Online retailers are likely to incur a cash-burn of over $1 billion during the coming month-long festival sales.
In just the first five days of the festival season, which begins on October 10 and runs till November 9, the e-tailers, led by Walmart-owned Flipkar, and Amazon, will likely splurge around $550 million.
Where the money goes
Cash-burn is the amount of venture capital spent by e-tailers to finance overheads such as customer acquisition, marketing and advertising and discounts, before generating positive cash-flow from operations.
“The cash-burn this year is on an estimated GMV of $2.5-3 billion in the first five days of the sale, which promises online shoppers discounted merchandise up to 90 per cent, apart from other offers such as cashback, exchange, buy-now-pay-later and cardless credit.”
For the entire season sale, the estimated GMV is $5 –5.5 billion, Anil Kumar, founder CEO, RedSeer Consulting, told BusinessLine .
Last year, the estimated cash-burn was $380 million for the first five days and $750 million for the entire sale period, according to home-grown research and advisory firm, RedSeer Consulting.
The Indian e-commerce industry is all set to witness one of the biggest fights for customers’ wallet-share in metros and non-metros as e-tailers look to net the next 50-100 million customers.
K Vaitheeswaran, author of Failing to Succeed – The story of India’s first e-commerce company , observed that Amazon is ready to go all out this year, while Flipkart is also equally well-prepared. This season is likely to see a higher share of orders from Tier-2,3 and 4 shoppers driven by affordability themes.
According to a report by Ace Turtle, an omnichannel platform solutions provider for leading retail brands, Fashion, a category which sees the highest number of units sold for e-tailers, has seen non-metro cities taking the lead during sale events, with a 70 per cent increase in orders compared to metro cities, which saw just 14 per cent. It gathered data across 1 million products sold by over 30 fashion brands to 20,000 pin codes from January to August 2018.
Nitin Chhabra, CEO, Ace Turtle, said: “The average selling price in metros is 14 per cent lower during sales event days, while in non-metros it is 7 per cent lower, indicating that buyers in non-metros buy higher-priced products during these days” .
Initiatives
Both Flipkart and Amazon have launched initiatives to attract shoppers from non-metro cities: the former has launched 2GUD, an independent platform to sell refurbished goods, and the latter has launched Hindi interface for its website and mobile apps.