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How to Tap India’s $15 Billion Diwali Shopping Opportunity

Fashion brands and e-tailers are increasing their investment in merchandise and campaigns pegged to India’s biggest holiday after two years of muted celebrations.
Indian actress Bhumi Pednekar in MAC Cosmetics' Diwali festival season campaign.
Indian actress Bhumi Pednekar in MAC Cosmetics' Diwali festival season campaign. (ERRIKOS)

Key insights

  • Diwali season retail spending will likely increase this year as most festivities are expected to resume after two years of muted celebrations.
  • Fashion contributes 20 percent of seasonal e-commerce GMV as Indians buy outfits for events and gifts or refresh wardrobes for the changing weather.
  • The cultural complexity of India’s festive season means that brands must consider the market’s many diverse communities, regions and demographics.

Mohita Aggarwal is planning on wearing a combination of local and international brands for this year’s Diwali season. The 38-year-old homemaker from the northern city of Jalandhar has been shopping for new outfits in the fashion capitals of India and Europe and already knows which style she’s going for. “Minimalist lightweight garments paired with heavy jewellery and international designer bags,” she said. “That’s what’s trending this season.”

People from all walks of life are gearing up for a big festive season culminating on Oct. 24, to mark the Indian festival of lights. Diwali is celebrated by Hindus and other religious communities around the country who come together with their families, exchange sweets and enjoy fireworks. In addition to its religious and cultural significance, the holiday is a time for retailers and other businesses to pull out all the stops.

The lead-up to Diwali and the days immediately after it during Kartika (the Hindu calendar month overlapping October and November), is arguably the country’s most prominent festival period for consumption. Those who can afford it shop not only for decorations for their home but also for new gadgets, appliances, gold and fashion. Some even start earlier during Ashwin (the Hindu calendar month overlapping September and October).

Aggarwal’s shopping spree kicked off in Paris, where she chose a Valentino clutch simply because “Paris Fashion week was on and Valentino was ruling.” The rest of her haul for the festival season includes items from Farah Sanjana, an Indian designer “who always knows exactly what I need,” a trouser suit from Massimo Dutti and a Louis Vuitton bag she picked up in India.

Luxury consumers are not the only ones in the mood to shop. Some Indians from middle- and lower-income groups are also keen to refresh their wardrobes. Early indications from the broader festive season, which includes not only Diwali but also Dussehra, Navratri, Dhanteras and Durga Puja, suggest a better outlook for businesses than previous seasons during the pandemic which were marred by humanitarian crises and seemingly endless restrictions and disruptions.

“The festive season is coming back … in the sense that people are [once again] able to step out, celebrate with their families, and travel to be with family,” says Nandita Sinha, chief executive of Walmart-owned Indian fashion e-commerce giant Myntra. Even the opulent ‘card parties’ that had been toned down in previous years are back in cities like Delhi.

According to YouGov’s Diwali Spending Index, which measures the purchase intent of consumers during the season, the propensity to spend among urban Indians this year is at 94.45 points, up from 90.71 in 2021, and 80.96 in 2020. That suggests Diwali season spending for all categories will likely be higher this year than last year’s estimate of approximately 1.25 lakh crore rupees (approximately $15 billion) as cited by officials at the Confederation of All India Traders organisation.

E-commerce marketplaces generally have about three sale events leading up to Diwali and, this year, online retailers clocked 27 percent year-over-year growth to 40,000 crore rupees ($4.8 billion) in gross merchandise value (GMV), during the first week of festive sales, according to Redseer Strategy Consultants. The fashion category contributed 20 percent of total GMV, an increase of 48 percent compared to the previous festive season.

Festive decorations in the Select City Mall in New Delhi, India during the October 2016 Dhanteras holiday leading up to Diwali.

The festive season for beauty brands like MAC Cosmetics, which includes not only Diwali but also Singles Day and Black Friday, accounts for the “lion’s share” of its India market revenue, said Karen Thompson, India market brand manager. “We’ve elevated what we do every year and tried to make it bigger and bigger each year and really tried to be a part of the celebration with our consumers.”

But why are clothing, footwear and cosmetics increasingly relevant categories in a shopping season that was traditionally dominated by gold and jewellery?

