If e-commerce and not the much-feared foreign direct investment (FDI) in retail turned out to be the real disruptor in the Indian shopping scene, as Arvind Singhal of Technopak Advisors had predicted some years ago, Covid-19 has come as an accelerator. The evidence is in the recent online events — Amazon Prime Day and Flipkart sales in the run-up to Independence Day. But, the record sales do not necessarily translate into a revival in consumer confidence, industry experts point out.
After the 48-hour sale, meant for Prime members, Jeff Bezos-led Amazon declared it was the biggest so far in India. The revenue garnered during the latest edition of Prime Day was double that of the previous year. A first-day comparison of the sales showed this was even better than last Diwali, sources said. That’s no mean achievement during the pandemic, especially as India is the only country to have gone ahead with Prime Day, which is usually held simultaneously across the world. Where other countries are waiting for the Covid-19 impact to wear off to ensure the success of Prime Day, the India business wanted to avoid a clash with Diwali sales. Others are planning for Prime Day during Q3 or Q4.
Estimates suggest Prime Day India sales of $450-500 million with the most popular categories being smartphones and accessories followed by large appliances, consumer electronics, home and kitchen and fashion. As expected, sanitiser, health products, lounge wear, laptop and smart devices were top of the shoppers’ list due to Covid-19 and work from home. But what stood out was the participation of buyers from tier-two towns — there was at least one order from 97 per cent of the Indian pin codes. Executives pointed out that acquisition of Prime customers (who make an additional annual payment for value-added services and quick delivery) was a key takeaway from the event. India has about one million Prime members, out of 150 million worldwide.
Flipkart, owned by Walmart, also showed good numbers during its four-day August sales. It recorded a 54 per cent increase in sellers’ transactions over the previous year, a company executive said. As in the case of Amazon, at Flipkart, too, local businesses, especially small and medium sellers, rocked the show. Reflecting the trend of investing in devices for both education and work, there was healthy growth in mobiles and premium smartphone segments. In fact, newly launched laptops were sold out in 120 seconds, and routers saw high demand on the Flipkart marketplace platform, the executive added. There was also a massive spike in the sale of trimmers — one trimmer was sold every two seconds during the Freedom Day sale on Flipkart. The platform also sold enough power banks to power 1,000 electric cars for 100 km. Another favourite was the amount of storage sold — enough to store 1.5 million movies, the company said.
The disclaimer though is that online businesses like Amazon and Flipkart are reluctant to use the sales numbers as an indicator of revival given that e-commerce still has a single-digit share of the around $790-billion retail universe in the country. “Market conditions are far from normal, so promotional peak sales are short and sharp and don’t indicate sustained demand,” said Devangshu Dutta, chief executive, Third Eyesight, a retail consultancy.
In fact, lacklustre demand for physical retail sales ahead of Independence Day was another pointer that a revival in buying sentiment may take time. Also, the fifth edition of the fortnightly business survey conducted by the Retailers Association of India (RAI) indicates signs of marginal recovery observed in July. According to Kumar Rajagopalan, CEO, RAI, “Localised lockdowns, weekend curfews and not allowing formats like food courts and cinema halls to restart are creating roadblocks on the path to revival.’’ The association has submitted representations to various state authorities asking for measures that will help business revival.
Confidence in the minds of the people is the most important for them to come out and shop. And that clearly is missing.
As Singhal, founder and chairman of Technopak, pointed out, consumers looking for deals would typically buy online, making the Amazon and Flipkart sales a success. With income down for a large number of Indians, it makes sense for them to opt for e-commerce sales, he said. That in no way can be a pointer towards consumer spending bouncing back, Singhal pointed out. “Consumer spending cannot bounce back till money is back in the hands of consumers. Neither the index of industrial production (IIP) nor the purchasing managers’ index (PMI) shows a revival.’’ There’s no green shoot yet, he added.
Indeed, even market researcher Nielsen said earlier this month that the fast-moving consumer goods (FMCG) sector is expected to see flat growth in 2020 due to the pandemic and the subsequent lockdowns. This is the second revision of its annual growth forecast for the sector.-Business Standard