E-commerce giants Amazon.com Inc and Walmart Inc-backed Flipkart Pvt Ltd on Sunday launched a crucial battle for shoppers ahead of India’s massive festive season, as retailers search for a much-needed boost to sales amid a slowing economy.
Traditionally, October and November — when much of India’s 1.3 billion population celebrates several major Hindu festivals and people go on spending sprees — are critical for retailers, with some raking in almost half of their annual sales during the period.
However, sales this year have been hit by falling demand as a liquidity crunch crimps personal loans and unemployment soars to its highest level since the 1970s.
“Things are difficult,” said Rakesh Kumar Yadav of the Federation of Sadar Bazar Traders Association, which represents about 40,000 wholesale traders in New Delhi.
Even aggressive pitches by Amazon and Flipkart, which have heavily invested in India’s budding e-commerce market, did not stop online consumer spending from slipping by about 20 percent in the six months to June compared with last year, the Economic Times reported, citing market research firm Kantar Consulting.
“The festival season is around the corner ... and a lot of these corporates are coming up with various schemes to prop up demand and woo the consumers, but my own sense is that despite all the efforts, overall consumer sentiment is so down-and-out that we won’t see similar kinds of spending that we have seen in the past,” India Ratings principal economist Sunil Sinha said.
With their deep pockets, Amazon and Flipkart are taking on India’s local family-run stores, known as kirana, that have dominated streets for decades.
ONLINE SPACE
Less than 5 percent of India’s US$600 billion retail market is online, but the sector is expected to expand to 8 to 9 percent of the market by 2022, thanks to smartphone adoption and a rising middle class, RBC Capital Markets has said.
Amazon — which recently opened a massive campus for 15,000 employees in Hyderabad — has taken out full-page newspaper advertisements to promote its “Big Indian Festival” sales and is offering discounts of up to 90 percent.
Flipkart has India cricket captain Virat Kohli as the face of its “Big Billion Days” sales campaign and has slashed prices on fashion items and home appliances.
The two platforms — which combined have almost 75 percent market share of the e-commerce market — hope to attract cash-strapped shoppers with financing options and have hired hundreds of thousands of temporary staff to cope with expected increased demand.
Their six-day festive sales are estimated to reach US$3.8 billion, up from US$2.9 billion last year, despite the wider economic slowdown, Forrester Research senior forecast analyst Satish Meena said.
Bricks-and-mortar retailers are also ramping up their visibility to keep pace with the online behemoths.
“These are difficult times and consumer sentiment has been tilted towards the negative for some time now,” Arvind Lifestyle Brands managing director J. Suresh told the Economic Times about why the 1,300-store owner was increasing ad spending by up to 20 percent this year.
GOVERNMENT MEASURES
Meanwhile, economists said a raft of Indian government measures to revive the flagging economy, including a corporate tax cut, would improve sentiment in coming years.
“It’s a good beginning... The likelihood is that we’ve almost reached the bottom and if the government continues to do its bit and corporates remain upbeat because of these announcements, things will start looking up,” Sinha said.
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