For one, Diwali marks the transition into cooler weather — especially in the northern regions — and is therefore a milestone in the apparel retail calendar when wardrobes need swapping out. Another, quite simply, is that the festival season has evolved to feature more and more occasions for people to dress up.

However, the business opportunity is not necessarily equal for all fashion players during ancient religious and cultural festivals such as Diwali. Indian brands and traditional clothing are still preferred by many consumers, and others delay big purchases of international brands until the pre-Christmas season when better promotions tend to be available.

Yet even these distinctions between holiday shopping habits are starting to blur, thanks to increasingly early and aggressive marketing campaigns launched by big retailers and brands.

The Lure of Discounts and Online Promotions

Local fashion, beauty and multi-category e-commerce platforms, including Amazon.in, Flipkart, Myntra and Nykaa, kicked off their festive sales in September. Meanwhile, Mukesh Ambani’s Reliance Industries-owned e-commerce platform Ajio had its sale last month. JioMart, Reliance Retail’s online marketplace, is running a month-long sale too.

“Our most recent launch, the JioMart-WhatsApp ordering, has been received well by our customers. We’re confident that during the … festival season, we’ll be able to strengthen our relationship with sellers and customers,” said JioMart chief executive Sandeep Varaganti.

Early indicators from festivals that started in August seem promising. If the growth that e-tailers enjoyed in the lead up to Raksha Bandhan (which celebrates the bond between brothers and sisters), and regional festivals like Onam (a harvest holiday) are anything to go by, then e-tailers can expect a lift from this year’s Diwali.

In August, Sinha says Myntra saw a 100 percent rise in the sale of traditional clothes like kurtas and saris, and jewellery. The footwear category grew by 40 percent, whereas men’s occasion wear rose by 50 percent. The sheer scale of Myntra’s promotion — which was significantly bigger than last year’s — can explain some of the growth.

Puma, sari brand Nalli Silks and private labels from US retailer Macy’s, which recently launched in India on Myntra, all created special merchandise for the season, as influencer events ensured continual engagement with customers on the app.

Flipkart’s sale tried to mitigate recent fluctuations in the Indian economy, suggests Kanchan Mishra, senior director, consumables (FMCG), home and general merchandise at the Walmart-owned multi-category e-tailer. “Knowing that this year has been difficult for consumers overall from an inflation perspective, to ensure that our customers do not feel the pinch, the offered prices were as good or better compared to last year,” she said.

Aditya Birla-owned The Collective store in India

Regional Festive Opportunities Beyond Diwali

In a country as multi-ethnic and multi-cultural as India, which counts over 120 major languages spoken across 28 states and 8 union territories, there are a great number of festivals, not to mention many different interpretations and customs.

A major festival takes place practically every month somewhere in India, ranging from Bihu in the Northeastern state of Assam to Onam in Kerala and Pongal in the southern state of Tamil Nadu to Karwa Chauth across the north and west, in addition to Ganesh Chaturthi in the western state of Maharashtra and Lohri in north India.

Nationwide, non-Hindu religious communities also have their own holidays, some of which are linked to shopping for some adherents. Eid-al-Fitr and Ramadan are celebrated by Indian Muslims while Sikhs and Jains celebrate their own festivals as well as Diwali. Christmas is increasingly popular too and not only celebrated by Indian Christians.

“At least in urban centres, up to tier-1 cities, Christmas is big. It’s almost like Diwali. People socialise, there’s gifting, parties etcetera,” said Gitanjali Saxena, business head of global luxury at Indian e-commerce platform Tata Cliq Luxury, which sells brands such as Versace, Coach and Paul Smith.

For fashion retailers with a nationwide footprint, sales can peak at different times for different store locations throughout the year.

“In Ahmedabad, Janmashtami (celebrating the birth of Hindu deity Krishna) is bigger than any other festival. It can be even bigger than Diwali. In certain cities, Holi (festival of colours) is bigger than Diwali. We may think that Diwali is the most important festival of all time, but it actually depends from city to city and from customer to customer,” said Palak Shah, chief executive of Ekaya, a traditional wear label known for its hand-woven weaves with stores across four cities.

Myntra says it activates promotions regionally during smaller festivals and creates regional language content while engaging regionally relevant celebrities and micro influencers.

