Festive season promises strong income for retailers

The most active shopping season in India has been the period that lay parallel to religious festivities, and India being a land of religious and cultural diversities, this has provided numerous occasions of heightened consumer spending

September 24, 2018

Thanks to the nation's vast cultural diversity, India’s annual festive season is perhaps the longest-running in the world, starting from mid August and continuing till January end

Festive season 2018 is touted to record sales worth higher than the US$2.8 billion of trade reported in October 2017; India’s retail market is likely to reach US$1.1 trillion by 2020

While retailers such as Amazon and Flipkart are investing heavily to boost festive season outreach, offline retailers are using a mix of online and offline capacity to win customers

Festive season 2018 is crucial for Indian retailers as it is expected to mark a turnaround following two years of slow sales growth owing to certain national policy enforcement

Shopping behavior across the world has long been dictated by seasonal variations. Factors ranging from religious festivities to climatic shifts to school holidays have typically led to cyclical peaks in consumer spending. Just like the annual holiday season in North America, which spans from late November to early January, India’s consumer landscape has also been dependent on seasonal factors. In line with this, the most active shopping season in India has been the period that lay parallel to religious festivities, and India being a land of religious and cultural diversities, this has provided numerous occasions of consumer spending. This has also guided investors to allocate their funding accordingly to grab the most of the seasonal spending frenzy. This has been particularly critical given the sheer size of India’s retail market.

 

Retailers target expanding marketplace

 

India’s annual festive season is perhaps the longest-running in the world, starting from mid-August and continuing till January-end. The period is marked by festivities related to the nation’s Independence day as well as religious occasions such as Eid, Diwali and Christmas. With studies indicating that Indians are increasingly celebrating all religious festivities irrespective of their personal faith, this has offered even more lucrative investment opportunities. The annual festive season is the time when consumers across the board buy things they both need and want, from fashion and jewellery items to domestic appliances, from properties and vehicles to travel and investment products. This has created income opportunities for both online and offline platforms that typically raise their capital infusion for the festive season.

 

The two largest players in the Indian ecommerce space – Amazon India and Walmart-run Flipkart – have been organising competing sale events targeted at the festive buyers for the last few years. Such festive occasions along with the platforms’ flash sale events have helped in expanding user base significantly. Targeting growth has become critical in India’s retail market, which is expected to increase by 60 per cent to reach US$1.1 trillion by 2020. Favourable factors such as improving affordability, increasing awareness and growing digital connectivity is driving this growth. To tap this opportunity, Flipkart and Amazon has invested in expanding its outreach beyond metropolitan centres and into places such as Leh in Ladakh, which is set at an elevation of 11,562 feet – the highest spot in the world to receive Amazon delivery.

 

Ecommerce companies are also investing to make shopping experience more interpersonal for a growing consumer base that is shopping online for the first time and is more accustomed to festive shopping at brick-and-mortar stores known for generations. Online retailers are targeting these consumers through digital interfaces that are easier to use and offer options in Indian languages, as well as through a more diverse and market-specific product offerings to attract buyers from varied socio-economic backdrop. India’s ecommerce market is expected to reach US$220 billion in terms of gross merchandise value and 530 million shoppers by 2025. A chunk of this growth will be driven by festive season demand, that too from newer territories. Herein, heavy discounts and flexible payments options have been critical tools.

 

Leading brick-and-mortar outlets such as Reliance Retail, Lifestyle, Shoppers Stop, Future Retail, among others, have traditionally registered the largest volume of footfalls during festive seasons, through brightly decorated stores that offer customers the feel of festivities

 

Increased investment to beat competition

 

Over the years, online retailers have increased their product acquisition significantly, focusing primarily on electronics such as televisions, household appliances and smartphones that have seen particularly strong buyer interest. This rising volume of acquisition has also helped in driving down sourcing prices from vendors which is meant to eventually make its way to retail consumers, thus further intensifying competition. As a result, discount offers are expected to last for a longer period during 2018 festive season. Following its US$16 billion acquisition of Flipkart, Walmart has pumped in another US$2 billion to make the best of the festive season opportunities. Parallely, Amazon.com recently raised investment in its Indian unit by over US$385 million, taking its total investment in the market to around US$4 billion.

 

Besides increasing sales and adding new customers, festive seasons have helped online outlets in the pickup of their inhouse digital payment features such as Amazon Pay and Flipkart Money. Meanwhile, leading brick-and-mortar outlets such as Reliance Retail, Lifestyle, Shoppers Stop, Future Retail, among others, have invested in augmenting their customer interactions amid competition from online rivals. These brands are using a mix of their online outreach and physical store network to secure customer confidence. Brick-and-mortar chains have traditionally registered the largest volume of footfalls during festive seasons, through brightly decorated stores that offer customers the feel of festivities. Hence the chains have steadily raised funding in brick-and-mortar outlets despite rising competition from online.

 

The increased investment has opened up opportunities of both permanent and seasonal employment. Festive season 2018 is expected to shore up more than 15,000 new jobs just in ecommerce logistics to support sales worth around US$1.5 billion, according to Forbes report in August 2018. Similarly, strong seasonal demand have created strong income opportunities for marketing (across various mediums), packaging and logistical services providers. Festive season 2018 is set to be all the more crucial for retailers as it is expected to mark a turnaround following two years of slow sales growth owing to certain national policy enforcement. This is good news for online retailers as the period remains unparalleled in terms of sales volume, registering traffic that is much bigger than the footfall recorded during flash sales.