SUMMARY
Ecommerce festive sales in 2022 saw lower consumer spending and a drop in the number of online shoppers even as new marketplaces have come in
We hate to be the bearer of bad tidings. But 2022 is an annus horribilis for startups and the tech ecosystem. Nagging issues across sectors have made for a shaky year, and the muted state of ecommerce sales is the latest to emerge.
From Amazon to Flipkart to Meesho to JioMart, marketplaces are certainly not quieter this year when it comes to pushing their sales, but are they actually getting returns for all their marketing efforts?
Data from the early days of what is considered the peak shopping season tells us the answer is a resounding no. Is it only down to the headwinds limiting consumer spending?
Not quite, as we will see after these two major stories of the week:
- Edtech’s Year Of Disasters: With the latest round of layoffs at BYJU’S, the edtech sector now accounts for close to 45% of the 15,000+ layoffs in Indian startups this year
- Licious Vs Beyond Meat: Interesting week for plant-based meat enthusiasts as Licious launched a new lineup called UnCrave this week and US-based giant Beyond Meat entered the Indian market
Where Are The Online Shoppers?
First, the data: While the total ecommerce GMV for the first week of the Indian festive season touched $5.7 Bn, a 4X surge compared to the non-peak season, but the average user spend has not grown at all, RedSeer data shows.
While these numbers are from the early days of the festive season sales, this period typically accounts for 60% of the total festive season volume. The average user spend of INR 5,200 is 41% lower than 2018 and 30% lower than 2019.
What’s worse is that the estimated number of online shoppers has shrunk. The number of active shoppers this festive season will come to roughly 50 Mn-55 Mn, 60% lower than the numbers reported in 2020.
Headwinds Remain Strong
The shrinking of the shopper base indicates that the Indian market might have hit a wall in terms of active internet shoppers, while long tail players that focus on small-ticket items might see an overall growth in GMV, the takerates would not be encouraging here.
Ecommerce fatigue among some of the new-to-ecommerce users after two years of shopping online is one of the reasons being cited for the slower sales this year. Unlike the past years, this year the sales of premium smartphones has outpaced budget or mid-tier smartphones, which again indicates that it is the more affluent user that is spending higher for ecommerce.
New ecommerce users typically have a lower cart size and average order value, and their withdrawal from this season’s sale has therefore not impacted the overall GMV as much, but still ecommerce platforms essentially lost out on this business in 2022.
The rise in lending interest rates, growing inflation, and depreciation of rupee against the dollar have led to marketing slowdown for brands as well.
Logistics No Longer Smooth
The same factors have also made imports and ecommerce logistics more costly for platforms in 2022, thereby making ecommerce less attractive or more expensive than offline shopping for the consumers.
Ecommerce logistics is no longer about marketplaces alone. Logistics tech and delivery startups are stretched with a number of new models emerging in the past couple of years. For instance, a number of logistics players are engaged in intra-city distribution for hyperlocal and quick commerce. Logistics players are also working with thousands of D2C brands that each have their own requirements.
The turnaround time (the total time between order placement and its delivery) was higher during the first week of the festive season compared to usual days, Redseer said. As more and more third-party logistics players (3PL) fulfil orders, there is a gap between what the ecommerce marketplace promises and the actual delivery situation.
Besides, delivery issues also occurred as the most numbers of orders came from Tier-II towns and beyond, where connectivity is still not as smooth as in the metros.
Ecommerce Is Tough Again
The entry of rivals to Amazon and Flipkart has also spread the ecommerce money across several platforms. The number of players have increased beyond Amazon & Flipkart to include Reliance JioMart, Meesho and TataNeu and other ecommerce vertical marketplaces for fashion, beauty and lifestyle.
JioMart claimed a 2.5X spike in traffic and overall sales in this period, while SoftBank-backed Meesho had the highest number of orders (not GMV) in the first week of the sales. It must be noted that the competition has resulted in claims about data discrepancies.
Amazon India countered Redseer’s claims of Meesho leading on order volumes with its own report on festive season sales.
This is not necessarily a bad thing, but it does mean that the user base is not as loyal as it used to be before. Plus, the entry of D2C brands has also taken some of the business away from marketplaces — though to what extent cannot be determined.
The ecommerce marketplace battle has revived some of the spiciness it was missing in the past few years after the retreat of Paytm Mall and Snapdeal. New shoppers can be acquired by any of the newer players, so ecommerce giants have to turn to high-quality customer experience to boost loyalty and retention which was so far largely dependent on discounts.
Each marketplace is able to offer the same discounts as the other, so it’s no longer a differentiation.
Plus, the potential ecommerce policy, which will look to tackle discounts even further. So the priority for ecommerce giants will shift towards customer experience features, logistics efficiency and discovery. Ecommerce is going to be tough again for the biggest players.
Sunday Roundup: Startup Funding, Tech Stocks & More
- Startup Funding This Week: Indian startups raised $312 Mn across 31 deals this past week, which is a major improvement over the weekly funding tally of the past few weeks as seen below.
- Starlink In India: Elon Musk-led SpaceX is reportedly close to approaching authorities in India to get approvals for its StarLink satellite-based internet service
- Tracxn IPO: The initial public offering of Bengaluru-based market intelligence startup Tracxn Technologies was subscribed 2X at the end of the window, receiving bids for 4.27 Cr shares as against 2.13 Cr shares on offer.
- Tech Stocks Crash: All the major new-age tech companies saw share prices drop in a week-on-week comparison, with Zomato seeing the biggest drop
- UPI’s Eurotrip: NPCI has partnered with France-based digital payment company Worldline to launch UPI and RuPay payments services in Europe
- Zoomcar Signs SPAC: Car rental platform Zoomcar has inked a merger pact worth $456 Mn with blank check firm Innovative International Acquisition Corp and is set to go public on Nasdaq by next year
- Influencers Beware: In its latest report, SEBI has revealed about search and seizure operations against entities in the crackdown on influencer-led stock market and investment tips on social media
That’s all for this week. We’ll see you again next Sunday with another weekly roundup
