Consumers are looking at spending cautiously, but they have not stopped their purchases.
With the auto sector in a slump and the economy in slowdown mode, is it all gloom and doom for consumer retail this festive season? Or, going by the stupendous sales figures that offline and online retailers are proclaiming, is the real story different? BrandWagon rounds up three experts to understand sales this festive season
“Consumer behaviour is different in a slowdown”
The Indian consumer is fundamentally both aspirational and value seeking. During the slowdown, the value seeking behaviour is more dominant which manifests in multiple ways: shifting from premium to value brands (like private labels) or cheaper variants of the same product; looking for deals and discounts; and third, higher use of affordability constructs like EMI. This is seen globally as well where value retailers actually see a jump during recession and slowdown.
Interestingly, people actually tend to hold off purchases before the festive season, as they look forward to deals and discounts offered by retailers during that time. This behaviour is even more pronounced this festive season for e-tailers as the overall GMV has grown by more than 30% compared to last year. Offline retailers should see it as a positive sign.
Globally, during slowdowns, winning brands tend to increase their marketing costs while cutting down costs elsewhere. Customer behaviour during a slowdown is very different and should be researched well (willingness to compromise on must-have features, harder bargaining at the point of sale, etc). The product portfolio should be adjusted based on new realities, with winning value propositions around affordability, discounting and private labels. Retailers and brands who adapt to this new normal will come out stronger.
(By Ujjwal Chaudhry, Director, RedSeer Consulting)
“Rural consumption will kick in soon”
What is obvious is that there has been a slowdown in the growth of the Indian economy, with GDP growth officially down to 5% in the first quarter of this fiscal. However, what is often forgotten is that this is still growth and not a decline. Though with expectations having been built up of 7-8% GDP growth over the past few years, this 5% growth does seem hugely disappointing.
However, the gloom is not all pervasive. The stock market’s sharp bounce back in the days after the FM announced the corporate tax cutbacks, clearly shows that sentiment is muted, but not completely downcast. In fact, the record response to the big online sale days in the first week of October, the surge in mobile handset sales and on select consumer electronics clearly indicate that the slowdown is uneven, and that there are sectors still buoyant.
In fact, with the monsoon being well above normal, quantitatively, one could expect that the rural economy will kick in during the second half. Further, the Government’s move to cut baseline corporate taxes announced in mid-September may result in many companies using a part of the windfall gains to drive sales — through promotions, increased advertising spends and even the occasional price cuts. Remember, many companies held back ad spend during the March-May election period, so the second half could well see a big surge in ad spends, spurring demand.
(By Lloyd Mathias, Marketing Strategist)
“Consumers haven’t stopped purchases”
Consumers are looking at spending cautiously, but they have not stopped their purchases. It is about the small pleasures versus indulgence, implying a slowdown but not a recession. Larger investments are, perhaps, what are getting delayed, like real estate, car upgrades and bike purchases. But, first time buyers are still buying this season as it is considered to be auspicious. As handset sales happen irrespective of season, entry-level handsets and mobile payment solutions are constantly talking to the masses through advertising.
We have seen an upswing in the second quarter, and we are reviving again in the festive period. It is a revival because we are facing challenges in obtaining the desired ad inventory on impact spots. This means media spends are happening across categories. The monsoon this year dampened festivities with floods in some markets. Onam in Kerala, for instance, was almost a washout.
Unlike in the previous years when we saw a 15-20% growth during the festive season, we are expecting an 8-12% surge over 2018. During a slowdown, we see a lot of media optimisation, ROI-driven campaigns and high reach and high ToM (top of mind) driven campaigns. We executed such campaigns during the 2008 recession. Marketers should focus on small-ticket products, target volumes and demonstrate the value for money proposition in every way that they can.
(By Sujata Dwibedy, Group Trading Director – Amplifi, DAN)