Tier-2 Cities Power India’s E-Commerce Sector's Whopping $14 Billion Festive Sales: Redseer Report

The festive season of 2024 marked a pivotal period for India’s e-commerce sector, with gross merchandise value (GMV) soaring to approximately $14 billion, up 12 per cent from the previous year, as reported by Redseer Strategy Consultants. The growth, observed between September 15 and October 31, was fueled largely by increased consumer spending in tier-2 and smaller cities. Shoppers in these regions turned to online marketplaces for various essentials, from fashion and electronics to personal care and home furnishings, illustrating the growing influence of e-commerce in reshaping spending habits across diverse demographics.

Here’s a deeper look into the factors behind this growth and what it means: 

Resilient Spending In Tier-2+ Cities: A Key Growth Driver

Tier-2 and smaller cities were central to the e-commerce boom this festive season, showcasing a remarkable 13% increase in spending compared to the previous year. Discounts and flexible financing options played a critical role in making high-average selling price (ASP) products more affordable. These incentives empowered consumers to make big-ticket purchases that would otherwise be challenging within their regular budgets.

Consumers in smaller cities are increasingly savvy about utilizing discounts, cashback, and prepaid options to maximize their budgets. This trend reinforces the importance of planning festive purchases and watching for seasonal discounts to manage larger expenses without impacting financial stability. For those looking to save or invest during sales, prepaid transactions can offer additional savings, though it’s wise to ensure financial cushion for essentials first.

Increasing Spending Per Shopper Amid Slower Shopper Growth

While the rate of new shopper acquisitions slowed, the average spend per shopper rose by approximately five to six per cent. With around 250 million annual e-commerce shoppers in India, the focus now appears to be on increasing spending from existing customers rather than rapidly expanding the customer base. The report suggests that e-commerce companies have room to grow by increasing wallet share—what a shopper spends on e-commerce versus physical retail—over the long term.

This trend underscores the potential benefits of setting a specific shopping budget for festivals. As customers are now spending more per transaction, individuals may consider creating a detailed budget to differentiate between “wants” and “needs.” For instance, setting aside funds for necessary large appliances during sales events can help prevent impulse buys, allowing more control over overall expenditure.

The Surge In Fashion And Ethnic Wear: Affordability In Focus

Fashion emerged as one of the fastest-growing segments, with a threefold increase in sales compared to usual monthly numbers. Unbranded ethnic wear, women’s accessories, and jewelry were especially popular in tier-2 cities, where affordability was a priority. Many shoppers sought to purchase traditional and cultural items, reflecting the cultural significance of festivals in their shopping choices.

Opting for budget-friendly, unbranded ethnic fashion or local artisans’ goods can be a smart choice during festive shopping. Supporting local sellers and prioritizing unbranded items when possible not only curbs spending but also supports regional businesses. This strategy allows consumers to stick to their budgets while embracing festive traditions affordably.

Rise Of Premium Electronics And Quick Commerce Demand In Metros

Demand for high-value electronics, such as air conditioners and large appliances, grew notably, partly due to prolonged summer conditions in metro cities. Additionally, the quick commerce sector initially focused on groceries, and extended to electronics and home appliances, with significant demand spikes on key festive days in cities like Delhi, Mumbai, and Bangalore.

For those in metro areas, the ability to access premium electronics through quick commerce channels can enhance shopping convenience. However, with high-value purchases, consider the longevity and utility of such items, especially for products like large appliances that may see discounts. A well-thought-out purchase plan can help buyers avoid overspending on high-priced items that may depreciate quickly or become obsolete.

D2C And Premium Brands Flourishing

Direct-to-consumer (D2C) and premium brands saw notable growth, particularly in tier-1 cities. Improved digital visibility and the allure of premium products led to robust sales among shoppers who were willing to spend extra on quality and exclusivity.

For those investing in premium or D2C brands, it’s wise to evaluate long-term value. Investing in higher-quality items that provide durability and performance over time may justify the initial cost. Shoppers should also consider waiting for further seasonal sales, especially on big-ticket items, to get the best deal and optimize their spending.

Financial Habits To Adopt For Future Festive Seasons

As India’s e-commerce landscape evolves, adopting a few practical financial habits can help consumers better manage their festive spending while still enjoying the benefits of online sales events:

Plan Early And Set Budgets: By creating a shopping budget in advance, shoppers can allocate funds specifically for festive expenses. Early planning also allows more time to compare deals and look out for discounts.

Differentiate Between Needs And Wants: Prioritize essential purchases and avoid impulsive buys that may strain the budget. Listing out necessary and discretionary items can help maintain financial discipline.

Utilize Prepaid Options And Cashbacks Carefully: Prepaid and cashback options are popular ways to save, but it’s crucial to avoid overspending simply to qualify for a cashback. Spend only what fits within your budget, and treat cashback as a bonus rather than a reason to splurge.