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How Tier 2 & 3 markets changed the e-commerce dynamics in 2021

The Covid-19 led economic slowdown has been catastrophic for most sectors, barring a few. The e-commerce sector belongs to the latter and its after effects led to a complete transformation and a massive surge in the e-commerce sector. As the pandemic and ensuing lockdowns came as a sudden blow, Indian retailers are bouncing back to normalcy and the retail sales boom observed this festive season is a testament to the improving consumer sentiment.

According to Shopify India’s Festive Shopping Report 2021, 76.9% Indian consumers show deep inclination towards online shopping this festive season because of the convenience it offers. While traditionally festive shopping has been an offline retail activity, pandemic-induced restrictions put in place to contain the virus forced most retail activity to move online. A practice that many consumers have got familiar with and also appreciate for the bouquet of benefits it has to offer. However, this year, even with the lifting of most restrictions, high vaccinations rates and a lower Covid caseload in India, Shopify India has witnessed a continued preference for virtual retail.

Commenting on the sales revenue observed during the festive season, Saroja Yeramilli, Co-Founder & CEO, Melorra, said, “We have had a very strong festive season this year. Customer enquiries have been very high online and also in our 11 offline experience centers which were not existing last year Dhanteras. Melorra is seeing strong customer love due to our trendy designs – we are the only company that launches a collection of 75 designs every week inspired by Global Fashion Trends -affordable price points (with 70% of the range under Rs.30K) and BIS Hallmarked Gold Jewellery delivered to every pin code in India.”

SkinKraft Laboratories’ Co-Founder & CEO, Chaitanya Nallan, added here, “We had launched a month-long Beauty ‘Ravissant SkinKraft Festive Carnival’. Festive packaging, colorful user interface & Mahaul, heavily discounted regimen, flash sales a couple of times during the month, and digital campaigns, #SkinKraftfestivecarnival and #Manayefromhome, led by 300 influencers and several celebrity couples.”

“SkinKraft has launched 2 unique and sharply priced gift sets of the indulgence body kit and face kit with 5-7 SKUs each starting at Rs 999. Every Customized Skincare Regimen during this period will get Free Hyaluronic Acid Drench Night Serum. Our sales even during the pandemic grew 100% and, with this mega sale we expect to double it again,” he added.

The pull of last-minute discount deals along with short-lead/ express delivery advantages offered by e-retailers have been instrumental in gaining consumer confidence. According to the report by Shopify India, 2 out of 3 Indian shoppers had not started shopping for the festive season at the time of taking this survey. This is in sharp contrast to pre-pandemic traditional behaviors where festive shopping in India would kick off in full swing nearly a month in advance.

The report further stated, “Multiple factors such as India’s nationwide mobile penetration, brands opting to shift to a D2C model, enhanced last-mile delivery and customer-friendly return policies have been instrumental in bringing the millennial, non-metro shopper to opt for the digital medium. While online shopping – in the last decade – has largely been prevalent amongst consumers in tier-I Indian metropolitan cities, the pandemic has accelerated and driven this growth up the charts in tier-II cities and non-metros as well. According to Shopify’s Festive Shopping Outlook Report, 53.5% millennial shoppers from non-metros have displayed a strong preference to shop online.”

Mehernosh Pithawalla, Head – Brand and Strategic Insights, Godrej & Boyce, observed, “A few prominent themes that have emerged among consumers in the backdrop of the Covid-19 Pandemic are “Health and Hygiene”, “Comfort and Convenience” and “Safety & Security”. We are already witnessing an uptick in discretionary spending in anticipation of the upcoming festivals and convenience continues to be the preferred spending method for all age groups. Given that the festive season is the most important time for consumption as they are often linked with yearly bonuses and are auspicious for purchasing homes and related products and solutions, we are channelizing our resources to study the market, understand consumer behaviour, trends and accordingly redefine our marketing strategies to further boost the festive sentiments.”

