Part 1
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If you have friends & family in retail — then you know that life has been nothing short of hell since the lockdowns hit. You’ll hear countless stories of entrepreneurs struggling to make rent and wondering how long they can hold on to their employees.
But with enthusiasm building in the e-commerce space around the festive season — we examine how badly the sector has been hit and if indeed there is hope for a recovery.
Believe it or not, 2020 started off on a better note than 2019 but sales witnessed a slow down all the way till May. The quantum difference between the two years is staggering; multiplied across hundreds of millions of consumers — this is what recessions are made of…
However, in the first week of May 2020 — the sale of non-essential items was allowed in designated ‘green zones’ and the pent-up demand is plain to see.
For many industries — like fashion & consumer electronics — now that footfalls at malls & shopping centers are all but dead — the only option to survive is to make the painful journey online. It is literally, the only market they have access to right now.
This is harder for those who are dealers for larger brands — where they may compete with the brand itself to get a share of online sales. Why would brands sell through their dealers on e-commerce platforms where the dealers are essentially middlemen.
An unintended consequence of the lockdowns is that adoption has increased. People were forced to learn new ways of conducting business, getting essentials, and entertaining themselves. Over the next few years, we should start seeing the effects of this exponentially larger base of users across every sector.
Is that a V-Shape Recovery? Maybe. While the data may indicate a return to pre-covid levels; It’s premature to call this a recovery. I say this for three reasons:
1) Spend Values and Volume of people spending are not the same
2) Since much of the GMV comes from a few categories (electronics, fashion & mobiles) we need to look at how category-wise transaction volumes have changed on e-commerce
3) Finally — These are online sales — India is still not an e-commerce country
We’ll explore these themes in greater detail over the next few newsletters and drill deeper into how each category has performed relative to this time last year — and if volumes have in fact increased. More importantly, we’ll explore where this demand came from — large urban centers or smaller towns & cities.
Feel free to reach out and share your inputs/thoughts/questions.
Thanks,
- Aman
