Festive fizz for economy as buyers boost sales

The online retail market touched $5.7 billion in gross merchandise value (GMV), registering about 27% growth from a year earlier, according to market researcher Redseer’s 2022 Ecommerce Festive Sales report published on Thursday.

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The festive season, which starts with Onam and continues till the New Year, accounts for as much as 40% of annual sales of companies that sell discretionary purchase items such as mobile phones, TVs, home appliances, cars and homes, making it a crucial period for India Inc. The surge in private consumption also bodes well for India’s economic growth amid fears of a global recession as central banks raise interest rates aggressively to cool prices.

Mobile phones continued to lead the market in the period between 22 September and 30 September, while garments saw the fastest growth compared to last year, possibly as Indians refreshed their wardrobe after two years of remote work. On average, 56,000 mobile phones were sold per hour during this period.

For smartphone retailers, the festive season accounts for more than 20% of the entire year’s sales. While the beginning of the last quarter was slow, Redseer says it has seen a good uptick in consumer sentiment and consumption patterns in late August-September. The market researcher expects the trend to “further lead to demand recovery in a build-up to Diwali".

Fashion, so far, has contributed to about 20% of GMV, which is about 48% higher than last year’s festive season. GMV represents the total value of items sold across platforms. The shopper base also increased by 24% over the corresponding period, with about 65% of shoppers coming from cities outside metros, the report said. Consumption, especially in smaller cities, tends to happen closer to festivities.

About 75-80 million shoppers placed orders across platforms in the first week of this festive shopping period. Even the spending per online shopper has increased by 3% during this festive week. According to the report, customers “had a vast catalogue to choose from, financial constructs and tech innovations (like live commerce) has driven adoption and excitement".

The Flipkart group continues to lead the market with about 62% share on a GMV basis, the report said. Flipkart also led in terms of order volumes, while Meesho emerged as the surprise second-largest, capturing about 21% of the market. Redseer expects the sale of white goods (large appliances) to gain momentum after a slow start, even as it expects mobiles to continue to drive GMV growth. Meanwhile, the focus on lifestyle and home categories is also expected to drive order volumes. The average increase of daily GMV across e-commerce stores stood at four times that of the business as usual days—with electronics and mobile phones leading the spike in consumer demand, according to the report.

To be sure, at least part of the sales growth in phones has been inflation-driven, as a semiconductor supply crunch forced firms to hike prices.

Still, resurgent phone sales are giving the industry a much-needed respite in terms of overall sales value, even as the volume of devices sold in the first festive sale period of the year remained flat. Industry experts said even if festive sales have a trickle-down effect on overall sales in the December quarter, shipments will likely remain flat through this period.

According to analysts, while the festive season came as a respite, a sustained recovery in the smartphone market is some time away. Faisal Kawoosa, founder of market research firm Techarc, said the announcements about the introduction of 5G, coupled with a lack of supplies in the budget smartphone segment, led the average selling price (ASP) of smartphones to rise by “anywhere between 15-25%, depending on the price segment".

“Buyers in India were clearly holding on to their phones for longer. However, there was some pent-up demand for new phones. In terms of volumes, sales have remained flat over the festive season of 2021. Companies have witnessed some growth in value terms, but this growth has come from the rise in ASP—which is at around ₹18,000 right now," Kawoosa said.

Tarun Pathak, research director at market researcher Counterpoint India, said a boost in overall value of phone sales in the first week of festive sales was expected. “The first sale usually accounts for 60% of the market’s sales in the entire festive period, and there was a lot of hype around smartphones due to the 5G rollout. On top of that, we entered the season with the highest inventory level in the smartphone market that India has seen to date," Pathak said.

The unsold inventory in the phone market stands at nearly 10 weeks—up from an average of four or five weeks a year ago. The smartphone market has seen sequential declines every quarter since the 2021 festive sales, owing to supply-chain disruptions pushing up the cost of affordable smartphones and the lack of compelling features in a phone pushing India’s average smartphone upgrade cycle up to nearly 30 weeks.

To be sure, the upgrade cycle for a smartphone was as low as six weeks in 2015—rising to around one year in 2017 and two years in 2020.

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