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Coronavirus impact: Online demand for non-essential items low

Discretionary spending is almost non-existent as online consumers defer high-cost purchases in the wake of uncertainty caused by the spread of Covid-19, said the sources who fear the economic contagion will also spread to metropolitan areas that account for two-thirds of India’s online commerce.

, ET Bureau|
Last Updated: May 11, 2020, 08.05 AM IST
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India’s ecommerce market grew by around 35% to $32 billion in 2019, according to Forrester Research.
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Bengaluru: India’s top online marketplaces including Amazon and Flipkart are finding few takers for non-essential products ranging from refrigerators to air conditioners and apparel, according to industry executives monitoring the partial resumption of ecommerce activity across non-metropolitan areas of the country in the past week.

Discretionary spending is almost non-existent as online consumers defer high-cost purchases in the wake of uncertainty caused by the spread of Covid-19, said the sources who fear the economic contagion will also spread to metropolitan areas that account for two-thirds of India’s online commerce.

“Our current estimates point at only 60-70% of demand recovering even after restrictions for ecommerce are eased across the nation,” said a senior executive at one of India’s leading ecommerce firms who did not want to be named. “It’s still early days and while things might change, we’re seeing that people are buying only when there is an absolute necessity.”

Online marketplaces are awaiting permission for sale of non-essential goods in key cities including Delhi, Mumbai and Bengaluru — that are classified as red zones. With the bulk of the job losses and salary cuts borne by people in the red zones, ecommerce companies expect demand to be severely muted in these areas too.

India’s ecommerce market grew by around 35% to $32 billion in 2019, according to Forrester Research. However, analysts have downgraded growth forecast for the industry to just 6% in 2020 due to the effect of the pandemic while estimating this figure could drop further.

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Gloomy Outlook

The gloomy outlook for the ecommerce industry is being partly borne out by the very low sales of goods such as air conditioners and refrigerators in tier 2 and 3 markets, this past week, despite it being summer when sales of such items spike. Industry executives ET spoke to said that while there is some pent-up demand for white goods, it’s extremely small.

“Demand is very low. We did see some demand for smartphones, laptops, ACs and washing machines, but only from people replacing faulty devices or from (first-time buyers),” said an executive at a top ecommerce firm.

Fashion, which is the second-largest sales driver for ecommerce marketplaces, is among the worst-hit categories as people are only buying basic apparel such as t-shirts, shorts and kurtis, with high-value garments like office wear and outdoor clothing barely moving off shelves.

‘NOT LARGE MARKETS’
Satish Meena, forecast analyst at Forrester Research, said while there has been low pickup in sale of ACs and other such items, “the markets where (ecommerce) sales are now open are typically not large markets for such goods anyway”.

A spokesperson for Amazon said that the company has seen demand for “smart devices, electronics, kitchen appliances, clothes, toys and games, and other work and study from home enablers,” in markets where business has been open for a week now.

Consumers from red zones are also searching online for such items, the person said.

Flipkart did not respond to ET's queries until the time of going to press.

Snapdeal, which is less reliant on smartphones and appliances to drive sales than its two larger rivals, said while sales have recovered somewhat, the contribution from tier 2 and 3 markets is yet to reach the levels prior to the lockdown.

A company spokesperson said demand for “daily-use products like mixer-grinders, pressure cookers, kitchen containers, fruit & vegetable washing bowls, water bottles and kitchen tools” had spiked over the last one week.

SALES OF GROCERIES STRONG
While the majority of ecommerce is seeing a downturn, sales of groceries continue to remain strong, analysts and executives confirmed. Moreover, a large portion of consumers who shopped on these online platforms during the lockdown say they did it for the convenience rather than price arbitrage or selection, which has typically been how ecommerce has grown.

A survey conducted by community platform LocalCircles showed that 52% consumers agreed that online grocery ordering services were useful during the lockdown. The survey, which got over 39,000 responses, showed that 32% of shoppers also placed one or more orders for groceries and other essential items a week during the last seven weeks of lockdown.

(Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

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