E-tailers sometimes note spikes for certain products during certain festivals. Flipkart says it sold nearly 2.5 million rakhis (amulet bracelets that sisters tie on brothers’ wrists on the Rakhi festival also known as Raksha Bandhan) this year.

Across the board, the pandemic pushed more Indians towards online shopping, opening up new markets to fashion brands looking to tap the festival shopping opportunity.

“[This] paradigm shift … [resulted] in the acceleration of e-commerce even in remote parts of the country, with customers seeking variety, ease, and comfort while shopping,” says Saurabh Srivastava, director and head of Amazon Fashion India, adding that the e-commerce giant is anticipating interest in categories like Indo-western fusion wear, party and evening looks, conscious shopping, and traditional Indian clothing during the festive season.

As brands become more accessible to shoppers in far-flung places and smaller towns which are difficult to scale in terms of physical retail, they also enjoy more opportunities to participate in local festivals.

Overestimating the Opportunity Risks Overinvestment

Though Indian festivals are increasingly important, fashion and beauty players should take care to not get distracted by the opportunity they present or overestimate what they can achieve, suggests Devangshu Dutta, chief executive of retail consulting firm Third Eyesight.

“The international brands that are the most successful in India certainly do adapt to the demand of the calendar that exists in India, rather than simply going by a global mandate,” said Dutta. “[But] it’s not just about running advertising campaigns to coincide with Indian demand peaks, such as festivals; [it’s] also ensuring that the product is relevant to the Indian context.”

Flipkart fashion senior director Abhishek Maloo is quick to remind partner brands that the Indian shopping calendar is not only centred around festivals, but also occasions that are more universal across international markets. India too sees sales of sneakers and sportswear go up during the New Year week as customers look to make good on fitness-based resolutions. Black Friday is also increasingly popular.

Flipkart's supply chain employees from Haryana and Punjab have a meeting ahead of the Diwali festive season and the Indian e-tailer's The Big Billion Days sale in 2022.

More importantly, not all festivals have strong links to the Indian retail calendar, and many don’t help drive significant demand for the fashion and beauty categories. Among those that do, opportunities for international brands can be more limited than those for traditional fashion players as many festivals typically call for occasion wear from the latter.

But since younger consumers tend to be willing to make more non-traditional purchases during the main festival season, they are increasingly important for international brands looking to invest in the opportunity. “[Younger Indians] want to make things special but in a way that is globally relevant,” said Amit Pande, brand head of The Collective, a multi-brand retailer owned by Indian conglomerate Aditya Birla Group selling Emporio Armani, Ferragamo, Fred Perry, Hugo Boss and Ralph Lauren among others.

Adwaita Nayar, chief executive of Nykaa Fashion, and co-founder of fashion and beauty e-commerce giant Nykaa, suggests that the approach to festive campaigns is evolving in part because the younger customer base sees festival shopping differently. Her firm’s customers are more interested in new collection drops that happen during the season. Targeting this demographic helps in her bid to try “to shift the conversation away from discounts,” she said.

Social media has a big role to play too. Rashi Khanna, a 24-year-old Indian marketing executive who shops more cautiously than some of her peers during the festival period, suggests there is immense pressure to wear things that seem worthy of posting on platforms like Instagram. “During Diwali … you automatically feel that maybe you didn’t have as nice of a night if you’re not [showcasing a special look on your socials],” she said.

No wonder brands like H&M, with 48 stores across 26 Indian cities, are leveraging social platforms for their festive campaigns. According to Amit Kothari, regional head of customer activation and marketing at H&M South Asia, the return on investment has been good for the Swedish brand’s ongoing Brighter Than Ever campaign, which launched in 2020. This year, H&M is collaborating with young actors and celebrities like Zaeden (Sahil Sharma), Manushi Chhillar and Chum Darang.

Gen-Z and Millennial consumers are also changing other long-held festival shopping customs.

Youth Driving New Shopping Patterns in Luxury

Gold, which is considered auspicious, has traditionally been the focus for Indian consumers during Diwali and the festival that precedes it called Dhanteras, so much so that Indians reportedly buy about 20-30 tonnes of gold on Dhanteras day. But while jewellery continues be a more natural fit for some consumers than clothes, gold jewellery isn’t as popular with every demographic.

