NEW DELHI, India — Festive season sales here last month saw skyrocketing growth for India’s e-tailers, which are battling for market share.
With sales figures up by three to four times over the same period last year, e-tailers are only just pausing to take stock as festive and wedding season sales are expected to continue to climb over the next two months. Online sales are likely being further boosted as a result of the horrific smog that has enveloped New Delhi over the last few days, forcing schools to shut and consumers to stay indoors to escape the dangerous pollution.
Overall, as the festive season continues, e-tailers are expecting sales to total 120 billion rupees, or $1.8 billion, with each of them talking about scale.
The country’s two biggest e-tailers, Flipkart and Amazon India, both based in Bengaluru, are in a race to be number one in India. The last few months have seen a considerable increase in advertising, adding sellers to their marketplace models and wooing customers with discounts and innovative pricing.
Flipkart, which is currently India’s largest e-tailer, revealed sales of 14 billion rupees, or about $210 million at current exchange, on the first day of its five-day sale in the first week of October, breaking all previous retail sales records for both brick-and-mortar retailers and e-tailers. In 2015, by comparison, Flipkart generated sales of 6 billion rupees, or about $90 million, in a single day.
“We focused on clutter-breaking creatives and innovative social media campaigns. This time, we were also able to predict where spikes in demand would come from and we ensured a demand-supply match,” said Binny Bansal, chief executive officer and cofounder of Flipkart.
In 2014, when Flipkart launched its Big Billion Day sale to kick off the festive season, demand outstripped supply and technical glitches caused anger among customers. The company issued an apology and followed through to strengthen back-end issues.
The learnings from the process have been obvious this year, and observers believe Flipkart will be prepared to meet consumer demand before the festival of Diwali.
“This year, there has been a coming together of understanding of the customer, as well as of a better prepared technical and advertising campaign by e-tailers,” observed retail industry analyst Mohan Karmakar.
Meanwhile, declining to quote numbers, Amazon India reported sales of more than 15 million units from 90 percent of all zip codes in the country during its five-day sale, which was called the Great Indian Festival.
Just after the sale, Amit Agarwal, country head of Amazon India, noted that one of the objectives of the sale was to provide a customer experience that had never been seen before.
“What I’m really [pleased] about is that in the last five days, in a little over three years, which is a very short time, we have probably achieved the fastest ever ramp up in e-commerce India has ever seen — not just India, but e-commerce in general has ever seen,” he said.
One of the biggest sellers during the sale was membership of Prime, the subscription service launched in India in July, which offers next day, free delivery service for 499 rupees, or $7.40, a month.
Overall, online still makes up a small part of the $550 billion retail industry. However, it has been seeing unprecedented growth. According to a study by the Associated Chambers of Commerce and Industry of India (Assocham) and PricewaterhouseCoopers, e-commerce is expected to grow at a compound annual growth rate of 35 percent and is expected to cross the $100 billion mark by 2019.
According to the report, apparel sales capture the biggest share of Indian e-commerce retail, along with computer and consumer electronics, which was also reflected during the festive season.
Although exact figures are not available for each category for the last few weeks of sales in the festive season, apparel, accessories, computer and consumer electronics sales accounted for 42 percent of e-tail sales in 2015.
Flipkart continues to dominate in apparel, with Bansal estimating that Flipkart had a 75 percent market share in the category. Over the last two years, the e-tailer has strengthened its apparel and accessories segment with the acquisition of two of the largest fashion e-tailers, Myntra and Jabong.
Industry analysts estimate that on the first day of Flipkart’s big sale in the first week of October, fashion accounted for about 500 million rupees, or $7.5 million, of revenues.
Meanwhile, Amazon, which is also a sponsor of the fashion week organized by the Fashion Design Council of India in New Delhi and is growing its private labels extensively, has made a consolidated effort to gain market share in apparel.
As Internet connections continue to increase, sales in rural areas and smaller cities are a major reason for the boom in online e-tailing. Over the last month, more than 60 percent of sales for all e-tailers came from smaller cities, according to industry analysts. According to figures from Flipkart, more than 22 percent were new customers this festive season, with nearly 25 percent from tier two and tier three cities.
Both Flipkart and Amazon continue to use the word ‘great’ liberally, as they tailor make their sales to the season. Flipkart’s five-day Big Billion Days sale in early October was followed by a three-day Great Diwali sale. Amazon’s Great Indian sale in late October was preceded by its five-day Great Indian festival in early October.
Both companies continue to boast about their success, although industry analysts note that Flipkart maintains its lead in the market. Meanwhile, Amazon has stepped ahead of Snapdeal to move into the number two position, and has been investing heavily to grab market share over the last three years.
Jeff Bezos, Amazon’s founder and ceo, said in June that investment in India would be scaled up to $5 billion.
In September, Snapdeal re-branded in preparation for the festive season, with a new brand identity and logo, spending a reported $30 million on the new look. “With this new positioning, we also focus on the next phase of our growth, as we seek to engage with the next 100 million online shoppers from an increasingly connected India,” said Kunal Bahl, ceo and cofounder. Although the company shut down — or integrated — the more premium apparel label Exclusively, which it acquired last year, the build up of its fashion offerings has been growing.
During their Unbox Diwali sale, Snapdeal said that two trends emerged: First, consumers were buying more products each, with more than 625,000 users ordering more than five products each and nearly 110,000 users ordering more than 10 products each.
There was also a growing trend to replace the cash-on-delivery model, which has worked for e-tailers in India so far, with a payment on purchase.