The recent festive season in India has brought a wave of optimism for the e-commerce sector, which has recorded a remarkable 12% growth from last year, reaching a gross merchandise value (GMV) of approximately $14 billion (over Rs 1.18 lakh crore) according to a report by Redseer Strategy Consultants. This significant increase is not merely a reflection of broad market trends but is predominantly driven by consumer behavior across tier 2 and 3 cities, showcasing the evolving landscape of online shopping in the country.

In an era where digital commerce is becoming increasingly accessible, the contribution of smaller cities cannot be overstated. Reports indicate that these regions have seen a staggering 13% rise in spending during the festive period, which spans from September 15 to October 31. This surge can be attributed to various factors, most notably the availability of discounts that have enabled consumers to purchase high average selling price (ASP) products across multiple categories.

The data shines a light on consumer habits, illustrating a dual trend where both premium goods and affordable products are gaining traction. Tier 1 cities continue to show strong demand for high-end electronics and major appliances, while tier 2 and 3 cities are increasingly opting for budget-friendly yet trendy items, particularly in fashion and beauty categories. Categories like quick commerce, electronics, fashion, beauty and personal care (BPC), home furnishings, and groceries have all seen resilient gains in consumer spending.

Kushal Bhatnagar, Associate Partner at Redseer, emphasizes the progressive shift in consumer trust and how tier 2+ customers are beginning to engage more deeply with e-commerce platforms. As these consumers bring a larger share of their spending online, we can expect a sustained growth trajectory in the sector. This aligns with a broader trend of market penetration in e-commerce, where roughly 250 million annual product shoppers participate in the ecosystem.

Fashion emerged as the standout category during this festive season, exhibiting a threefold growth compared to typical months. Notably, unbranded ethnic wear, jewelry, and women’s accessories have resonated particularly well with consumers in tier 2 cities. This reflects not only changing consumer preferences but also the ability of smaller city demographics to adapt and engage with the trendy aspects of shopping.

The quick commerce segment is yet another area of growth, having diversified its offerings to include electronics promptly. Enhanced delivery services, particularly during festive times, positioned it as a crucial player in meeting immediate consumer needs.

Moreover, another interesting trend is the increase in prepaid transactions within smaller towns, reflecting an overall improvement in consumer experience and payment reliability. Although new shopper acquisition rates have started to plateau, per-shopper spending has notably increased by 5-6%. This trend hints at a possible long-term evolution in e-commerce, where the shopper base has been effectively established, leaving considerable room for deepening wallet penetration within these existing customer segments.

This festive season’s data supports a narrative that promotes a hopeful future for India’s e-commerce landscape. As more customers from smaller cities engage with digital platforms, the expectations for continued growth are robust. From the choices consumers make to the platforms they trust, the festive season has undoubtedly showcased the resilience and potential of Indian e-commerce, confirming that the road ahead is promising.

The success of this year’s festive season sales solidifies the need for e-commerce businesses to continue innovating and adapting to the preferences of their diverse consumer base in smaller towns and cities. It will be crucial for retailers to capitalize on this momentum and strengthen their offerings to maintain this growth trajectory in the coming years.