Good news for online retailers! With sales likely to increase by up to 20% over the festive season, online retailers could surpass the major milestone of Rs 90,000 crores. This upbeat view is based on several things, including a gradual return to typical consumer spending patterns after a period of subpar sector development. According to market research firm Redseer, online retailers are also benefiting from improved profit margins as a result of higher purchase values and increasing brand advertising spending.
According to the report issued by Redseer, “Pre-COVID, the year-on-year growth rates of nominal Private Final Consumption Expenditure (PFCE) used to be around 8-9%. However, due to continuous external shocks like COVID-19 and the Russia-Ukraine conflict, there was significant flux in the market. And in the last couple of quarters of FY23, there was a material consumption slowdown due to tightening liquidity conditions”.
Redseer further added that the PFCE’s year-over-year growth, however, has recovered to 9%, and various stabilizing factors are starting to take effect. For instance, interest rates are at their highest point, nations are working to find a solution to the Russia-Ukraine crisis, and India’s economic growth figures are looking good. Consequently, there are significant tailwinds to support a comparatively successful holiday season this year.
The first Indian online holiday sales were held in 2014, making this year’s sales the tradition’s momentous 10th anniversary. The Indian eCommerce market has grown exponentially over these incredible ten years, over 20 times. From a 2014 total gross merchandise value (GMV) of 27,000 crores INR, it is currently predicted to reach a remarkable level of around 5,25,000 crores in 2023.
The presence of product categories with greater profit margins, such as beauty and personal care (BPC), home and general items, and fashion, is expected to increase during the forthcoming holiday season. The rising emphasis on premiumization, as noted by Redseer, is poised to cause this change to raise average selling prices (ASP). Additionally, this year’s holiday season is anticipated to be a game-changer from a profit standpoint because the increase in advertising and promotional activities is projected to dramatically increase revenues, making it one of the most effective festive seasons in terms of margins.
Mrigank Gutgutia, Partner at Redseer Strategy Consultants, said that “over the last several quarters, we are seeing enhanced GMV contributions from categories beyond electronics. While electronics sell a lot in the festive period, looking at the bigger picture and comparing the festive sale periods over the last several years, there is a clear trend of category diversification.”
In addition to category assortment, Redseer predicts that throughout the forthcoming festive season, many other notable trends will emerge. The predicted importance of Direct-to-Consumer (D2C) brands in the market is one key development.
According to Redseer’s predictions, D2C brands are expected to experience spectacular development over the long run. Between 2022 and 2027, they are anticipated to grow 1.6 times more quickly than the whole e-commerce market.
All things considered, it is assumed that online retailers would have a lot more to gain this festive season.