D experiences.

Although Flipkart and Amazon have not disclosed the dates for their annual festive sales programmes, Redseer said that the first week of the sale will likely be from September 24 to October 1. The debut week of the season is likely to see a 24 percent rise in sales at $5.9 billion as against $4.6 billion a year back.

The festive months are typically the busiest shopping season in India. The season peaks during Diwali, which is in October this year, and continues till Christmas-New Year.

Online festive sales grew 52 percent to $9.3 billion in the 2015-2021 period when the size of the total online retail market in the country was just over $50 billion. The gross merchandise value (GMV) from festivals has been growing twice as fast as online retail in India, according to a recent report by Bernstein.

Moneycontrol had reported earlier that growth in the festive season sales on e-commerce platforms will be muted this year due to inflation and the resumption of offline shopping.

This year’s sale will be driven by fashion and electronics, as per the RedSeer report. Fashion is expected to increase from 16 percent to 24 percent this year, while electronics will see a slight drop.

“Around 70 percent of this year’s festive sales will also be driven by mobiles and electronic items, similar to other festive sales. The dip in the sale of electronics category over the last few months is mostly due to the seasonality factor,” said Sanjay Kothari, Associate Partner at Redseer Strategy Consultants.

But, he added that the average order value or spend of a customer is likely to drop because the sale is expected to be driven by smaller towns and cities. "The average spend will drop because this cohort is buying low-price items. Fashion, which will be a key, is a low-price category so that will reflect in the order value.

The report highlighted that the number of online shoppers has grown to 78 million this year, compared to 50 million in 2020, which is also a reason for the flattening growth, said Kothari.

“We are forecasting four-fold growth in the number of online shoppers from 2018. This growth has been driven by accelerated digital adoption and increasing penetration in Tier 2-plus cities. We expect that this expanded customer base to reflect in higher sales during the festive sales period as well,” said Kothari.

Experts said that this year's online festive sales will be closely watched as the technology sector grapples with a funding crunch. At a recent industry event, Flipkart CEO Kalyan Krishnamurthy said that the company is cutting down spends across new experiments, capex, and mergers & acquisitions amid a tightening of the funding environment for technology companies.

"We are doing everything to preserve cash, ramp down experiments, cut down on discretionary capex and M&A spending, invest for the long term," he added.