Why e-tailers have sharpened their focus on ‘value’ play

Companies are also betting on emerging ‘at-home’ categories to drive demand this yearCompanies are also betting on emerging ‘at-home’ categories to drive demand this year

Despite the Covid-19 pandemic and muted consumer sentiment on discretionary purchases this year, retail analysts are hopeful of festive sales bringing the cheer back into shopping, particularly online. The first leg of festive sales on online marketplaces, which kicked in on October 16, is expected to rake in $4 billion in gross merchandise value (GMV), as per RedSeer Consulting.

Flipkart’s flagship festive sale event Big Billion Days started on October 16 and will end on October 21, while Amazon’s Great Indian Festival, which started on October 17, will go on for a month. Other players like Snapdeal and Myntra, too, launched their first sales events of the season on October 16.

Amidst the pandemic, e-tailers this year have sharpened their focus on the ‘value’ play, as they expect first-time buyers from tier II and beyond towns to drive growth. According to the RedSeer report, almost half of the 45-50 million online shoppers this year will come from smaller towns this season.

On the first day of Flipkart’s Big Billion Days sale on Friday, nearly 50% of the new customers came from tier-III cities and beyond. Among categories, the home segment registered a 53% increase in new customers from tier-III cities.

The large appliances and beauty and general merchandise categories each witnessed a near 50% increase in new users from the region. Snapdeal, too, reported that 90% of customers who shopped on the first day of its sale were from tier II and III towns.

E-tailers like Myntra, which were targeting the metro audiences earlier, have also increased their focus on tier II and III markets. “We have got brands like Bata India, Liberty and Tribes India on-board, which connect well with these towns,” says Ayyapan Rajagopal, head of business, Myntra.

A recent report by SaaS platform Unicommerce says consumers have become value-conscious and the average order value on e-commerce in the July-September quarter declined by 5%. The average selling price for fashion on e-commerce is `500-750, whereas it is `10,000-15,000 for mobile phones and `25,000-40,000 for desktops and laptops.

Most marketplaces have asked their sellers to price their products in the lower segments keeping in view the dismal economic situation. This move would also help them woo first-time buyers. Sellers in the fashion category, for instance, have been asked to price a major share of their merchandise in the `500-1000 range.

“Anticipating the growth in the value segment, we have asked our sellers across categories to keep prices at the lower end of the spectrum,” says a Snapdeal spokesperson. It has also tied up with 5,000 manufactures in commercial hubs to sell products at affordable prices directly on its platform.

Companies are also betting on emerging ‘at-home’ categories to drive demand this year and have tailored their merchandise accordingly.

“We have doubled down on products such as laptops, smartphones, headphones, lounge and comfort wear, etc, that cater to the work-at-home, stay-at-home and wellness-at-home segments,” says Nandita Sinha, vice-president, events, engagement and merchandising at Flipkart. The marketplace has kept these categories the focus for its special edition of over 200 products under ‘Big Billion Days Specials’.

While fashion overall as a category is expected to see nominal growth this year, experts say first-time buyers are expected to shop in the segment because of its low pricing. “We have waived the shipment charges for the first-time buyers to keep the entry barriers low,” says Arun Sirdeshmukh, business head, Amazon Fashion India.

For timely deliveries to the smaller towns, e-commerce companies have also ramped up their infrastructure and have tied up with hyper-local players for deliveries. The feat to reach these towns, however, is not going to be easy. “It has become difficult to service these regions due to containment zones and restricted movement. With average order value coming down, the cost of delivery will increase,” says Kapil Makhija, CEO, Unicommerce. As per industry estimates, the cost for delivery has already gone up by 10-15% as a result. The higher volumes of orders placed in the fashion category would further add to cost, as it has a higher return rate of around 20-30%.

While these companies generally acquire a lot of new customers during the festive sales, says Saurav Chachan, senior consultant, RedSeer Consulting, they are often unable to retain them in the absence of strategies to create stickiness.

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, Why e-tailers have sharpened their focus on ‘value’ play , Devika Singh , 2020-10-18 09:48:00 , The Financial Express , https://images.financialexpress.com/2020/10/online.jpg , https://images.financialexpress.com/2020/10/online.jpg , , , https://www.financialexpress.com/brandwagon/why-e-tailers-have-sharpened-their-focus-on-value-play/2108249/

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