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Flipkart, Amazon Gear Up For the Festive Season. Who Is Buying Though? While people are staying at home and increasingly depending on doorstep delivery, a sharp 23.9% contraction in India's GDP in the April-June quarter and low purchasing appetite, the e-commerce space is interestingly juxtaposed

By Prabhjeet Bhatla

Opinions expressed by Entrepreneur contributors are their own.

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The COVID-19 pandemic has led businesses to re-evaluate their strategies for the upcoming festive season. While a sizeable number of companies have struggled to adapt to the new dynamic, e-commerce trends reflect an optimistic story. And with Reliance Industries' JioMart, too, entering the arena, the space is getting exciting.

In preparation for the festive season ahead, Flipkart has significantly expanded its kirana onboarding programme to make deliveries to customers in more than 850 cities. With more than 50,000 kiranas on-boarded, it aims to provide a fast and personalized e-commerce experience to millions of consumers while creating opportunities for digital upskilling as well as additional income for kiranas.

"Flipkart believes in technology-enabled inclusive growth by taking all the ecosystem stakeholders with us and our kirana partners are an integral part of this ecosystem. As one of the oldest retail formats in India, kiranas have one of the highest penetrations and showcase effective management of the supply chain drivers such as facilities, inventory, information and sourcing, as well as in maintaining a long-standing relationship with consumers. Through a combination of their hyperlocal presence and innovations by Flipkart, this programme has become a great enabler in strengthening the kirana ecosystem in the country. We are pleased to witness the increasing participation from kiranas across the country to reinvent themselves and align with the fast growing e-commerce industry," said Amitesh Jha, senior vice-president, Ekart and Marketplace, Flipkart in a recent statement.

At the same time, Amazon India has announced the expansion of its sort centre network. The five new sort centres will be launched in Vishakhapatnam, Farukhnagar, Bangalore, Mumbai and Ahmedabad. It will also expand its eight existing sort centres to increase its overall sortation area to more than 2.2 million square feet, across 19 states. With this expansion, it will strengthen its delivery speed and connectivity for customers and sellers, ahead of the festive season.

"Wherever they are, customers trust Amazon for fast, reliable and safe delivery of products. By expanding and investing in the sort centre network, we are positioned to ensure continued customer and seller delight, ahead of the upcoming festive season. This expansion will create hundreds of opportunities for individuals and ancillary industries especially during this time when economic growth is a priority for the country." said Abhinav Singh, director, Amazon Transportation Services, Amazon India in a recent release.

E-commerce looks different this year

Usually, the October-December festive season is the biggest event retailers spend all year preparing for. The sheer volume of site traffic, orders and fulfillment requests pushes many sellers to their limit. Think of it as the big marathon you have been training for. But things are different now.

With many stores closed and people sheltering at home, everyday e-commerce volume is way up over previous years.

E-commerce may have plunged into a coma of sorts when India's coronavirus lockdown started at the end of March, but five months later it's back with a bang.

In May, June and July, Indians spent more on shopping online than they did in the same period a year ago months, according to market intelligence firm Kalagato. The sale of non-essential items being permitted in designated "orange" and "green" zones that were not COVID-19 hotbeds is one of the reasons for the uptick.

Even as the country opens up bit by bit, shopper's habits have changed. Footfalls are decreasing at malls and shopping centres, and shoppers are spending lesser time at these places. In contrast, e-commerce is booming. Amazon India's paid customer base, for instance, has more than doubled amid the pandemic.

"While the data may indicate a return to pre-COVID levels, it's premature to call this a recovery," said Kumar. Spending values do not indicate spending volume. Each person may be spending more but the total number of shoppers could still be low. After all, just 1.6 per cent of the total retail in India is online.

For better or for worse, no industry has gone untouched by COVID-19. It has thrown the entire e-commerce landscape for a loop, with consumer's buying behaviors seemingly changing overnight. While some trends have accelerated, others have declined unexpectedly, and the impact on brands depends largely on every segmented industry.

Coronavirus is also expected to impact festive season shopping, with consumers across all income brackets saying they expect to spend less during these seasonal times than in 2019.

The festive season is just around the corner and it is already clear that the coronavirus is forcing kiranas to plan for a festive season collaborating with popular e-commerce, a shifted sales timeline and more conservative spending habits among consumers.

A historically wide opportunity for e-commerce sales not only stand to change how shoppers buy gifts for themselves and others, experts say they also could scramble the traditional festive shopping enthusiasm and pulling some sales forward.

That is nearly certain to happen against the backdrop of a recovering economy and consumers scaling back their spending over 2019 due to job losses and the pandemic, which is expected to last well into 2021.

"From a retailer perspective, your goal is how do you do the same amount of volume but shifting the e-commerce penetration very significantly," said Stephen Rector, a former executive at Macy's Inc. and founder of Bakertown Consulting, in the July survey by 451 Research, an offering of S&P Global Market Intelligence. The Research took into account the global scenario affected due to COVID-19. While kiranas have spent recent months beefing up their digital strategies in response to COVID-19, filling a larger portion of festive season orders early would be a new test, he added.

Depressed consumer spending is also likely to weigh on festive sales, regardless of how the transactions take place, said James Thomson, a partner at consultancy Buy Box Experts who formerly led teams at Amazon focused on its third-party marketplace. "Disposable income is nowhere near where it was last year," he said the Research. "We're not going to see much growth in sales" across the entire retail industry.

Around 55 per cent of high-income consumers plan to cut back their spending in the next three months compared with the same period in 2019, according to the S&P Global Market Intelligence report. Just 15 per cent said they planned to spend more, the survey found.

Not all products will be equally hurt by a pullback in consumer spending, Rector said, adding that electronics are likely to sell well even in a depressed economic environment, while categories like apparel, which are seasonal and more subject to markdowns could fare worse.

Kiranas are already coping with one key selling season disturbed due to the coronavirus. "Consumers are buying for the here-and-now," the Research quoted Marshal Cohen, chief industry advisor for retail at the NPD Group, noting that consumers with tighter budgets as a result of the pandemic will likely wait to make seasonal clothing purchases, including some festive items, until well into November or December.

In the short term, though, one expects sales will continue since India's festive season is just around the corner.

Prabhjeet Bhatla

Former Staff

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