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Retailers said brands will need to incentivize consumers over the next few months to keep demand intact (Aniruddha Chowdhury/Mint)
Retailers said brands will need to incentivize consumers over the next few months to keep demand intact (Aniruddha Chowdhury/Mint)

Retailers remain cautious about post festive demand

  • Retailers remain wary of the slump after December as pent-up demand may subside in the last quarter of the current financial year

Consumer goods companies—which benefited from pent-up demand in the run up to India’s festive key season—remain watchful about post-festive consumer demand as covid-19 cases are again ravaging the country’s top cities.

Several apparel, packaged consumer goods and electronics retailers said they expect demand to continue till December, helped by an uptick in weddings, strong winters and a sustained demand for home appliances. However, they remain wary of the slump post December. Pent-up demand may subside in the last quarter of the current financial year. Meanwhile, a rise in covid cases is leading to localized curfews.

“No retailer is willing to commit beyond December. However, until December, helped by the marriage season and winters starting strong in the North, retailers are fine, given there is no resurgence of covid cases," Kumar Rajagopalan, CEO, Retailers Association of India (RAI) said.

Last week, Nestle India’s chairman and managing director told reporters that for the industry, at large, the months post-Diwali will be critical to gauge consumer intent to shop as festive season saw consumers come out and spend.

“We would need to watch for the next couple of months, to see what level of stability we're able to reach…Since we are just coming out of this terrible economic hole—I think we have to give ourselves some time to see whether things really have stabilized, or whether the demand that we have seen has been largely kind of pent-up demand. That’s because I'm looking at it from a multi-sector point of view. And therefore, probably, there could be some pent-up demand in particular sectors that might be running itself out. So short answer, next couple of months, I think are critical to see how demand is able to get stabilized," Suresh Narayanan, chairman and managing director, Nestlé India said.

Helped by unlocking of the country, and aided by festivities that commenced in September and stretched till mid-November, several retailers ratcheted up sales; albeit trends were divergent for retailers of apparel, home appliances and fast-moving consumer goods.

Data sourced from Retailers Association of India (RAI) suggest that while electronics retailers reported a 15-18% jump in the 30-day period prior to Diwali compared with a year ago period, formal-wear retailers reported a 35% drop in business. Meanwhile, athleisure, casual wear and fitness footwear reported growth, while sale of home-related items were down 10%.

On Friday, however, several states, including Madhya Pradesh and Gujarat announced night curfews to curb the spike in covid cases, raising concerns among retailers of imminent localized lockdowns.

The risk of lockdown is again increasing for retailers and multiplexes as Ahmedabad announces weekend lockdown and cases rise in Delhi, said Abneesh Roy at Edelweiss Securities. Roy said that rise in cases could bode well for in-home consumption of packaged goods but could bother apparel and fashion retailers.

Retailers said brands will need to incentivize consumers over the next few months to keep demand intact.

“For the upcoming months the brands are looking at a recovery of 85%-90% compared with last year. The key route to achieving this would be through purchase occasions such as winter launch, end-of-season sale, wedding festivals followed by spring launch towards mid and end of January, this will be further coupled up with shopping-based gratification in parallel catering to the above occasions," said Abhishek Bansal, executive director, Pacific Malls. The first two weekends of November “were encouraging", with brands clocking 60-70% recovery compared with last year, he said.

While, apparel companies struggled to meet last year’s numbers this festive season; electronics companies reported growth over the last year emerging from a more permanent demand for household appliances.

The post-festive season will be crucial to help sustain demand for electronics, said companies.

"The white goods market has been witnessing a steady return towards normalcy. While the festive season played a crucial role in making up for most lost opportunities in early months of the lockdown, the post-festive period will be even more critical for making that growth sustainable," Pradeep Bakshi, MD & CEO, Voltas Limited said. Bakshi said that clear demand has emerged for need-based products as consumers seek products to ease their daily lives in the new normal. "We expect this demand to be high in the coming few months as well, owing to an increased need for automation of household chores due to the work-from-home culture. With the second wave of pandemic hitting several cities, people are already looking for white goods that help with the burden of household chores. In fact, our Voltas Beko range of appliances has witnessed more than a 100% growth over last year," he said.

Kamal Nandi, president at industry body CEAMA and business head and executive vice president, Godrej Appliances, expects demand for home appliances such as washing machines and heaters to help retailers tide the next few months. “Organic demand will be sustained given that we are seeing a new trend which is of appliances substituting domestic help and that trend is not going to get over till we get the vaccine," he said.

Nandi said the first half of the year was marked by job losses and salary cuts—events that have seen partial reversal. “Therefore, there will be more money in the hands of consumers in the second-half," he said. He, however, flagged concerns as rising commodity prices and supply shortages could prompt appliance makers to take a 3-4% price increase in December.

“The only worry is the rise in covid cases and the resultant curfews. If that is taken care of, we expect we will be at par or report slight growth over last year for the remainder of the year," said Nilesh Gupta, managing partners at electronics retailer Vijay Sales.

For the full year, though, several retailers, especially those that sell formal apparel, beauty products, home furnishings and other discretionary products are unlikely to recover business lost in the months of the lockdown.

“The fervour of demand, driven by weddings and year-end festivities, will keep up until February—but post that, the period will be very critical for us," said Sanjay Vakharia, CEO, Spykar Lifestyles Pvt. Ltd. “We will really look at those months to really see whether we are anywhere close to normal or not," he said.

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