Last year if I am not mistaken, Flipkart and Amazon together did about $3.5 billion of business in just four days flat. As we head into the festive season, what are Amazon India’s expectations?
Let me break it up into a couple of segments. The first thing is we are continuing to see consumer shop online in large numbers and more frequently. So, the trend we saw continues and consumers continue to believe that this is the safest way to shop sitting at home. This is reflecting in all the events which have happened. For example, prime day, we had the Independence Day sale.
Right now, we have the Rakhi and the Onam stores and the same interest is reflected in sellers. So, if you look at the seller acquisition, more and more sellers are coming online to sell. The interest on online shopping and the fact that it is a safe way to shop continues. As we get into what is the peak season of the year, we continue to be focussed on safety. I think that is super critical for us. As you are aware, we had a massive vaccination drive for all our frontline workers and we vaccinated more than 1,00,000 people.
Do you think 2021 can surpass 2020 festive season sales?
I just want to share with you how we are looking at this Diwali. This Diwali is not a normal Diwali for reasons which all of us know so well. I think our complete focus right now is to make it a really eventful and rewarding Diwali for ourselves. Our key success metric would be focussed around the number of sellers who actually have sales during this period; the number of sellers who record their highest ever sales.
Our complete focus is in making sure that especially given the consumer demand being so strong online, we feel it is a responsibility to make sure that this Diwali becomes that point at which most of India’s small sellers see a massive spike and that sets them up really well for the year ahead. I think all of us believe that spike would really do wonders for small sellers across the country. Our current focus is not so much on how many billion dollars, it is more on saying ‘how can we make the maximum number of sellers successful during this Diwali?’.
This festive season what jump are you expecting in sales volume and what will lead it?
Let me start from the growth aspect of it. We are seeing two trends very clearly, which is why it should be difficult to define it as a value growth versus unit growth. There are two trends. One, of course, we are seeing more and more new customers coming online and there are large number of these customers – close to 80% plus – from smaller towns. Therefore, their first purchase is usually not a high-value product. It is usually grocery and softline.
The other trend which is equally strong is prime customers. Prime customers continue to buy more in terms of new categories and in terms of frequency. These are the customers who are very comfortable shopping online for higher-value items. So, I would not hazard a guess, but our interest is always more looking at specific cohorts rather than look at a blended piece and say will it be value led or unit led. So, I think you would see a sharp surge in units because of grocery, softlines businesses coming from new customers who are moving online.
We do anticipate this season to be very strong especially given the demand. So, I would keep it at that. The second thing is we are not so focussed on putting a number to the growth. Our philosophy always has been to work on the inputs which we can control. Sales are an output. We do not control that. So, what we are doing right now is we are rapidly putting the infrastructure together, both in terms of warehouse space – we have just opened a large number of new warehouses – and in terms of getting all our people who work on the field vaccinated.
That is what we are preparing for. As you are aware, on the customer side, we have also got a lot of innovations including introducing a lot of new languages. These are the things which we are focussing on at this point of time. Sales is an output, that is not something which we control. But we feel confident given the way our sellers are preparing for it, the infrastructure and support which we have created, this Diwali should be a very good one for our sellers and, of course, for our consumers.
How different do you think the purchasing pattern would be this festive season?
On all three fronts – sellers, consumers and categories – we are seeing new trends. One of the very strong trends we are seeing on the seller front is more and more local shops are selling. So, small sellers who have retail establishments are coming online and that is a very strong trend. We have seen over the last few months and we believe that it will peak during the Diwali festival.
Second, we are seeing a large number of sellers coming from smaller towns. It is almost reflecting the customer mix which we are seeing. One of the things which is helping sellers is now you can log in, use the Amazon seller benefits, adding who are coming online from smaller towns. As far as categories are concerned, overall a category which we see a difference in from last Diwali would definitely be groceries because so many consumers are now shopping online.
The second is of course some new categories which have grown rapidly over the last 12 months, like I mentioned personal grooming, sports; a lot of categories which are around hobbies. These categories have really grown over the last 18 to 20 months and we expect this trend to peak during Diwali. Besides this, in the large businesses of electronics, soft lines, we expect the trends to be largely in line with last Diwali.
What will drive sales for you? Will it be smaller towns and which categories will grow there?
Yes, definitely. I think small towns are important. The consumption is getting stronger and stronger in these towns and more and more consumers in these places are getting comfortable shopping online. So yes, it is very important for us and whenever we talk about customers, we do not look at the transactional value of a customer. We look at the relationship value to get the customer shops online and what they would do online for years to come.
So yes, small towns are very important. The second thing when people start shopping online, they do try and experiment with new categories, which is very good for consumption overall; not just for online, but even for our brand and partners. So, that definitely is a threat.
As far as what would sell, it would be difficult to predict at this point of time, but one can safely say based on the preparation the sellers are doing, softlines which is fashion, apparel – these are categories which are very strong in smaller towns. Most consumers start shopping online from smaller towns using either fashion and other accessories or groceries. These are two categories which are very strong categories for first time buyers online.
