E-commerce companies have started showcasing small-scale promotional events to spur consumer demand, two weeks after restrictions on shipping products were relaxed across the country, in what analysts say is a sign of normalcy in a sector that typically drives sales through discounts.
Flipkart, too, announced its Flipstart Sale spanning three days starting June 1, offering bank-led offers along with straight up discounts across a range of products.
The e-commerce platforms may be running promotions just like they did before the Covid-19 pandemic, but industry executives told ET that they were gauging consumer demand as well as supply side issues before hosting the next mega sale event.
“This is a small activity to try and improve consumer sentiment at this point of time with a few sellers getting together and running promotions,” said a senior executive of a large marketplace that is currently running a sale. “There have hardly been any discussions around running a large sale event because we are still unsure of demand.”
Large e-commerce marketplaces Flipkart and Amazon lost the opportunity to host a big sale event around the Indian Premier League this year and have yet to announce their back-to-school sales that typically take place in early June owing to lack of visibility around when schools and colleges would reopen.
They are also closely monitoring supply of products such as smartphones, laptops, TVs, electronics and some appliances, which require components to be imported from countries where supply chains have not yet been fully restored.
“Anything with a screen in it runs the risk of supply issues, so sales to boost buying is out of the question,” another executive added.
Others said discounts on platforms could be muted for at least a quarter as sellers are witnessing only need-based buying, from opportunistic buying rampant on their platforms earlier, chiefly led by a multitude of sale events through the year.
“Brands are caught between a rock and a hard place,” said a venture capital investor with a large brands portfolio.
Even after the 50-day shutdown and the fear of stepping out to physical outlets, ecommerce has only recovered 70-80% of its pre-Covid-19 sales, he added.
“With that kind of consumer traffic online, businesses will have to think harder about when to trigger discounting,” he said.
Amazon, which has not yet announced a sale or promotional event, said it was seeing high demand, although that has been driven largely by need-based buying, which could taper off in the coming weeks.
“Right now, customers are barely trying to get their needs satisfied and sellers are barely trying to get their businesses online, and the demand is very high. So, the natural cycle of shopping is not a festivity and sales,” Amit Aggarwal, SVP and Country Manager at Amazon India, told ET in an interview last week.
Analysts tracking the sector said discretionary spending was not expected to recover before the festive season around Dussehra in October, making large sale events by e-commerce players redundant before that as consumers might pass up promotions at a time when questions around job security and wage cuts are rampant.
“We don’t expect much response from customers before Dussehra in October (end),” said Satish Meena, senior forecast analyst at Forrester Research, which has pegged India’s e-commerce sector to grow at just 6% to $35.5 billion in 2020.
A senior executive at a temp staffing firm said that both Flipkart and Amazon were yet to ramp up hiring of on-ground workers to support their sale events, which usually begins around June and ends in early November.
“While Amazon has announced hiring of 50,000 additional workers, they will do this over the next few months, which will be lower than what they usually do,” the person added.
Another worry for e-commerce marketplaces is that if demand persists they may not have the necessary infrastructure to fulfill any spike in orders like those seen during mega sale events.
Activities to acquire new warehousing facilities were at a standstill during the lockdown and are expected to remain slow as it might take longer than usual for companies to acquire fire safety, labour and other permissions in time, a senior e-commerce executive said.