“Consumers’ festive spends will largely depend on how the pandemic takes shape in the next few weeks. Overall, the industry will be in readiness to spend – perhaps even at par with pre-Covid levels, optimistically speaking. However, the final decision will depend on how the market behaves and the foot falls witnessed on the ground. Additionally, with work from home getting stretched for the second consecutive year, people have also realised the importance of setting up an office space at home. Interestingly, the ‘chairs’ category turned out to be the most sold category during the recent prime day sale as compared to pre-pandemic prime day sales when storage furniture was the most preferred category among consumers. Further, Godrej Interio has also witnessed their sales rise 2.5 times in the first four months of the fiscal year to reach 86-90% of the pre-pandemic levels. This clearly points to the recovery being much quicker than the first wave where unlocking was slow and their reaction was more balanced.  With the lockdown rules being a little more lenient and the increase in social interactions in private secure bubbles, we also wish to propagate the concept of Gifting the Promise of Security for your loved ones with our offerings of home cameras and safes,” he added.

Tonic Worldwide’s recent report on The rise and rise of e-commerce in India, stated, “Today, from chatbots, Live videos, conversation commerce to AR features, the options are plenty. Inclination towards conversational commerce is on the rise, with 79% increase in industry-led conversations on decoding conversational commerce, and the technologies involved. Further, top conversational AI platforms see steady growth. Implication: ‘Experience’ can be your post-pandemic advantage. Invest in experiences now.”

According to Adloid’s Founder & CEO, Kanav Singla, “Retail industry has seen a paradigm shift in the last few years, as most retailers have started selling online. The concept of e-commerce had gained popularity even before the pandemic, as it offers comfort and convenience to shoppers, and also saves on time. However, the pandemic has added a new dimension to the scenario, and that is hygiene. People have started avoiding public places, and therefore the overall reach of the digital mediums and the time spent on them has increased. Some customers still preferred physical stores over online markets, as it allows them to experience the actual product before buying. However, Augmented Reality has solved for this to a large extent. Customers are now able to augment the products in their personal spaces, with close-to-real product experiences, that boosts customer’s confidence in the product before buying. According to recent studies conducted globally, personalised AR experiences on e-commerce significantly impact the complete sales funnel, reducing the bounce rates by 30-40%, increasing the purchasing propensity of customers by 51%, and boosting conversion by 2-3x. With higher engagement and conversion possibilities on their platforms through AR, e-commerce brands are now looking to spend big on digital technologies and advertisement to add value to their businesses.”

“E-commerce companies are spending big on AR technology and advertisements to attract and engage potential buyers. The strategy works in most cases and marketing outreaches do generate awareness and demand. However, the challenge is not just to get the customers on the platform, but also to provide a personalised buying experience to reduce bounce/drop rates and drive better engagement. Therefore, e-commerce companies across the world are investing in AR technology to drive brand engagement, and boost conversion rates. The revenue and investments of e-commerce companies have been upwards and the ROI is expected to increase significantly”, added further.

Criteo’s data revealed that this year, marketers witnessed an early shopping hype during pre-Diwali from late September 2021, compared to mid-October in 2020. The highest peak observed during the period of the Big Billion Days was on October 3, 2021, representing an overall Y-O-Y daily sales of 200% with the first seven days of September 2020 as a baseline. Five days before Diwali 2021 demonstrate an increase in the buyers’ retail shopping interest. Home furnishing and Food led the festival with +42% and +18% sales, respectively (with First 7 days of October 2021 as a baseline).

Pee Safe’s Founder & CEO, Vikas Bagaria, said, “Pee Safe has always been a digital first D2C brand. We have strategically expanded and now command a strong omni-channel presence. In sync with the times, we have integrated our online and offline sales points to create a holistic shopping experience for the consumers. Pee Safe is the leading hygiene and wellness brand in India, and alongside our digital campaigns which are our primary channels for driving product awareness, we are also using mass media options like print and TV advertising etc., to make sure that we reach customers wherever they are.”

“The biggest pandemic-driven change has been the rise in awareness about the personal hygiene products available in the market and the need for the same. In the early days of the pandemic, panic buying made people buy anything and everything off the shelves which resulted in stock outs. Now the production capabilities and number of brands across the spectrum has grown significantly. Hence, while the demand continues to be strong, there is also an emphasis on buying only trustworthy products which provide the right quality and price mix. Overall, the Indian customers are no longer ignorant about what their hygiene needs are and brands that have swiftly responded to the needs in the right manner are those that will benefit from this market evolution,” he observed.

