Amazon eyes festive boom in tier-2 and premium segments

As India enters the festive season, Amazon hopes to capitalise on the heightened demand with its flagship event, the Great Indian Festival sale. The e-commerce giant, which has become an integral part of India's social and shopping fabric, is banking on key trends such as premiumisation and the increasing penetration of online shopping in tier-2 and tier-3 cities. This year, Amazon hopes to better its previous records during the festival season, buoyed by a series of innovations and customer-centric strategies.

“We're seeing a lot of momentum,” says Saurabh Srivastava, vice president - Categories, Amazon India. He highlights the impact of recent events, including the Prime Day and Freedom Sale, which set the stage for the upcoming Great Indian Festival. “Prime Day was our record-breaking Prime Day ever. It was the biggest. We had 24% more Prime members shopping with us, and it is across the length and breadth of the country, both for the sellers and the customers.”

One of the standout observations from recent sales is the growing contribution of smaller towns and cities. According to Srivastava, almost 65% of the orders during the Prime Day event came from small and medium businesses in tier-2 and tier-3 cities. “At the peak, we were doing close to 25,000 orders per minute,” he says, underscoring the scale of Amazon’s operations during key shopping events.

A report by Delhivery which draws data from 125 million plus shipments from the 2023 festive season similarly says that “non-metro cities are leading the pack in growth in orders”. While metro hubs like Bangalore, Hyderabad, and Mumbai continue to generate the highest volume of orders, tier-II cities are witnessing the fastest surge in demand. The report says cities like Gurgaon (36.8%), Raipur (32.8%), Nagpur (20.9%), Jaipur (20.6%) and others are leading the charge in growth.

Premiumisation takes center stage

Premiumisation has been accelerating over the past two years. “We are seeing across categories, customers prefer more and more premium products. This is happening across customer segments, not just in metro cities,” Srivastava points out. He explains that demand for premium items, such as larger televisions and luxury goods, is growing even in smaller towns, reflecting the rising aspirations of consumers outside of major urban centers.

Srivastava highlights the shift in consumer preferences, saying, “There was a time when 43-inch televisions were top sellers. Now, 56-inch and 65-inch televisions are what people are looking for.”

This trend is not confined to electronics. Even in categories like fashion, health, and personal care, customers are gravitating towards higher-end products.

Moreover, Amazon’s seller base is also benefiting from the growing demand for premium products. The company has launched several initiatives to help sellers, particularly from tier-2 and tier-3 cities, meet the evolving needs of consumers. Programmes such as Amazon Launchpad and Amazon Karigar have played a crucial role in enabling small and medium businesses, women entrepreneurs, and artisans to reach a wider customer base.

“There are a lot of entrepreneurs that we enable. There are a lot of direct-to-consumer brands that are doing very well on Amazon and have created their own brand,” he says. He also shines light on the importance of handcrafted products sold under the Amazon Karigar programme, which supports artisans from places like Varanasi, Jaipur, and Moradabad. These items, often sold at a premium due to their handcrafted nature, are even exported to 18 countries outside India.

Amazon is also helping sellers by reducing referral fees across categories, particularly for lower-priced products, ensuring that sellers can offer better value to customers during the festive season. “We have reduced the fee across categories, and it’s a big decrease. We are focused on more lower ASP (average selling price) products, such as diyas and decorations,” he adds. The fees have been decreased by 9-12%.

In addition to ramping up its seller and product base, Amazon is investing heavily in technology to enhance the shopping experience. One of the key innovations for this year’s festive season is the integration of generative AI into the platform. This includes the ability to summarise thousands of customer reviews, making it easier for shoppers to make informed decisions. “We use generative AI to summarise customer reviews and bring the highlights. Even if there are 10,000 reviews, you can quickly see the essence,” says Srivastava.

Amazon has also launched a conversational AI-powered shopping assistant called Rufus, which allows customers to ask questions and get product recommendations in natural language. “You can ask, ‘Hey, my father's birthday is coming. What should I shop for?’ and Rufus will provide suggestions. It's like ChatGPT, but for Amazon,” the vice president shares. This new feature is expected to be available to all customers before the Great Indian Festival kicks off.

Amazon is confident that this year's festive season will be its biggest yet. “Every year we set a new watermark for ourselves during the festive season sale, and this year, we have very high confidence that we are going to break all previous records,” he says.