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Amazon, Flipkart discounts boost online spending

Asmita Dey
As more and more people shop online, they are attracted by deep discounts and cashback offers

Even as FMCG (fast-moving consumer goods) and retail sectors are facing a slowdown on the back of low consumer spend, e-commerce companies are carrying on with their high discounting practice, cashbacks, etc, to attract buyers.

Ankur Pahwa, partner at EY, said it is not just about discounts and cashbacks, but customers are also slowly getting accustomed to the value proposition offered by shopping online - benefit, ease and convenience. Further, customers from Tier II and Tier III cities are increasingly taking to online shopping as a broad availability of products and offerings (free exchange, delivery, etc) gives an opportunity to transact.

"Customers will continue to respond positively as long as they are getting a bang for their buck," Pahwa said.

"While the exact impact of these will be determinable when the sale period is completed, customer sentiment continues to be high," Pahwa said.

Amazon, which saw the 'biggest sales ever' for Amazon devices in the two-day July Prime day sales, gave consumers discounts and bundled offers on electronic items in the four-day Independence Day sale that ended on August 11. Flipkart's extended sale that ended on August 15 offered up to 75% discount on television and appliances. Prices of various fashion items have also been slashed by over 80%. E-grocers Grofers and BigBasket are also offering attractive deals to consumers. While Grofers' nine-day grand orange bag days (GOBD) sale concluding on August 18 gives all consumers 100% cashback up to Rs 5,000, rival BigBasket’s 11-day freedom 47 sale had 47% discount on top 500 products in the offing for customers.

As per data sourced from market research firm GfK, during the six months ended June 2019, online channel sales for consumer electronics and major domestic appliances registered volume growth of 49% compared to the year-ago period.

Given that proliferation of cheap internet is prodding consumers to take to online shopping, online firms’ aggressive pitch to consumers to push sales can be understood. According to analysts at market research firm RedSeer Consulting, an estimated 65 million users on an average adopted Internet every year from 2016 onwards. With close to 530 million internet users, India has the world’s second-largest internet user base. The analysts said almost 70% of e-tailing GMV (gross merchandise value) would come from tier two cities and beyond and rural areas by 2023, compared to 40% in 2018. Amazon said over 40% of new members (who signed up during prime day sales) came from cities outside the top 10 cities, including Durgapur, Kurukshetra, Hooghly, Guntur, Satara, Bharuch, Chittoor and the like.

Satish Meena, senior analyst at Forrester Research, said on an average, discounts doled out by e-tail platforms have, however, been gradually falling every year as competition is limited and the market is largely dominated by Amazon and Flipkart. Meena said in e-grocery segment, aggressive discounting will continue as players are still in customer acquisition mode and Amazon and Flipkart are also looking to make it big in the segment.

"The sale has been extremely promising for us and we expect to be three times of last year’s numbers. We have seen up to 600% growth in certain products," KB Nagaraju, chief customer experience officer, BigBasket told FE.

Grofers said it logged highest single-day sale of Rs 115 crore during the first day of its GOBD sale. The company said it is aiming to triple its customer acquisition through the course of the sale.

Forrester Research’s Meena said e-commerce sales in CY2019 will be lower than the estimated $32.5 billion given the current slowdown in consumer spending. However, sales are still likely to be higher than previous year’s $26.5 billion. "When the economy is in slowdown or distress, e-commerce companies are less affected. There is a perception that the pricing is right on these platforms compared to offline retail," Meena said. Also, when spending slows, customers look for better deals which e-commerce companies are better equipped to provide. Hence, a large chunk of spending moves online from offline, Meena added.