Walmart-owned Indian e-commerce giant Flipkart has maintained a clear lead in this year’s Indian festive season online sales, grabbing 60% market share during the Diwali sales. However, it lost some ground to its archrival Amazon and smaller players like Snapdeal and Meesho, which primarily focus on the lower-tier cities at a time when more growth is expected to come from those markets.

Amazon came in second with a 32% market share.

As per PGA Labs’ data, despite a clear lead, Flipkart’s Diwali market share dipped by 5% from last year’s 65%. On the other hand, Amazon India climbed up by 7% from 25% in 2020. Other players like smaller rival Snapdeal, social commerce firms Meesho and DealShare, Reliance’s fashion portal Ajio, and Tata Group’s online platform for electronics, fashion, and accessories Tata Cliq, among others, shared 8% of the market share in terms of GMV, compared with 10% a year ago.

India’s major e-retailers usually kick off their biggest annual sales in early October for over a month leading up to Diwali, a festival that celebrates the triumph of light over darkness. According to the data compiled by PGA Labs, during this year’s festive season sales, e-commerce firms clocked USD 9.2 billion in gross merchandise value (GMV)—the total monetary value of products sold by online channels, compared to the USD 8.3 billion in 2020, an increase of almost 11%.

While Snapdeal is often considered the third-largest e-commerce platform after Flipkart Group and Amazon, new players like Meesho and DealShare are catching up fast. A recent report by local media Moneycontrol said Flipkart has begun to take Meesho, which scooped up about USD 870 million in funding this year, as a key competitor, so much so that it has set up a 20–30 people team to closely monitor its progress.

PGA Labs’ holiday sale tallies are in line with those published by RedSeer Consulting last month, which estimated Flipkart Group’s 62% share during this year’s festival sales that totaled USD 9.2 billion GMV, up from USD 7.5 billion in 2020.

The country’s overall online shopper base grew by 25% to 100 million in 2021 compared to last year, as per RedSeer. However, it still means less than 10% of Indians are shopping online, indicating plenty of headroom for growth. The number of transacting users online is projected to increase to 350 million by 2025, with a majority of shoppers coming from smaller cities in India.

On the back of the broader adoption of online services and digital payments, PGA Labs estimates that India’s e-commerce will grow to a USD 60 billion market in the financial year (FY) ending March 2022. PGA Labs expects Flipkart Group and Amazon India to capture 36.6% and 30% of this USD 60 billion market, with respective GMVs of USD 22 billion and USD 18 billion.

“The 2021 festive season sales continued to show an uptick in terms of e-commerce sales,” said Abhishek Maiti, director of competitive intelligence and consumer insights at PGA Labs. “Just like the previous year, Flipkart Group accounted for the lion’s share, i.e., 60% of the sales compared to Amazon, which was about 30%, owing to a continued focus on mobiles as a category and innovative user engagement strategies.”

“We expect e-commerce sales to climb a further 25%, to USD 75 billion in FY 2023 from USD 48 billion in FY2021, with growth in digital buyers,” he added.

The growth drivers

Since the COVID-19 pandemic, online shoppers from smaller cities and towns have become a major growth driver for e-commerce in India. In an August report, Bain & Company researchers said that 80% of the new customers who came online last year were from smaller Indian towns.

According to them, the Indian e-retail market will continue to grow at a rate of 25–30% annually over the next five years to reach USD 120–140 billion by FY 2026, and much of this growth is driven by non-metro markets.

The trend became quite prominent in this year’s festive sales. As per RedSeer estimates, 57% of the 100 million online shoppers came from tier 2 and tier 3 cities in the festive period.

Festive period sales have largely become a tier 2 plus cities phenomenon as customers outside this demography have a more democratic spending pattern through the year, RedSeer noted in the report.

Snapdeal, which held almost a month-long festive sale in October, witnessed the demand from tier 3 cities grow by 91% over last year. Furthermore, the company said that 58% of the orders during the festive sales period came from tier 3 cities like Azamgarh in Uttar Pradesh, Gaya in Bihar, Prakasam in Andhra Pradesh, Sopore in Jammu & Kashmir, Chandrapur in Maharashtra, and Pali in Rajasthan. Meanwhile, tier 2 and tier 1 accounted for 15% and 27% of the order volumes, respectively.

“Bharat (India beyond metros and tier 1 cities) continued to sparkle in Snapdeal’s festive season performance,” the company said in a statement last month. “The growth from smaller cities was limited not only to buyers. Sellers from tier 2 and 3 cities, too, saw a 99% increase in sale orders compared to last year’s sale event.”

Mobile and electronics continued to dominate the festive period, but fashion apparel and accessories—which saw muted sales in 2020—struck a U-turn this year, indicating an increase in discretionary spending by consumers. For instance, Snapdeal saw a 254% growth in volumes in the fashion category over the previous year. Overall, RedSeer said the sales of fashion items through online channels doubled in this year’s festive period, compared to 2020.