Tata Cliq Luxury’s Saxena confirms that festival shopping trends are evolving fast, especially among younger households in the “top 15 to 20 cities”

“Suppose every household [used] to spend 40 percent of their Diwali budget on gold, well, that’s coming down now. There might be a token purchase but a lot of the spend might go into buying something like an expensive watch for 1-2 lakh rupees (about $1,235-$2,470) or Swarovski sets or other premium fashion jewellery. [But with] men disproportionately spending on footwear, sneakers are … almost like the [new] cool watch category.”

Younger customers generally appear to be more open to new ways of spending during the festive season. “I don’t see myself or any of my friends caring about [whether the jewellery I buy] is gold or not,” said Khanna. And apart from gifts, “I don’t think I’m leaning towards any big purchases during Diwali unless it’s a specific, capsule collection.”

Special edition collections or products relating to the festival are as important as festive campaigns for a growing number of brands.

Reliance Industries-owned JioMart created campaigns for the e-tailer's two sales during the 2022 Diwali festive season.

For this year’s MAC campaign called “Light Up,” the cosmetics brand’s Indian ambassador, actress Bhumi Pednekar, picked her favourite products to create festive kits. Two years ago, the brand used crowdsourcing over Instagram to choose the products for the kit. This year, it is organising parties and masterclasses, and its Instagram audience has voted for the cities they want these events to be held in.

Estée Lauder also sells limited-edition festive kits and gifts with products in colours and shades more suited to the festive occasion. But for Anastasia Beverly Hills, the season is also good for something else. “I feel that the Indian festival season is the best time of the year to launch your hero product,” said Medhavi Nain, head of marketing in India.

From Cultural Sensitivities to Wedding Market Synergies

While traditional Indian clothing brands often have an edge over international players during the festive season, there are multiple categories for the latter to exploit, especially in handbags, shoes, menswear, eveningwear and gifts.

Diwali also presents overlapping opportunities as it coincides with the beginning of the first phase of the Indian wedding season (usually between October and December, and then January and March). The wedding market is currently worth more than three times the Diwali festival season market.

Pande says made-to-measure suits are good business at The Collective during both seasons, but gifting is where some of their international brands shine. The retailer, which offers special packaging and white glove delivery with high-end chocolates and flowers in specific cities, runs a campaign during the season in which wallets, handbags and perfumes do well, he adds.

However, some luxury players note that seasonal spikes are affecting them less than they used to.

“For several years the difference between the Diwali peak and the rest of the year had been reducing, as urban demand has spread out through the year,” says Dutta of Third Eyesight.

In this regard, fashion and beauty brands looking to grow in the India market during the festival season may have something to learn from multinational consumer goods giants like PepsiCo and Nestlé, suggests Indian business strategist and angel investor Lloyd Mathias.

“They have a more meaningful long-term relationship with India, which means not only do they do things for Indian festivals, but they also play with the passions of Indians — cricket and Bollywood. A brand has to retain its international aura, but at the same time has to be seen as a part of an of Indian lifestyle,” he said.

That’s not the only challenge for international brands looking to expand their India business during the festival period.

In a market where even Indian brands can be swept up in controversy when festival campaigns inadvertently offend certain members of the public, foreign players need to tread carefully. Most Indian festivals not only present cultural sensitivities but are rooted in religion and can therefore serve as lightning rod issues for hard-line Hindu nationalists or other groups affiliated with certain ideologies across the country.

“We have seen a lot of flashpoints in the last couple of years [in India],” said Mathias. “It’s very easy for a troll [on social media] to gather momentum and to actually damage a brand’s prospects. Brand custodians do have to be increasingly careful about how they approach cultural subjects.”

Another consideration is whether Indian festivals are at risk of becoming overly commercialised to the extent that brands are blamed for their part in it. Indian retail experts contend that, for now, local festivals have not gone nearly as far as religious and cultural holidays in some western markets like Christmas, Valentine’s Day or Halloween.

But Mathias suggests that continued commercialisation is “an eventuality of modern times” as “conspicuous consumption is a reality of life” in India too.

“As we’re moving into a more free economy, I think businesses will compete aggressively, and they’ll create more selling opportunities out of birthdays, festivals, cultural events, just like in the west.”

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