Amid the GDP growth gloom, E-commerce maybe the winner

By:Vandita Jadeja 2017-10-06

With robust festive season sales number posted by e-commerce companies, the sector is set to grow by 25% in 2017

There may be a slow growth of the economy and the consumer sentiments could be tepid, but the same has not impacted the e-commerce sales in the festive season that culminates with Diwali. This festive season has also marked a turning point for the e-commerce sector in 2017. Online retail is now set to grow by more than 25% for 2017 after a slow and sluggish performance in the first half.

In the five day Big Billion Day sale which ended on the 24th September, Flipkart had generated gross sales of more than Rs.5000 crore which was driven by the booming sales of iPhones, VU televisions and Xiaomi phones. The number includes sales at Jabong and Myntra, which is the specialty online fashion retail business of Flipkart. Its rival, Amazon generated gross sales of Rs.2500-2700 crore in the four day Festival sale. The gross sales are net of discounts but before the returns and cancellation of the products.

For the most part of last two years, the online retail market has grown at an extremely slow pace, which is largely due to the mismatch between the increasing number of internet users and the purchasing power of the same users. With Flipkart and Amazon ending their sale events on a high, the market has shown signs of revival. In the last two years, many investors had overestimated the size and potential of India’s e-commerce market while some had made forecasts of it being a $100 billion market by 2020. The reality check shook these predictions and the sales during 2016 were only around $14-14.5 billion. Despite the heavily advertised sale events by Amazon and Flipkart in May, the growth during the year was only 5%.

However, with the latest boost from the festive season sale, concerns around the future of the e-commerce sector have been melted down and investors may stand to gain more on their bucks over the next one year. Currently, Amazon and Flipkart are the leaders in the e-commerce sector. Flipkart also had a successful festival sale in 2016 and has repeated its success with an impressive performance this year. With the recent sale success, Flipkart has thrown the gauntlet towards Amazon and has proved that it can keep the American retailer at bay with a fund of atleast $4 billion at its disposal. It has already raised $2.8 billion in a fresh funding during the year through two separate tranches from investors such as SoftBank Group, Microsoft Corp, Tencent Holdings Ltd and eBay Inc. Its sales doubled in 2017 as compared to 2016. Flipkart claimed it accounted for atleast 70% of the total e-commerce sales in India during the five day Big Billion Day sales which indicated that it had beaten Amazon by a huge margin. It also claimed that it sold at least 1.3 million smartphones in the first 20 hours of the launch of the sale.

The robust sales season has set a stage for India’s top e-commerce companies to finish the year with a strong note. It would be a turning point for the sector which has been sluggish for the past one and a half year. Even the physical retail chains are highly optimistic of the sales receiving a welcome boost in the festive season.

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