The must know E-commerce- consumption trends this festive season
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The just concluded festive season in India was expected to have an increased dependence on e-commerce channels given the impact of COVID. To understand the consumption trends this season, there are summary takeaways below:
Strong growth in the festive season:
This festive season has seen 30-40% growth in e- commerce volumes with overall growth similar to that witnessed last year. While not a negative surprise, we had anticipated a much higher growth for online sales this season given the COVID impact. This, in our view, either reflects unlocking a better than expected offline momentum or the impact of weak economy on overall festive demand. The offline checks suggest a mixed read on festive trends with some categories seeing strength and some others still down YoY. Another interesting read was that there were no major supply constraints this season suggesting adequate channel restocking.
What are consumers buying online?
Apparel (including footwear and sportswear) continues to be the largest category in e-commerce with consumer electronics being the No 2 category (mobiles, laptops etc). Categories which are gaining scale are grocery, home personal care and household goods. The widening of category choices from consumers also reflects the willingness of consumers to experiment, reflecting their trust on online platforms. Consumer durables have seen 165% growth in volumes this festive season with almost all products (TV, AC, washing machine), witnessing a spike in growth.
Comfort on online shopping increasing, two interesting data points were :
Sharp reduction in return orders which declined by over 25%, and is a good indicator of increased consumer engagement with the online platform and also reflects the quality of growth.
Increasing trust on online payments as indicated by lower share of COD (cash on delivery) orders (55% now vs. 65% pre-CoVID). While COD as a mode of payment may remain relevant due to ease of use (Quicker checkout, consumer comfort on delivery timelines etc.) online payments should continue to gain ground.
Emerging trends – brands focusing on "direct to consumer":
Growth of long tail customers- Mom and pop outfits, small e-commerce companies that use Instagram or Shopify has grown at over 120%. Another trend is brands aggressively moving towards "direct to consumer". Most brands were unprepared with their channel strategy and while they wanted an omni-channel presence, they did not know how to do that. Logistics companies help such brands in achieving their "direct to consumer" goals.
Which cities are driving growth?
Growth for e-commerce channel emerged from all geographies. Tier 3 cities outpaced Metro and Tier 1 and 2 with booking from these markets increasing to 60% of mix vs. 55% last year. Tier 1 and 2 mainly comprised existing shoppers who are buying more, while Tier 3 and 4 reflect new online shoppers.
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