Small Towns, Big Bonanza

Despite low e-commerce penetration, smaller towns and cities have driven sales for online retailers this festive season

X SMALL TOWNS AND unbranded fashion brands have dominated the festive season sales this year on e-commerce platforms in India. Consulting firm RedSeer, in its latest report, has said that these sale events have largely become a ‘Tier II+ phenomenon’.

Per RedSeer’s estimates, 64 per cent of the transacting shoppers were from Tier II and beyond cities this festive season. Fashion as a category emerged as the leader in Tier II cities, led by unbranded fashion apparel, wherein one in every five orders had a kurti or a saree in their cart.

“When you look at India as a market, for any consumerfocussed sector, the next wave of growth would always come from Tier II+ cities because that’s where most of the population resides. We are seeing that happen with e-commerce as well. Pre-Covid-19, metro and Tier I cities used to dominate the gross merchandise value (GMV) and shopper share. Now Tier II and beyond cities dominate in both. We must also realise that the penetration of online retail is still very low in Tier II+ markets. So, you will see Tier II+ cities contribute more to the shopper share as well as GMV growth in the next couple of years,” says Sanjay Kothari, Associate Partner at RedSeer.

Amazon stated that 80 per cent of new customers during its Great Indian Festival came from Tier II and III towns. The company says, it saw 1.2x higher Prime member sign-ups compared to 2021, whereas three out of five sign-ups originated from beyond the metros from places such as Agartala, Bellary, Cuttack, Warangal, Jalgaon, Bhilwara, etc. More than 1.5 million new customers shopped for fashion and beauty products, of which more than 85 per cent were from the Tier II cities and beyond.

A majority of the platforms including Flipkart, Amazon, Meesho, Myntra and Shopsy held their festive season sales during the one-month period between September 22 and October 23. The sale events this year saw a growth of about 25 per cent year-on-year (YoY) in e-tailers’ cumulative GMV, compared to last year, while the shopper base increased 1.26x YoY. Overall, 115-125 million shoppers placed orders across platforms in the festive season and goods worth `76,000 crore were sold online during the period. Three in four sellers reported at least 2x volume growth from regular business days.

However, RedSeer’s pre-sales prediction of `83,000 crore for e-tailers’ cumulative GMV was not met, as spends per shopper remained flat at 0.99x and smartphone sales growth remained lower than expected. Amazon said that over 4,000 sellers on its platform witnessed sales growth

of more than 5x during the festive season with 25 products being sold every second.

Flipkart’s US-based parent Walmart said that the online retailer’s flagship festive season sale event ‘The Big Billion Days’ helped the retail giant improve its international business revenue in Q3FY23. Net sales of Walmart’s international business grew $1.7 billion or 7.1 per cent to $25.3 billion in the quarter ended October 31, 2022. “In India, Flipkart had a great quarter with strong customer response to our Big Billion Days sales that moved forward into Q3 this year from Q4 last year. We had over one billion visits to our site during the eight-day event and importantly, we saw more than 60 per cent of those customers coming from Tier II and III cities,” John David Rainey, Walmart’s CFO, said at an analyst call after the Q3 results announcement.

IN ANOTHER REPORT, RedSeer had said that Bharat-focussed online marketplace Meesho surpassed Amazon during the first week of the festive season sales and emerged as the second-largest player after the Flipkart Group. Meesho’s share of orders in the festive season sales pie stood at 21 per cent, while Flipkart Group platforms led the market with a 49 per cent share in the last week of September.

RedSeer’s consumer and seller surveys indicate overall satisfaction with online retail platforms. Consumer net promoter score (NPS)—an index measuring a customer’s willingness to recommend a company’s products or services— for online retail platforms stood at 68 per cent, which is 2 per cent higher than last year.

A clear trend emerging over the years has been the democratisation of categories. Fashion and lower average-order-value products such as groceries and mobile accessories continue to gain prominence online, while long-tail categories are growing faster than mobile phones and electronics. Long-tail categories like home & kitchen and groceries saw the highest YoY growth of about 1.86x. Within long-tail categories, grocery contributed about 34 per cent to this growth, while home & kitchen contributed about 21 per cent, and beauty and personal care accounted for 14 per cent. Fashion grew approximately 1.32x, electronics jumped 1.13x, and the mobile category grew at 1.07x. E-groceries witnessed growth of around 2x from the last festive season, the fastest among long-tail categories.

“During the one month of the festive season, online retail adds almost 7-10 per cent new shoppers and almost 15-20 per cent of yearly GMV. So in terms of scale, this is an important month. Usually, festive season sales set the tone for the rest of the year. So, a good festive sales is always a healthy indication of the growth of online retail,” says Kothari.

The RedSeer report added that offline channels had a robust Q2 with most companies reporting rise in footfall and sales and that trend continued into the festive season as well.