Every festival season, a battle royale begins among retailers (local and national, offline and online) as they fight for garnering a greater share of the consumers’ wallet. The festive season, especially Diwali, accounts for close to 30% of the sales of many retailers and brands.
This year, major e-tailers (and offline retailers) have been gearing up for the festive sale season, which starts on 10 October, for months, ramping up their analytics engine, warehouse space, delivery workforce, and enlisting more and more sellers to offer the widest range of products. To capitalise on this opportunity, the three major focus areas for them are range/assortment, convenience and value.
With e-commerce expected to grow from the current 3-4% of total retail to 10% of total retail in the next 5-8 years, we can see a major shift in consumer behaviour as they move from offline to online purchases. Factors like convenience/ease of shopping, value and assortment, and delivery to the doorstep are majorly impacting the 5Ws (who, when, where, why and which) and “how" the category is being shopped by consumers. This change in behaviour, which is being driven by e-tailers, is forcing many offline retailers to match these services, be it better value, or free home delivery of their products. Even in other categories like QSR/restaurants, we see a major increase in home consumption driven by food tech companies offering free/easy home deliveries, with many restaurants/QSRs seeing close to 30% of their business moving from on-premise to at-home consumption today, and this has grown from less than 5% about 2-3 years ago.
As the fight for the consumer’s wallet intensifies during the festive period every year, e-tailers turn to advanced analytics and algorithms geared towards understanding shopper buying behaviour better, and use this information to influence shoppers by predicting their preferences. They use the large amount of shopper browsing and actual purchase data that sits with them, and marry that with their social media activities of shoppers to create detailed shopper profiles. They then use predictive algorithms on the purchase and browsing history of similar cohorts across geographies to not only make product recommendations to shoppers, but also ensure that the right products are available at the correct locations near the shoppers to enable faster deliveries, and even offer individualized product offerings to consumers. All this is done to not only improve the shopping experience, but also create stickiness to their platforms/brands as consumers reward convenience (same day/next day deliveries) of shopping as an important factor in their use of any channel.
Another example of using predictive analytics by e-tailers is the offering of credit to high-value customers. Using their large purchase history data to gain valuable insights, Indian e-tailers are planning to offer cardless credit to consumers who either don’t have a credit/debit card or are unwilling to use the same.
Apart from mainline advertising, including television, print and outdoor, e-commerce companies in India, learning from their counterparts in other markets like China and the West, are planning to create personalised videos on their websites and social media pages based on the browsing history of millions of consumers. Rather than creating one-size-fits-all ads, they are creating 10-15-second hyper targeted ads to drive higher customer acquisition and retention, hoping to reduce their overall customer acquisition costs, and getting closer to the ultimate goal of marketing to the “segment of One".
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In India today, almost 60 to 70% of e-tailers’ sales are through male customers, and this festive season, major players are trying to target women buyers to widen their customer base and make it more “inclusive". Shopper research shows that compared to male buyers, female buyers have greater stickiness to retailers and brands. Therefore, the aim for e-tailers is to increase the female customer base to approximately 50% this festive season from the current 30-40%. The e-tailers are also listing many “exclusive" items on their platforms that are not available in offline stores, to ensure better targeting of consumers and “move" them away from offline shopping.
Finally, it is estimated that 55 to 50% of annual GMV (gross merchandise volume) for online retail comes from festive sales, and e-tailers/online players are banking on using analytics and many targeted strategies to offer more customised range of products based on the unique festivals celebrated locally in different geographies to win with their shoppers/consumers.
Rajat Wahi is partner , consumer business, at Deloitte India.