India’s E-Commerce Hits $14 Billion In Festive Sales Driven By Tier 2 Cities: Report

India’s e-commerce sector reported a gross merchandise value of approximately $14 billion this festive season, representing a 12% growth over last year, according to a report by Redseer Strategy Consultants. This growth observed between Sept. 15 and Oct. 31, was driven largely by robust consumer spending in tier-2 and smaller cities, with categories like fashion, electronics, beauty, personal care, home furnishings, and groceries witnessing notable upticks.

The report highlighted strong engagement from tier 2+ consumers, who increasingly favoured ethnic fashion, affordable accessories, and home essentials. Resilient demand for both premium and lower-priced products point to a broadening e-commerce footprint in these regions.

"The 2024 festive season reassures us of Bharat’s (tier 2+ customers’) spending potential. With these customers further cementing their trust in e-commerce and bringing a larger share of wallet online, we are ready to witness a continued spell of e-commerce growth in the next few years," said Kushal Bhatnagar, associate partner at Redseer Strategy Consultants.

Consumer trends also indicated an uptick in spending per shopper, offsetting slower new shopper acquisitions. Demand surged for high-value items like large appliances in metros, while smaller cities leaned toward affordable fashion and beauty items, underscoring India’s diverse and evolving online shopping landscape, the report said.

• Resilient spending from tier 2+ cities: Smaller cities displayed the highest growth rate in spends, climbing to 13% in 2024. Availability of discounts enabled tier 2+ customers to afford high-ASP products across categories. Further, there was a market rise in prepaid transactions which enhanced the shopping experience in the smaller towns. 

• Decline in shopper growth but increase in spend per shopper: Despite a slowdown in the rate of new shopper acquisitions, spending per shopper has risen by 5-6%. This trend suggests that while the e-commerce shopper base—currently around 250 million annual product shoppers-may have largely matured, there is still substantial potential to increase retail wallet share over the long term.

• Fashion segment surge: Fashion emerged as the fastest-growing category, showing a threefold increase compared to typical months this fiscal. This growth has been fueled by ethnic wear and accessories, especially in tier 2 and smaller cities, where unbranded ethnic wear, jewellery, and women’s accessories have seen rising popularity.

• Robust sales of premium and D2C brands: On the other hand, premium and international brands observed robust sales in tier 1 markets. Direct-to-consumer brands also saw substantial growth due to enhanced brand visibility via digital channels. 

• Surge in premium electronics demand: Other than the above, the report also noted that premium electronics, including air conditioners and large appliances, experienced significant demand due to prolonged summer conditions.

• Surge in quick commerce demand: The quick commerce sector also extended its offerings to include electronics and home appliances, meeting festive demand through expanded delivery hours. Non-grocery sales spiked on key festive days, with Delhi, Mumbai and Bangalore among the top-performing cities. 

"As the quick-commerce wave expands materially beyond the top three cities, we are likely to witness a large chunk of the Indian population receiving products at their doorstep within 10 minutes—which will be truly transformative!" Bhatnagar said.