💎 The financial and business impact of sales on e-commerce giants in India

As the festive season approaches, the anticipation of the grand e-commerce sales begins.

Giants like Amazon, Flipkart, Myntra, and Nykaa, with their massive discounts and marketing campaigns, have transformed the way India shops.

In this newsletter edition, let’s delve deeper into this e-commerce euphoria, exploring its impact on the market, the changing retail landscape, and the evolving psyche of the Indian consumer.

What's driving the e-commerce retail landscape in India?

India's e-commerce sector has undergone a transformative journey, evolving into a robust and dynamic industry. Here's a glimpse of where we stand today:

Market size: India's e-commerce market was valued at $100 billion in 2022, and it's been on a remarkable growth trajectory since. It's no surprise that India is poised to become one of the world's largest e-commerce markets in the coming years.

Projected growth: By 2030, the Indian e-commerce market is estimated to reach a staggering $400 billion. This rapid growth is fueled by a surge in internet penetration, smartphone usage, and digital literacy.

The online shopper: India boasts a burgeoning online shopper base, with over 200 million online shoppers as of 2021. This number is expected to swell further with the increasing digital adoption, reaching an estimated 500 million online shoppers by 2030.

Rising digital economy: With the proliferation of smartphones, mobile commerce is the driving force. It accounted for approximately 48% of e-commerce sales in 2021, and this trend is expected to continue.

Rural expansion: The rural market is emerging as the next frontier for e-commerce growth. Increased digital access in rural areas is opening up vast untapped potential for online retailers.

The future of e-commerce in India looks promising, but it also presents challenges. As the industry evolves, e-commerce players must navigate issues like logistical complexities, thin profit margins, and intense competition, as mentioned in the previous sections. However, the opportunities are vast.

The market's response to deep discount sales

According to recent reports, India's e-commerce giants are gearing up for a 'big-billion' jump in sales this festive season. The market is buzzing with predictions of a 28% on-year increase in sales, amounting to a staggering $11.8 billion during the festive month.

There is a notable shift in consumer sentiments, with expectations of 30-40% higher sales during the Diwali sales this year than the previous year. This optimistic outlook comes despite the challenges faced by online retailers due to inflationary pressures and the intense competition in the industry.

This surge is attributed to a combination of factors:

• Doubling of online shoppers: The number of online shoppers during the festive season is expected to double compared to 2018. This growth is driven by increased awareness of festive sales due to aggressive marketing, a broader reach of e-commerce platforms, and the expansion of products catering to a wide range of consumers across various cities.
• Category mix evolution: The fashion category, in particular, is poised for robust growth. The increasing shopper base from Tier 2+ cities and first-time online shoppers, who often start their online shopping journey with fashion, are significant contributors. Additionally, the participation of fashion-led players in the festive sales is expected to be more pronounced this year.
• Mobile and electronics drive: The mobile and electronics category remains a strong contender during the sales period, bolstered by attractive deals and new product launches.
• New e-commerce models: Innovations like live/video commerce are anticipated to further drive the growth of online shoppers during the festive period.

Consumer behaviour during sale season

This festive season, India is witnessing a significant shift towards online spending. A recent report reveals that 81% of Indians intend to increase their online expenditures, with electronics topping the list. This surge in electronics demand can be linked to the country's digital transformation, the work-from-home trend, and the appeal of festive upgrades.

E-commerce giants, Amazon and Flipkart, experienced this firsthand, registering 18.6 crore customer visits within the first 48 hours of their festive sales. Enhanced credit options, EMI schemes, and cashback offers further make high-ticket purchases more accessible. Additionally, the streamlined digital payment ecosystem encourages higher online spending.

In essence, the 2023 festive season is poised to set new online spending records in India, propelled by consumer sentiment, financial incentives, and the convenience of e-commerce.

The psychology of deep discounts

As we've observed the surge in online spending this festive season, a significant driver behind this phenomenon is the allure of deep discounts. But why do we find ourselves irresistibly drawn to the '50% off' banners and 'limited-time offers'?

Deep discounts uniquely captivate our attention and, more often than not, our wallets. It's not just about the reduced price; it's about the psychological triggers they set off.

• FOMO - Fear of missing out: Deep discount sales often come with a ticking clock. Limited-time offers, flash sales, and countdowns create a sense of urgency. FOMO kicks in, compelling us to make impulsive purchases before the deal vanishes.
• Perceived value: Discounts make us feel like we're getting more value for our money. Even if we didn't intend to buy something initially, a significant discount could tip the scales in favour of a purchase.
• The dopamine rush: The brain's reward system loves discounts. Scoring a deal releases dopamine, the feel-good neurotransmitter, creating a sense of accomplishment and pleasure.
• Social validation: Sharing our discount conquests on social media adds an element of social validation. It's a way to showcase our savvy shopping skills and gain approval from our peers.
• Stocking up: Discounts often lead to stocking up on items we may not need immediately. The promise of saving money in the long run can be a compelling reason to buy in bulk.

As consumers, recognizing these triggers can lead to more informed purchasing decisions. And for businesses, understanding the psychology behind discounts can be a powerful tool in crafting effective marketing strategies.

Are deep discounts sustainable for e-commerce brands?

Deep discounts, a major driver of festive sales, raise sustainability concerns for businesses in an oversaturated market. While these discounts attract a vast customer base, they reduce profit margins. In a competitive landscape, businesses might find themselves in a relentless discounting cycle, constantly reducing prices to outdo competitors.

Furthermore, discounts, though effective in driving immediate sales, don't guarantee long-term customer loyalty. Price-driven consumers might easily switch to another retailer offering a better deal, leaving businesses in a perpetual race to the bottom.

For businesses, the challenge lies in striking a balance: offering enticing deals without compromising profitability or brand integrity. This might mean innovating product lines, enhancing customer experiences, or providing non-monetary value.

In summary, while deep discounts captivate consumers, especially during festive times, businesses must navigate this strategy with caution. Balancing customer attraction with financial sustainability is paramount.

As we wrap up, I wish you a festive season filled with discerning choices and valuable purchases.