Amazon sees premiumisation trend spreading to Tier 2, 3 towns; expects a busy festival season

Amazon — which is seeing 80 percent of its new beauty customers coming from tier 2 and beyond markets — is prepared to capitalise on the projected rise in demand for beauty products during the festive season.

The trend of premium choices in fashion and jewellery has gone beyond metros, catching on in Tier 2 and 3 cities and towns, indicating a much-awaited shift in India’s burgeoning e-commerce sector, Zeba Khan, director, Amazon fashion and beauty India, has said.

“We are witnessing robust demand trends across various demographics, with metro and tier 1 cities continuing to show strong engagement, particularly in premium and luxury segments. However, what’s particularly exciting is the significant uptake in tier 2,3 and beyond cities,” Khan told Moneycontrol.

The comments come as Amazon and its biggest rival, Flipkart, started their annual festival sales on September 26. The festival months are the busiest shopping season in India, which peaks during Diwali and continues till Christmas.

Amazon giant is seeing a substantial demand for contemporary western and ethnic wear, accessories, footwear, and beauty products from both established brands and direct-to-consumer brands, Khan said.

“This trend is a testament to the evolving fashion consciousness across all tiers, highlighting the expanding influence of fashion beyond traditional urban cities,” she said.

Amazon also observed that premiumisation extends beyond the high-end brands — it includes consumers choosing higher-quality variants within the comparatively smaller brands as well.

With the growing affinity for costlier purchases cutting across geographies, the company recently launched a “Premium Store” that boasts a selection of over 650 high-end brands, including Seiko, Mathey Tissot, Tommy Hilfiger, Guess, Swarovski and Satya Paul.

“Furthermore, the focus on premium brands during events has precipitated a notable spike of over 45 percent year-on-year in premium segments,” Khan said.

This year's festival season is expected to see e-commerce sales rise 23 percent year-on-year to about Rs 1 lakh crore ($12 billion), driven by a surge of purchases in categories such as cosmetics and grocery, a report by market research firm Datum has said.

Compared to the last year’s festival season, the grocery category will see the biggest growth — of 60 percent — followed by beauty and personal care at 41 percent, Datum said.

Amazon, which is seeing 80 percent of its new beauty customers coming from tier 2 and beyond, is prepared to capitalise on the projected rise in demand for beauty products during the season.

“In June 2023, we launched the Global Beauty Store, an exciting new storefront that brought together a curated selection of over 60 international beauty brands with over 5,000 products. The store received nearly 2.5X more visits than our main page,” said Khan.

The demand for clean beauty remains strong in the premium beauty category. There is a 40 percent YoY growth in business from clean beauty brands, both global players and homegrown favourites within the luxury beauty segment, she said.