Smaller sellers are bullish on sales growth during the festive season this year, with 22% planning to increase ad spending during this period compared with last year. This is higher than the average 15% increase in ad spending on online platforms by e-commerce sellers. Ad spending by smaller sellers is expected to increase by 75% versus the business as usual period of this year, higher than the average 50% across the seller community surveyed by Redseer Strategy Consultants for a recent report.
Over the past few festive seasons, brands have attracted hordes of new users from non-metros and tier II markets who prefer to compare offers across platforms before loading products onto their shopping carts. Against the backdrop of a depressed job market and inflationary trends, this festive season will likely see consumers hunting for deals. And that presents a big opportunity for MSME players and smaller brands, say observers.
For MSME sellers there are big benefits of selling on e-commerce platforms such as targeted marketing, deeper customer understanding, higher visibility and larger reach. While online retail overall is anticipated to grow at a CAGR of 25% by FY27, MSMEs are expected to outgrow online retail substantially at a CAGR of 60-70%, adding $50 billion to the online retail market in India.
E-commerce platforms are also tailoring solutions to meet the sellers’ optimism. Sellers also reported a steady increase in the share of sales from online channels versus offline, as 56% of their total sales revenues are driven by e-commerce. 96% saw their net profits increase by adoption of e-commerce.
Putting the smaller players’ optimism in perspective, Mrigank Gutgutia, partner at Redseer Strategy Consultants says, “Smaller sellers and MSMEs will play an important role in the festive sales growth this year. One way to look at this year’s projections is by examining the category mix. In the festive season, historically segments like mobiles, electronics and appliances see much higher sales than usual. This year, however, categories like fashion, personal care and beauty will have a stronger festive season. These categories are largely driven by smaller players and MSMEs rather than larger sellers and brands. To that extent, we expect this season to offer higher impact to smaller sellers, MSMEs and upcoming D2C brands.” However, he adds that it would be difficult to quantify and put a number to the share that the smaller players will take out of the total festive sales pie this year.
In the longer term, more and more sellers will continue to benefit from e-commerce growth given its strong positive impact on seller top-line and bottom-line, remarks Gutgutia. “Online provides a level-playing field to the smaller sellers allowing them to reach audiences they could never reach otherwise in a traditional setting,” he observes.