Coronavirus lockdown to hurt spendings as incomes fall; even bigger shocks expected in coming time

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Updated: April 8, 2020 2:52:19 PM

The ongoing coronavirus lockdown has dealt a massive blow to income of a larger section of the society which can also reflect in how consumers choose to spend their money in the coming time.

The FMCG industry has asked for permission to operate longer shifts of 12 hours instead of the usual eight-hour shifts. (Representative image)As retail stores have been temporarily shut in the wake of the coronavirus, consumer discretionary players would be the most impacted.

The ongoing coronavirus lockdown has dealt a massive blow to income of a larger section of the society which can also reflect in how consumers choose to spend their money in the coming time. “While lockdown measures seem to be working in reducing the spread of the coronavirus pandemic globally, the associated loss of income for a large section of the society in India could hurt consumer spends,” Kotak Institutional Equities said in a report. However, consumer goods companies might be in for an even bigger shock if the lockdown situation persists. “Companies are indicating bigger shocks if the lockdown is extended beyond April 14, 2020,” the report added. 

As retail stores have been temporarily shut in the wake of the coronavirus, consumer discretionary players would be the most impacted and many stores have reported zero sales since lockdown became effective. Various other industry bodies such as RAI have also said that the coronavirus lockdown will likely cast a long shadow on the retail sector with retailers not expecting profits till August 2020. However, as consumers started to stockpile in the preceding days of the lockdown, consumer goods companies in food and beverages business might have benefitted. 

“In terms of consumer off-take, core Food & Beverages and home/personal hygiene categories would have benefitted from panic buying and stockpiling by consumers,” the Kotak report said. On the other hand, several categories such as personal care items and discretionary products even within F&B may be impacted even when they usually have higher consumption. “Primary sales prints would be worse than off-take for most categories, in our view, with very little invoicing and movement of goods from the companies to distributors in the last week of March,” the Kotak report said. 

The retail sector and the consumer goods sector may see high damages as consumer impulse buying may take a hit, Anil Talreja, Partner, Deloitte India, had earlier told Financial Express Online.

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