Ecommerce Demand Spikes But Will Discounts Continue To Retain Customers?

After a long wait and many appeals, the ecommerce industry was finally allowed to revive the sale of non-essential items across the country, except in containment zones. Over the past week, industry players have noticed a surge in consumer demand, which is mostly seen as pent-up demand due to the two-month-long lockdown.

Ecommerce companies like Flipkart, Amazon, Paytm Mall, Snapdeal have seen pent up demand driving their sales volume over the last week. Talking to Inc42, a Snapdeal spokesperson said that in non-metro markets, the sales volumes are now 80% of pre-Covid levels, up nearly 10% in the last week.

“The sales are growing in urban markets also and are now approximately 65% of pre-Covid levels; up about 15% in the last one week. We expect a further increase in demand in coming months,” the spokesperson said. Paytm Mall spokesperson told Inc42 that the company has seen a 1.5X increase in sales as compared to March. They have witnessed a surge in searches and the sale of mobiles, masks, trimmers, laptops and other consumer electronics.

Amazon and Flipkart have reportedly seen brisk sales of smartphones, laptops, tablets, kitchen and home appliances which have brought sales back to about 70% of pre-Covid levels.

The companies have varied opinions on the future of this pent up demand. The Economic Times report cited sources as saying that this pent up demand may taper off in the coming fortnight as consumers continue to purchase only need-based products and delay discretionary spends.

However, Paytm Mall and Snapdeal spokespersons remained hopeful of stability and strong demand. Snapdeal spokesperson said that the swift demand recovery has indeed been propelled by pent up demand, which is evident from users checking out goods that they have been adding to their carts over the last few weeks.

“However, there is still a lot of unfulfilled demand at this point due to supply-side constraints as many sellers have not been able to resume operations. We expect sales volumes to remain strong due to supply-side additions,” the spokesperson said.

Similarly, Paytm Mall spokesperson said that they believe that the overall trend of ordering online is going to remain strong due to social distancing norms. “Many of our users are from Tier-III and Bharat cities who are now ordering groceries as well as non-essentials routinely on our platform,” the spokesperson added.

Apart from smartphones and laptops required for communication and to work and study from home, other fast-selling products include electronic items like headphones and power banks, as well as home and general merchandise. Snapdeal said that maximum growth has been in the home and general merchandise, where users are buying utensils, pressure cookers, kitchen appliances like mixers and grinders, food containers, bed sheets, towels etc.

Paytm Mall said that it has seen growth in work from home essentials including consumer electronics such as laptops, monitors, related accessories such as cooling pads, mobile phone charges, hard disks, pen drives, headphones, webcams, as well as education-related stationery as well as books along with personal grooming products.

The consumer electronics brands we spoke to saw 70%-80% increase in demand, while other audio brands like Noise are said to have achieved pre-Covid demand levels. The detailed questions sent to these companies remain unanswered till the time of publication.

Further, ecommerce brands we spoke to emphasised that brands are skeptical to spend money on marketing, hence, discounts are limited or products are being packaged with other benefits. Overall, the brands have been trying to keep acquisition costs lower with smaller marketing budgets considering the cost restrictions due to Covid-19 pandemic.

Over the last few years, discounts have been the biggest driving factor for ecommerce companies to drive sales. But considering the pressure on consumer discretionary spending expected due to the pandemic, will sellers and brands be able to afford discounts?

The market players note that discounts will be back to revive the demand and make the most out of it. Further, they said that shopping festivals will be needed to push the demand further because very few brands are giving discounts as no one is spending capital on push marketing.

Paytm Mall spokesperson told that at the moment, they feel customers are looking for reliable delivery of goods and not discounts, hence, the company is focussing on that as well. However, festive or event-based sales always help in generating consumer interest and the company is thinking of coming up with some offerings going forward.

Snapdeal spokesperson added that they expect spending to remain cautious as users balance needs with income uncertainties and hence, there will be a clear shift towards value as buyers trade down.

The company said it is already witnessing a perceptible shift as buyers are opting for value-priced brands and value-offers like multi-packs of basic garments etc. “We expect this trend to deepen. We also expect more local brands and businesses to move online to serve this demand,” the spokesperson added.

Experts suggest that there will be a significant shift from physical to online retail as consumers will be wary of returning to brick-and-mortar stores due to new social distancing norms as well as risk capabilities.