Discounts have dropped lower on the customer’s priority list, say Indian e-tailers
- As the COVID-19 pandemic forced people to stay home and shop online for everything, consumers moved away from just discounts and looked at products that bring value.
- While the overall transaction value in e-commerce fell during the months of peak lockdown in India, April to June, it picked up soon after.
- This shift from discounts to quality products has also resulted in consumers shopping from Direct to Consumer brands.
Last year, as the global pandemic forced people to stay home and shop online for everything, consumers started moving away from pinning buying decisions on discounts to looking at products that bring value, indicates a report by Bengaluru-based research firm RedSeer.
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While the overall transaction value in e-commerce fell during the months of peak lockdown in India, April to June, it picked up soon after as people still afraid to venture out of their homes resorted to buying most of their essentials online.
Consulting firm RedSeer pointed out the trend in its recent Ground Zero report. “Consumers have been shopping for product or service quality of online retailers rather than price and are keen to continue shopping online in 2021 as well- which bodes very well for the continued growth of the online sector and makes it imperative for brands to focus on online offerings,” said Mrigank Gutgutia, director at RedSeer.
Gutgutia broke it down further for Business Insider. “One dimension is that simply there’s one set of consumers who want to buy the usual products but even without a very large discount being offered online. There is another smaller category of customers who have grown increasingly conscious about the quality of the products, both these customers may have slightly different focussed channels,” he said.
However, while this may be an urban-centric phenomenon, it’s not too different for Tier II and III e-commerce customers. Consumers from Tier II and Tier III cities chose online shopping last year due to two reasons -- they wanted a safer experience and they began to trust online retailers for the quality of products. “In our consumer survey with thousands of users, we found that discounting was probably the 4th-5th reason which pushed people to shop online,” said Gutgutia.
During the pandemic, as essential products became the most sought after category online, it was also the category that saw the highest average order value growth in the last year, which means that consumers opted for better quality products in FMCG.
During the fourth quarter of the calendar year 2020, the trend of choosing value over price was seen in Tier II and Tier III cities as well.
Source: Unicommerce and Kearney report
|Tier II and Tier III cities||2019||2020|
This trend of loyal online consumers didn’t go unnoticed by giant e-commerce retailers like Flipkart. Flipkart India CEO Kalyan Krishnamurthy during Walmart earnings results on February 18 said that they have seen a growth from trial only consumers to loyal, long-term consumers, which is pushing them to focus more on their subscription only programme in 2021.
Growth of Direct to Consumer in this online paradigm
This shift from discounts to quality products has inspired customers to move away from aggregator e-commerce portals and look at Direct to Consumer brands for example, boAt, MamaEarth who have seen an uptick in revenue, last year .
Mangesh Panditrao, co-founder of Shoptimize, a startup which helps businesses come online, told Business Insider, "The COVID-19 pandemic sparked an increased preference for high-quality products that enhance wellness, with price consciousness being less of a factor. Organic food and wellness products, locally sourced produce, sustainably farmed goods, and vegan/cruelty-free products are now more popular. Our clients saw a 40% increase in AOV (Average Order Value) in this fiscal year compared to last year,”
And experts like Gutgutia believe that this trend of online spending won’t change much in 2021 as well. “More than half of the people surveyed indicated that their spending would increase in 2021,” he said.
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