The festive season of October-November this year, which will include Dussehra and Diwali, will see a record splurge by consumers, as many break free from muted spending for months.
Nearly Rs 4 trillion of consumer spending is expected this festive season across online and offline channels, which is 25% higher than last year, when consumer spending was around Rs 3.2 trillion, according to estimates by companies, consultancies such as Deloitte and Redseer and industry bodies such as the Confederation of All India Traders (CAIT) and the Clothing Manufacturers Association of India (CMAI).
The 2023 festive season spending will be higher than the 2019 level by 60%, when spending was around Rs 2.5 trillion across online and offline channels. (See chart).
The categories that will be big beneficiaries of this surge will include durables, electronic products, apparels, fashion and lifestyle goods, jewellery, toys and other gifting items, kitchen appliances, beauty and personal products and sweets and confectionery.
On Friday, consultancy Redseer gave the first indication of festive season spending this year, saying that e-commerce platforms would clock a gross merchandise value (GMV) of around Rs 90,000 crore in terms of sales, higher than the Rs 76,000 crore seen last year during the festive period.
Mrigank Gutgutia, partner at Redseer Strategy Consultants, said that there was a clear trend of enhanced GMV contribution this year versus previous festive sale periods, driven by higher consumer confidence, interest rates peaking out and the Indian economy growing strong.
India’s GDP growth rate rose to a pace of 7.8% year-on-year in the April-June quarter of 2023, compared with growth of 6.1% year-on-year in the January-March quarter of 2023, according to data released by India’s National Statistical Office. The growth rate was despite a high base year effect, the NSO said.
This strong economic growth will reflect in terms of offline consumer spending, with Rs 3-3.1 trillion of offline sales likely this festive season across discretionary categories, Praveen Khandelwal, general secretary at CAIT, an apex body of traders, said.
“What has happened this year is that consumers are not seeing the threat of a pandemic any time soon. That is one aspect for this likely burst in spending. The festive season is also an occasion to buy and consumers this year are willing to loosen their purse strings after months of holding back due to inflationary concerns,” said Khandelwal.
“There is optimism around the festive season,” Rahul Mehta, chief mentor, Clothing Manufacturers Association of India (CMAI), an apex body of apparel makers, said. “The likely growth should be at least 10% this festive season versus last year for apparel makers. This is fairly significant because the last few months were quite challenging for the apparel industry due to a discretionary slowdown. But it is reversing now,” he says.
Signs of this became apparent during the Independence Day sales and Onam sales this year, both falling in the month of August. Categories such as durables, electronics, fashion and lifestyle saw a year-on-year sales growth of around 15-20% during the Independence Day weekend, while Onam, which is celebrated in Kerala, saw a 23-25% year-on-year growth in sales, according to top industry executives, led by premium categories.
“People are upgrading to a better lifestyle and premium products will find traction as a result. The focus on launching new products, coupled with good deals and enhanced distribution, especially in the tier-2 and tier-3 cities, should help brands during the festive season ahead,” Parag Kulkarni, senior vice-president, international and president, A. O. Smith India, said.
Apparel, fashion and lifestyle chains, on the other hand, are not only counting on the festive season, but the upcoming wedding season which will kick off after Diwali, from November 23 to December 14.
“This year the festive season is spread out across two months (October-November) plus the wedding season will begin in November-December, which will aid consumption in discretionary categories. At a broader level, India is a bright spot, with consumption expected to double by 2030,” Anand Ramanathan, partner and consumer industry leader, consulting at Deloitte India, said.
Deloitte expects the food and grocery market to touch $1,230 billion in 2030 from $600 billion now, while consumer durables, apparel & footwear and gems and jewellery will touch $ 175 billion, $160 billion and $145 billion respectively from $85 billion, $75 billion and $70 billion now in terms of size.