For many of us, the October-December quarter of the calendar year is associated with many a happy memory: the lights and sounds of Diwali and other festivals, multiple hours spent shopping and eating out and the overall festivity and cheerfulness of this period. However, starting 2014, this period has also come to be associated with something else to cheer up all and sundry: mega online shopping festivals, variously named ‘Big Billion Days’ and ‘Great Indian Sale’ by e-tailers.
The 2014 online festive sale season was a watershed moment for the Indian e-tailing industry and was the first time Indian shoppers went online in such big numbers. For all practical purposes, it could be termed the ‘t=0’ moment for the industry, the point where the industry took the first step towards attaining maturity from the nascent pre-2014 years.
The industry took another giant leap forward in the festive season of 2015 and delivered a bumper sales performance. Consider the numbers: Compared to the previous (non-sales) month of September 2015, the month of October saw a 300% growth in daily gross merchandise value (GMV), made possible by a 200% increase in daily transactions and a 50% increase in average order values. Nearly 15% of the GMV for the entire calendar year 2015 was derived in just the month of October.
However, the industry’s joy from the stupendous success of last year’s October sales proved short-lived.
Post October 2015, e-tailers showed only a limited growth pattern till Q3-2016, as new customer acquisition slowed, investors played the valuation markdown game and GMVs flatlined and dropped for big e-tailers, very sharply in some cases. It is only in August 2016 that the industry’s growth engine finally started pumping again, driven by the sales on offer in this period.
The importance of the online festive season
Today, as we stand on the cusp of the 2016 edition of this online sales bonanza, it is worth considering just how incredibly important this part of the year is for the e-tailing industry. Of course it is extremely important from the sales perspective, what with ~35% of all annual sales occurring in the October-December quarter, but the importance of this season extends beyond just sales growth.
The festive season has a tremendous impact on multiple factors which determine the long-term viability of this industry: a) Increase in infrastructure maturity, b) New customer addition, and c) Opportunity to increase customer loyalty.
Infrastructure creation and maturity is the key long-term benefit from the festive season, as e-tailers race to increase their warehouse and delivery capacities on a war-footing to handle massively increased volumes—further enabling the process of bringing more and more small and medium enterprises online.
The festive season is also an opportunity for the industry to expand into newer geographies and customer segments which have never shopped online. More than 50% of all shoppers in this period turn out to be first-time shoppers, many of whom will likely shop again in the next few months and increase the industry baseline shopper count.
Finally, the festive season brings with it the opportunity for e-tailers to delight their past customers on a much grander scale and showcase their DNA to this much bigger base of customers, thus ensuring increased loyalty going forward.
Festive season 2016: The big picture
The regulatory changes enacted in early 2016 were expected to dampen the sentiment around e-tailing and possibly impact the 2016 festive sales. However, e-tailers are going all out to ensure that this October sale is the biggest ever, driven by key initiatives and attractive offers.
This is likely to lead to increased share of India’s online population (370 million in mid-2016) shopping online this festive season and push up the count of total monthly unique online shoppers to beyond the 30 million mark and set the industry up to achieve a record GMV run rate of $18-20 billion in October, a shade higher than the $18 billion recorded in October 2015.
Even though a significant number of newly added online shoppers would drop off from the radar in Q1-2017, we still expect a fair share of them to remain active—driven by access to faster internet networks and a wider supply chain reach and stock-keeping unit portfolio of e-tailers. Which should stabilize the average monthly shopper count in Q1-2017 at 25 million and average monthly GMV run rate to $15 billion—important milestones in the journey to 100 million monthly online shoppers and $80 billion GMV by 2020.
Anil Kumar is founder, RedSeer Consulting.