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Is the tide finally turning in favor of brick-and mortar retail?

E-commerce platforms, including Amazon and Flipkart, saw only nominal growth in sales volume during this Independence Day (I-day) sale as compared to 2021 I-day sales volume.

According to logistics firm Shiprocket, which handles shipments for digital brands, saw a growth of 7.2 per cent in the terms of shipments between 6-10 August 2022 as compared to 2021. Both Flipkart and Amazon have held Independence Day sales between August 6 and 10.

Drop in growth
At least three e-commerce sellers that BusinessLine spoke to said that there has been a drop in the growth seen during the Independence Day sale period as compared to last year. An apparel seller listed on multiple e-commerce platforms including Amazon, Flipkart, and Myntra told BusinessLine that the growth in his brand’s sale volumes during this Independence Day sale was almost 30 per cent lower than what he observed during the 2021 Independence Day sale.

Talking about the potential reasons for the lukewarm response to Independence Day sales, Abhishek Maiti, Director of business research and market intelligence firm PGA (Praxis Global Alliance) Labs, said, “One reason could be that the buyers or consumers who have taken to online purely because of the Covid-19 pandemic have actually started shifting back to offline. It should be noted that, unlike e-commerce platforms, offline retailers such as Nexus Mall, Eternity Mall, and Croma have recorded bumper growth during the Independence Day sale.”

The Nexus Malls portfolio is estimated to have seen a 35 per cent growth in sales during this Independence Day sale and the footfalls have also shown a good increase as compared to 2019, according to Nexus Malls’ chief marketing officer, Nishank Joshi. The Nexus Mall portfolio includes around 10 million square feet of retail space spread across 17 malls in 13 cities across India.

Consumer demand up
A recent retail business survey by the Retailers Association of India (RAI) also indicated a growth in consumer demand. The RAI survey noted that in July 2022, retail businesses across India had seen about 18 per cent growth in sales as compared to pre-pandemic levels (July 2019).

Further, PGA Labs’ Maiti said that another reason for the tepid growth in online sales volume could be the e-commerce companies’ increasing focus on profitability. “A lot of e-commerce companies have now started trying to build for profitability. This means they are trying to reduce CAC (customer acquisition cost) and thus reduce their marketing spend. This can essentially be a very direct reason for the minor growth in sales volume during this Independence Day sale. I think a combination of these two reasons is why we are seeing this trend,” said Maiti.

Kapil Makhija, CEO of Unicommerce, saw this as a sign of a maturing e-commerce ecosystem, where consumers are not waiting for the sale season and are shopping online throughout the year. “E-commerce is now an integral part of India’s retail industry, with consistent YoY growth. The e-commerce industry of India has evolved significantly over the last two years, consumers are not just shopping online for heavy discounts they are shopping for convenience and wider product options,” he added.

The cumulative order volumes during the first 15 days of August 2022, when compared with 2021, saw a 30 per cent growth, according to the data collated by Snapdeal-owned ecommerce SaaS platform Unicommerce. Adding to this, Abhishek Chakraborty, Executive Director of DTDC Express Ltd., said the shipment volumes this year were still higher than the pre-covid levels and DTDC saw a sizable number of shipments going to Tier-2 and Tier-3 cities.

Precursor to diwali
The Independence Day sale is usually a precursor to the mega Diwali and Dussehra festive sales on ecommerce platforms, which are expected to start around October. In 2021, ecommerce platforms recorded $2.7 billion of Gross Merchandise Value (GMV) in the first four days of 2021 festive sales (October 2–5), according to consulting firm RedSeer.

Speaking about the expected trends in this year’s festive sale, Maiti said that the growth spike in the upcoming festive sale might now be as pronounced as last year, but it will definitely not be as low as the Independence Day sale performance.

“It has been established for the last few years that people actually defer their purchases for a few months and wait for festive sales. If this trend of less consumer shopping continues for the next one or two months, then the ecommerce firms will compete very heavily in terms of discounts, marketing and promotion,” he added. The Hindu BusinessLine

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