The 21-day lockdown will lead to a loss of at least $1 billion in gross sales as India’s largest online retail platforms like Amazon and Flipkart stop selling non-essentials till at least the middle of next month, based on current government directives.
What’s of further concern is that the online retail players are expected to grow only by 5% this year, in the most optimistic scenario, compared to about 26% growth in the previous year to reach $23-24 billion in gross sales. Overall e-commerce sales, including movie tickets and other platforms, was $32 billion in 2019, according to market research firm Forrester’s data exclusively shared with TOI.
While online grocery is seeing a spike in orders, it constitutes only about 10% of overall sales for e-tailers. Last year, e-grocery sales stood at about $2 billion. Online platforms see $50-60 million in daily sales around this time of the year, which for several players is down to zero.
Smartphones, large appliances, electronics and fashion are the top drivers of gross sales for e-tailers, contributing 60-70% of the total. To be sure, these data points are based on current circumstances and may evolve further, for better or worse, based on how India manages to deal with the pandemic.
“If they (online retailers) can grow by 5% this year, they should feel lucky. Even after the lockdown ends, consumer spending will be hit. Even with EMI waivers, people will push many of their spendings to next year,” said Satish Meena, senior forecast analyst at Forrester. According to Meena, retail sales in China were down 21% in the last two months and e-commerce sales grew by only 3%, but grocery is a big part of online sales in the country, unlike India.
Investors tracking the space feel the April-June quarter could be a washout for the sector. Some e-commerce executives said that electronics and other items would also need to be allowed for deliveries if the lockdown lasts longer than April 14 as the groceries segment by itself is not sustainable in terms of margins.
Some sector-focused e-tailers like fashion website Myntra and baby care products seller FirstCry have stopped taking new orders. Others such as beauty products seller Purplle and furniture seller Pepperfry are taking fresh orders but offering delivery only after April 15.
Even before the outbreak of the coronavirus, overall consumer spending was muted owing to broader economic challenges. But the virus spreading at this pace brought online commerce to a screeching halt. Last year, 140 million Indians shopped online at least once, according to Forrester. This might not grow significantly in 2020 even though online grocery and medicine delivery platforms are seeing new customers sign up.
“During a meeting for 2020 projections at the end of 2019, Amazon India leadership team was told about economic and policy challenges in India, which might be a hindrance to growth. The mandate was to grow despite those issues. But now, with Covid-19, it looks virtually impossible,” an Amazon executive recently told TOI when the number of confirmed cases started to rise in India. Flipkart and Amazon India spokespersons declined to comment.
Investors said that the next few months will be tough for the business and there will be a slowdown in discretionary spends even after a potential recovery. But the development could increase penetration of online shopping, like in grocery, which has largely remained offline till now.
“There will be some permanent behavioural change in consumers due to coronavirus and they will come back after getting used to purchasing online, especially for must-have categories,” said T C M Sundaram, MD at venture capital firm Chiratae Ventures.
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