Is the eCommerce Juggernaut Slowing Down?

A new report from data platform PGA Labs predicts that eCommerce daily shipments would grow by about 20% during fiscal year 2023. Has a good resonance to it, but for the fact that over the past two financial years, this number was higher. However, no need to press the panic button as experts believe the last two years were blips on the radar. 

Media reports quoted industry bodies and key executives to suggest that consumption growth rates are on the wane with even India’s top FMCG brand Hindustan Unilever (HUL) bracing for some poor numbers over the next couple of quarters. While this may be true, the predicted decline in eCommerce growth rate  in itself needs to be put in context. 

Wrapping a context around things

While FY21 saw a month of no activity followed by three months of hyperactivity with customers even engaging in revenge purchases as they got locked out of the world by the Covid-19 pandemic and its repercussions. eCommerce giants like Amazon and Flipkart reported robust numbers during the festive season sales. 

The same continued in FY22 as the second wave of the pandemic returned in all its ferocity. Though the government kept essential services up and running and allowed eCommerce deliveries to happen, the mood this time was somber due to the Covid deaths as well as salaries getting truncated. 

In addition, the last two years saw the eCommerce industry witnessing the fastest growth in shopper migration that brought with it an increase in fulfillment as most of those who were new to the platforms would have purchased something, even if at a very low price point. So, aiming for a similar growth rate in FY 2023 may be a tough act to follow. 

What’s causing the concern? 

Having said so, eCommerce and logistics companies are reporting that growth during sales events such as Prime Day on Amazon and similar activities on Flipkart hasn’t been robust. This in spite of higher discounts. In fact, HUL managing director Sanjiv Mehta had warned of inflationary pressures resulting in a slowdown in consumption. 

In fact, most executives at eCommerce companies are concerned that sales do continue even in March in spite of the salaried class often curtailing expenditure to meet their tax obligations in terms of insurance payments and other such stuff. However, this time round, the sales during March and April have been even more sluggish. 

What’s the solution?

FMCG companies are looking to increase both ad spend and discounts over certain fast moving product categories in time for the festive season but do not see price tags coming down drastically, in spite of input costs showing signs of easing in recent times. 

In terms of consumer electronics, the expectations are lower this time round with company officials privately accepting that offtake could be considerably lower for high cost items though home appliances may witness good sales. Smartphones could become the worst affected as officials believe that expecting the usual 50% growth spike during festivals may not happen. 

Overall, things may not appear as rosy as the past two years, but daily shipments could still average around 9.5 million as against 8.3 million over the past six months. The festive season will result in more buying though the challenge would be to get people into the costlier categories such as top notch televisions or flagship smartphones.