Tier-I-led premiumisation picks up pace for Flipkart's electronics sales

Notably, over 60 per cent of Flipkart's electronics sales come from tier II and beyond markets. To cater to this segment, Flipkart has been investing in its technology stack

E-commerce giant Flipkart has witnessed a doubling in demand for premium devices across electronics categories year-on-year (Y-o-Y) on its platform, primarily driven by consumers from Tier-I cities seeking upgrades, revealed an executive at the firm.

“We are observing a faster growth rate in the premium category compared to other segments. Tier-I consumers are increasingly opting for devices with enhanced specifications (specs)... Premium growth has outpaced other categories by twofold,” Jagjeet Harode, vice-president of electronics at Flipkart, told Business Standard.

The company is seeing robust growth in categories such as laptop, personal computer (PC), and gaming device, while the wearable device category has seen a decline.

Consumers from metropolitan cities seeking higher-spec devices are particularly contributing to the value growth of PCs.

“Although the PC market has remained relatively stagnant, our growth has surpassed 20 per cent Y-o-Y. We are consistently seeing a strong upward trajectory,” Harode affirmed.

While Tier-I consumers have been the driving force behind growth in the upgrade market, the company is also observing traction for PCs in the affordable segment from Tier-II and beyond markets.

 

“Our ability to discern trends and expand into Tier-II and beyond markets is proving successful, which has contributed to a higher growth rate on Flipkart over the past 18 months,” Harode commented.

He further noted that the increasing connectivity in these regions due to 5G, coupled with affordability options like bank offers, is fuelling growth. Moreover, the rising consumption of over-the-top content has bolstered sales of products such as tablets and laptops.

Over 60 per cent of Flipkart’s electronics sales originate from Tier-II and beyond markets. To cater to this segment, Flipkart has been investing in its technology stack.

“Over the past year, we have made major strides in tech-led capabilities, including features such as video assistance, our generative artificial intelligence (AI)-led chatbot, and our AI-led catalogues, among others,” Harode highlighted.

The e-commerce giant has also seen increasing consumer interest in gaming products, including consoles, laptops, handheld devices, and other gaming accessories.

“There is a combination of affluence and interest in gaming. The number of consumers purchasing gaming-related products has increased by 1.5x. We intend to continue investing in this segment,” Harode asserted.

However, the sale of wearable devices, such as smartwatches, has declined on the platform, aligning with the slowdown observed in the Indian wearables industry.

“There has been a slight deceleration. Wearables are following the typical cycle seen in every electronics category, transitioning from mere penetration to upgrades. It is only a matter of time before the repeat and upgrade cycle commences,” explained Harode.

According to the International Data Corporation, the market grew by just 2.1 per cent Y-o-Y to 25.6 million units in the first quarter of the calendar year (CY) 2024, after experiencing double-digit growth consecutively since the fourth quarter (Q4) of CY 2017. Meanwhile, smartwatch shipments declined for the first time since Q4 of CY 2018, dropping by 7.3 per cent Y-o-Y to 9.6 million units.

“We expect a rebound in the second half of the year as new launches enter the market,” Harode added.