What explains the bumper retail sales this festival season?

The festival season is here. Retailers, both offline and online, have rolled out carpet discounts on all categories of items, from electronics to fashion to appliances. In a festive season without Covid restrictions after two years, consumer demand has shot up, despite the soaring inflation. The festival sale, which started on September 23, is expected to be month-long and last till Diwali.

Ahead of festival season, retail businesses across India have reported a moderate growth of 15% in sales in August 2022, as compared to the pre-pandemic levels of 2019, according to a survey by Retailers Association of India.

The trend captured during this period suggests that most items were hit by inflation. While higher priced items reported good growth, driven by upper middle and elite class, sales of lower priced items were not that impressive.

On what the early signs are looking like for the offline retail segment, Kumar Rajagopalan from Retailers Association of India tells us more

[Byte of Kumar Rajagopalan, CEO, Retailers Association of India]

Once the sale season kicked-in, both online and offline retailers doled out steep discounts in order to woo consumers. The discounts are also coupled with big cashbacks and other offers. Internet marketplaces have run a marketing blitzkrieg, hired additional workforce and rolled out other sops including a partial waiver of seller fee.

In the online segment, Redseer Consulting expects the internet e-commerce companies to clock a 28 per cent year-on-year growth in sales at nearly $12 billion during the sale month.

In Covid-hit 2020 and 2021, e-commerce companies clocked overall sales of $7.5 billion and $9.2 billion respectively. Amazon and Flipkart accounted for 90 per cent of overall festival sales in 2021.

The bumper sales in the festival month this year are expected to push the online retail gross merchandise value to $68 billion in 2022, up 30% from last year. Another survey found that 83% of consumers are willing to shop this festive season, with a strong sentiment for fashion and electronics appliances.

The early signs are encouraging and are in line with the forecast. The first four days of the festival sale saw the overall daily average gross merchandise value, which is the total value of items sold in a given period, rise to 5.4 times when compared with the business-as-usual (BAU) days for the overall online retail, according to a report from the redseer. The business-as-usual days are non-sale days. The growth is driven mainly by fashion and mobiles.

Mobile phones have seen a 10-time jump in terms of daily average GMV and an estimated 50-55 million shoppers made purchases in the first four days, according to a report from the redseer. Meanwhile, fashion, including apparel and footwear, saw a jump of 4 times in daily average GMV from BAU days. The fashion segment was muted in the last two years due to the pandemic.

Overall, the first four days of the festival sale have been better than that of last year. It stood at $3.4 billion, making up for 60% of the projections. Last year it stood at $4.8-billion. The first week of sales is expected to reach $5.4 billion.

Most of the demand is also coming from non-metros and tier 2, 3 cities. According to unicommerce, over 60 per cent sales for Amazon Fashion came from tier 2 and 3 cities in the first two days. Meesho said 85 per cent of its first day sales came from tier 2 cities and beyond. According to redseer, the tier-2 plus growth wave is driven by reverse migration, digital adoption and value offers post Covid.

So, what is driving this retail buying frenzy online? 
 

Sanjay Kothari, Associate Partner, Redseer Consulting says, hangover of Covid forced people to stay muted for last two years. Consumer sentiment improved over the last couple of months. Clear indications of people wanting to spend on high-ticket items.

The first part of the festival month is off to a good start and analysts expect the trend to continue going forward. Clearly, it points to the first signs of consumers having moved on from the pandemic scars.