E-commerce and digitization has been a game changer for multiple companies of all sizes. In an effort to accelerate their business, GIPSI's ecommerce insights report focuses on ways and means to see higher growth by adopting best practices. By making this report accessible to other brands and businesses beyond tonic, we look forward to contributing to the larger growth story for marketers.

Online players have been focussing on geo based strategies in terms of store front, categories. This has helped in increasing the sales from Tier- 2/Tier-3. Celebrity led & Social Media Influencer marketing has been a big lever as this helps in bigger reach. “As a digital first brand, our media mix has been key. It's important to be present where the customer spends their maximum time during the day and with good frequency. Jewellery being a cluttered market, it's important to gain significant SOV depending on the brand's objectives. So we do a good mix of programmatic buying, search marketing, video, social media as well as influencers. It's also key to leverage the strength of digital as a platform and talk to a TG of 'one'. So we ensure to have relevant customised creatives for each unique individual based on their browsing patterns, interest, gender thus providing them with a very unique customer journey of their own. Apart from that, we have come back with a full fledged TV campaign that has helped drive sales online as well as offline,” said Shyamala Ramanan, Business Head, Mia by Tanishq.

Founder & CEO of Bewakoof, Prabhkiran Singh, added here, “In the initial few months of pandemic, With Work-from-home becoming the new normal, we have seen a huge demand in Comfort wear like loungewear, T-shirts, Joggers & Shorts. These are categories Bewakoof Brands are known for. With the Speed, flexibility & comfort of online shopping, we have seen demands even in the Festive Wear & also in the winter wear post-Pandemic, to keep up the momentum there is strong focus on long term customer retention strategies through improving shopping experience, engagement, customisation & fulfillment speed.”

According to the latest report released by homegrown firm RedSeer Consulting, the first week of Online Festive Sales of 2021 saw 23% YoY sales growth in 2021 that is $4.6 billion (Rs 32,000 crore) of goods have been sold online from brands and sellers during the festive sales. Earlier, RedSeer Consulting had forecasted a sale of $4.8 billion in the first week of the festive sale.  Further, the overall online shopper base grew by ~20% compared to last year with Tier 2 contributing to ~61% of all shoppers. Also, the overall GMV per shopper has grown by 1.04X – indicating an inherent aspiration in the shopper.

The report further indicates that eCommerce platforms were able to shave an average of 5hrs on delivery timelines to customers with better warehouse planning and streamlined supply chain.

Bharat continued to sparkle in Snapdeal’s festive season performance. The demand from Tier 3 cities grew by 91% over last year.  58% of the orders came from Tier 3 cities, while Tier 2 and Tier 1 accounted for 15% and 27% of the order volumes respectively. The growing popularity of e-commerce in Tier 2&3 cities was a pan-India trend with buyers starting their journey on Snapdeal from towns like Prakasam(Andhra Pradesh), Azamgarh (Uttar Pradesh), Gaya (Bihar), Baleshwar (Orissa),  Sopore (Jammu & Kashmir), Chittoor (Andhra Pradesh), Bardhaman (West Bengal), Nagaon (Assam), Thanjavur (Tamil Nadu), Chandrapur (Maharashtra), Pali (Rajasthan), Sundargarh (Orissa) and many others.

The growth from smaller cities was limited not only to buyers. Sellers from Tier 2 and 3 cities too saw a 99 % increase in sale orders compared to last year’s sale event. Popular items sold by them included:

  • Religious and spirituality items from Raya (Uttar Pradesh) 
  • Clothing items like Kurtas, Pyjamas & Dhotis, frocks and dresses, pants and chinos from Howrah & Bally (West Bengal)
  • Mobile & computer accessories from Upleta (Gujarat), Morena (Madhya Pradesh), Kekri ( Rajasthan) 
  • Home and kitchen items like taps, faucets, dinner and serving ware and kitchen tools from Yamunanagar (Haryana), Tonk ( Rajasthan).

Snapdeal’s spokesperson said, “The growing popularity of online shopping from smaller cities and towns is an indication of the vast growth potential in Bharat. With a sharp focus on both quality and price, Snapdeal’s value e-commerce proposition is well-positioned to serve these requirements.”


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