Ecommerce logs 24% Q2 growth as premium products click

Ecommerce sales volumes have grown by about 24% in the April to June quarter, data from ecommerce-focused warehouse solutions provider Unicommerce showed.This does not include smartphones, where, according to several ecommerce executives and research firms like Counterpoint, the growth is being led by premium devices. Demand continues to be soft for mass-market phones.

The 24% quarterly growth follows a slower-than-expected 16% growth in the January to March quarter, as reported by ET in May. While certain segments like pharma and eye wear have grown at a faster clip, senior ecommerce industry executives said there is an emerging trend of slowdown in online sales of low-priced items across categories like fashion, appliances, etc. This affects the overall volume growth for ecommerce marketplaces, even though the demand for high-value items compensates for the drop in volume.

Data from Unicommerce showed that health and pharma, eyewear, and fashion and accessories grew by over 47%, 30%, and 24%, respectively, during the June quarter.

“Rural consumer spending, and I’m including the urban poor in this category, has been extremely sluggish over the past six months. This has impacted both offline and online retail”, Ashish Dhir, executive vice president (consumer and retail) at market research firm 1Lattice – earlier PGA Labs – said.

E-commerceETtech

Smartphones, which make up roughly a third of the wider electronics segment in ecommerce, saw a 20% contraction in sales volumes between January and June this year on a year-on-year (YoY) basis, said Neil Shah, vice president of research at Counterpoint. By value, this would be a drop of around 13%.

Discover the stories of your interest

“Inflationary and recessionary pressures are making consumers withhold purchases till the second half of the year, when festival discounts will kick in, especially in the segment costing between Rs. 8,000 and Rs. 12,000”, Shah told ET. Brands like Xiaomi, Realme, and others have been facing this over the last two quarters at least, ET has reported.

Premium drive

A senior ecommerce executive said that while high-value products are driving growth in online retail for now, slowing sales in low-value items is not a good sign for the industry. “In fashion and accessories, for example, products priced below Rs 500 are selling less while those priced higher are doing well. This has been the case with smartphones as well, and it continues. It has to be seen how this trend pans out over the rest of the year’’, this executive said.

Research from 1Lattice echoed the same: it said that sales of cheaper apparel had slowed over the past six months.

According to two senior executives from electronics brands, firms are diversifying into new categories like wearables to drive growth. “The wearables market in India is still growing at a promising rate. On average, we have been experiencing a 20% YoY growth,” said Sameer Mehta, CEO, Boat. “This year we will focus on smart watches, which is the fastest-growing segment in our portfolio’’, he said, adding that the firm had clocked sales of around $500 million in FY22-23.

For smartphones, the premium segment, comprising models costing over Rs. 33,000 ($400 approximately) , had seen a 50% jump in sales volumes over the past six months, Shah said, adding that the growth was similar in value terms as well. “Post pandemic, the perceived return on investment on a phone has become extremely high, and people are willing to invest more”, he explained.

In contrast, phones costing under Rs. 12,000 had seen volumes shrink by over 20%, with phones in the Rs. 8,000 to Rs. 12,000 range being the worst hit. Sales below the Rs. 8,000 mark had also declined.

Other factors such as increased sale of second-hand phones and wider availability of financing options have pushed a chunk of mass-market buyers to ‘upgrade’ to pricier devices.

E-mails sent to Walmart-owned Flipkart and Amazon India did not elicit any response. A spokesperson of ecommerce firm Meesho said it had seen its order volumes grow 30% during the first six months of 2023.

Offline and online

The re-opening of physical stores post the Covid lockdown has also impacted online sales, analysts and e-commerce executives said. This has been a growing trend for the past few quarters. The executives from electronics brands mentioned above also echoed this: “We are definitely seeing higher traction offline’’.

Increasingly, ecommerce ventures are looking to have an offline presence as well. Mensa Brands — an ecommerce aggregator — has opened its first offline store in Mumbai, according to a tweet from its CEO Ananth Narayanan.

The share of online in total smartphone sales had fallen to 44.5% in the last six months, as opposed to a 47% share in the calendar year ended December 2022, Shah said. In 2021, at the height of the pandemic, online sales comprised 53% of total smartphone volumes, per Counterpoint data.

“As the market opts for premium phones, offline retailers have benefitted. People often want to touch and try out the product before making an expensive purchase”, Shah added.

A similar trend was seen in the broader ecommerce market, according to Abhishek Maiti, director at 1Lattice. “A large number of ecommerce customers are pretty fickle. They were forced online by the pandemic, and went back to physical retail the first chance they got. Physical retailers correctly anticipated their return and offered attractive discounts, further driving that move. As a result, we’re seeing a correction in online sales’’, he added.

However, there are exceptions to this trend. As metro and tier 1 markets have become stagnant and stable markets, most e-commerce players have pushed further into the hinterland.

“We have continued to see about 8% growth in online sales over the past six months, while offline sales seem broadly flat. Our best guess is that this is due to customers moving online from offline as e-commerce platforms expand to tier-2 towns and beyond”, an online seller of home furnishings told ET, declining to be identified.

For all the latest Technology News Click Here 

 For the latest news and updates, follow us on Google News

Read original article here

Denial of responsibility! TheDailyCheck is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected] The content will be deleted within 24 hours.