The 24% quarterly gain follows a slower-than-expected 16% rise between January and March, ET reported in May. While some segments, such as pharmaceuticals and eyewear, have grown at a faster pace, e-commerce industry executives have said that there is a slowdown trend in online sales of low-cost products in categories such as fashion, home appliances, etc. This is affecting on the overall growth in the volume of e-commerce marketplaces, although the demand for high-value goods compensates for the drop in volume.
Unicommerce data showed that sales of health and pharmaceuticals, eyewear, fashion and accessories rose by more than 47%, 30% and 24%, respectively, during the June quarter.
“Consumer spending in rural areas, and I include the urban poor in this category, has been extremely sluggish over the past six months. This has affected both offline and online retail,” Ashish Dhir, EVP (Consumer & Retail) Marketplace. said research firm 1Lattice, formerly known as PGA Labs.
Smartphone sales, which make up about a third of the broader electronics segment of e-commerce, fell 20% year-on-year between January and June this year, Neal said. shah, vice president of research at Counterpoint. In value terms, this would be a fall of about 13%.
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“Inflationary and recessionary pressures are forcing consumers to refrain from shopping until the second half of the year when festival discounts kick in, especially in the Rs-10,000,000-rupees segment. 8000 and rupees. 12,000,” Shah told ET. Brands such as Xiaomi, Realme, and others have been dealing with this for at least the past two quarters, according to ET.
The senior e-commerce executive said that while high-priced products are currently driving online retail growth, a slowdown in sales of cheap items is not a good sign for the industry. “For example, in fashion and accessories, items under Rs 500 sell less, while higher priced items do well. So it was with smartphones, and it continues. It remains to be seen how this trend manifests itself in the rest of the year,” the executive said.
The 1Lattice study repeated the same thing, saying that sales of cheaper clothing have slowed over the past six months.
Firms are diversifying into new categories, such as wearables, to drive growth, according to two electronics brand executives. “The wearable market in India continues to grow at a promising pace. On average, we are seeing growth of 20% year on year,” said Samir Mehta, CEO of Boat. “This year, we will focus on smartwatches, which are the fastest growing segment in our portfolio,” he said, adding that the company generated about $500 million in FY22-23 sales.
For smartphones, the premium segment includes models costing over Rs. 33,000 (roughly $400), sales have increased by 50% in the past six months, Shah said, adding that the growth was similar in value terms. “After the pandemic, the perceived return on investment in a phone has become extremely high and people are willing to invest more,” he explained.
In contrast, phones costing less than Rs. 12,000 people saw sales volumes drop by more than 20% and phones cost Rs. from 8000 to rupees. 12000 range is the strongest hit. Sales are below Rs. 8,000 marks also fell.
Other factors, such as rising sales of used phones and the wider availability of financing options, have pushed some mass-market buyers to “upgrade” to more expensive devices.
Emails sent to Walmart-owned Flipkart and Amazon India have received no response. A spokesperson for e-commerce company Meesho said its order volumes grew by 30% in the first six months of 2023.
Offline and online
The reopening of physical stores following the Covid lockdown has also impacted online sales, analysts and e-commerce executives said. This is a growing trend of the last few quarters. The executives of the electronics brands mentioned above also echoed this: “We are definitely seeing an increase in offline popularity.”
Increasingly, e-commerce businesses are looking to have an offline presence. Mensa Brands, an e-commerce aggregator, has opened its first offline store in Mumbai, according to CEO Anant Narayanan.
The share of online sales in total smartphone sales has fallen to 44.5% over the past six months, compared to 47% in the calendar year ending December 2022, Shah said. In 2021, at the height of the pandemic, online sales accounted for 53% of total smartphone sales, according to Counterpoint.
“As the market selects premium phones, offline retailers have benefited. People often want to touch and try a product before making an expensive purchase,” Shah added.
According to Abhishek Maiti, director of 1Lattice, a similar trend has been seen across the broader e-commerce market. “A lot of e-commerce customers are pretty fickle. The pandemic forced them to go online and they returned to retail at the first opportunity. Physical retailers correctly anticipated their return and offered attractive discounts, further spurring this movement. As a result, we are seeing a correction in online sales,” he added.
However, there are exceptions to this trend. As the metro and first-tier markets have become stagnant and stable markets, most e-commerce players have moved further into the hinterland.
“Over the past six months, we are still seeing an increase in online sales of approximately 8%, while offline sales generally seem to be flat. We speculate that this is because customers are moving online from offline as e-commerce platforms expand to Tier 2 cities and above,” the online home goods retailer told ET, declining to name it.