BackBiz wary of post-festive demand
Retailers worry of a slump in demand after the New Year
PremiumConsumer goods firms that benefited from pent-up demand in the run-up to the festive season are keeping an eye on demand trends as covid is again ravaging the big cities of the country.
Retailers across apparel, packaged consumer goods, and electronics expect the wedding season and a strong winter, as well as sustained demand for home appliances, to help maintain sales momentum up to the end of December. However, they are wary of the slump in the New Year.
“No retailer is willing to commit beyond December. Until then, since this whole marriage season is there, they will be comfortable only if there is no resurgence in covid cases and markets don’t get shut," said Kumar Rajagopalan, chief executive officer, Retailers Association of India (RAI).
The months following Diwali will be crucial for the industry to gauge consumer intent, Nestle India’s chairman and managing director (MD), Suresh Narayanan, said last week. “We need to watch for a couple of months to see the level of stability we can reach. As we are just coming out of this terrible economic hole we have to give ourselves some time to see whether things have stabilized, or whether it was largely pent-up demand...the next couple of months are critical to see how demand is able to get stabilized," he said.
Electronics retailers reported a 15-18% jump in the 30-day period before Diwali from a year ago, while formal-wear sales saw a 35% drop, according to RAI data. Sales of athleisure, casual wear and fitness footwear grew, while home-related items were down 10%.
Several retailers ratcheted up sales, helped by the unlocking of the country and aided by festivities that started in September and stretched till mid-November. However, trends were divergent for retailers of apparel, home appliances and fast-moving consumer goods.
On Friday, however, several states including Madhya Pradesh and Gujarat announced night curfews to curb the spike in covid cases, raising concern among retailers about imminent localized lockdowns. Ahmedabad has announced weekend lockdown, and cases have started rising again in Delhi, pointed out Abneesh Roy at Edelweiss Securities. The rising cases could bode well for in-home consumption of packaged goods but could bother apparel and fashion retailers, Roy said.
Brands will need to incentivize consumers over the next few months to keep demand intact, retailers said.
“For the coming months, brands are looking at a recovery of 85-90%, compared to last year. The key route to achieving this would be through purchase occasions such as a winter launch, end of season sale, weddings, and festivals followed by a spring launch in mid and end of January," said Abhishek Bansal, executive director, Pacific Malls.
The first two weekends of November “were encouraging", with brands clocking 60-70% recovery compared to last year, he said.
Apparel firms struggled to meet last year’s numbers this festival season. However, electronics firms reported growth over last year, emerging from a more permanent demand for household appliances.
“The white goods market has been witnessing a steady return towards normalcy. The festive season played a crucial role in making up for most of the opportunities lost in the early months of the lockdown, but the post-festive period will be more critical for making that growth sustainable," said Pradeep Bakshi, MD and CEO, Voltas Ltd. Clear demand has emerged for need-based products as consumers seek products to ease their daily lives in the new normal, Bakshi said.
“We expect this demand to be high in the coming months as well because of an increased need for automation of household chores, with people working from home. Our Voltas Beko range of appliances has witnessed a more than 100% growth over last year," he said.
Demand for home appliances such as washing machines and heaters will help retailers tide over the next few months, said Kamal Nandi, president of industry body Consumer Electronics and Appliances Manufacturers Association and business head and executive vice-president, Godrej Appliances.
“Organic demand will be sustained, given that we are seeing a new trend of appliances substituting domestic help," he said.
The first half of the year was marked by job losses and salary cuts, which have seen a partial reversal, Nandi said. “Therefore, there will be more money in the hands of consumers in the second half," he said. However, rising commodity prices may prompt appliance makers to raise prices in December, Nandi said.
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