Indian consumer companies are tailoring marketing and output plans that will suit the thrift-focused buyer, with the lockdown-induced disruptions triggering health and income-loss concerns across the country.
As foods and groceries are the only categories reporting stable sales, companies are focusing on the value end of the spectrum for most product lines, assuming that cuts in discretionary spend will gravitate toward staples.
According to a BCG consumer sentiment report, buyers are likely to trade down (buying cheaper brands or lower variants) in discretionary categories and trade up (expensive brands) for staples and household care. This document is based on responses from about 1,300 SEC A and B respondents in metros, tier 1 & tier 2 cities.
“How consumers behave will be a function of how long and severe the crisis will be. Many of the lifestyle categories will be impacted by the job layoffs and how soon the economy rebounds,” said Abheek Singhi, senior partner and managing director, BCG. “The frontline jobs are easier to get back in construction or retailing; the middle management jobs that will be hard to recover. While 55% of overall consumption, led by food, grocery, rent and medical needs, will not be impacted, travel, high-end purchases and fashion constituting 45% will be.”
That might explain why Pradeep Bakshi, MD, Voltas, believes that essential durables, replacement demand, and entry level models will witness more offtake. “Today, consumers are spending only on functional and necessary products, on a need-of-the-hour basis,” Bakshi said. “We expect functional and entry-level products, like semi-automatic washing machines, direct cool refrigerators, and dishwashers to open up ahead of other high-end options. Entry level products…will work better in Tier 2 and 3 markets. And we are prepared with our wide range of models, catering to this segment,” he said.
Before the lockdown, Voltas had 60% of its sales from the metros. The needle is tilting toward smaller cities in the post-lockdown period. But home consumption, especially of staples, is unlikely to edge lower.
“Our consumer basket value rose by 75% in the lockdown as cooking at home recorded a surge,” said Damodar Mall, CEO of Reliance Value Retail. “We don’t expect downtrading in the home food consumption space. One less holiday this year or no big spends on travel, multiplexes or eating out will get directed to splurging on foods and health.”
Asian Paints CEO Amit Syngle said that when the new normal emerges, there will be a shift from premium to value products, and tier 2 and 3 markets that have not been as affected as urban cities will foster better demand. “The fear factor is less in smaller cities and while the situation is dynamic as of today, what is clear is that there will be a hit on discretionary spends,” Syngle said.
Historically, demand for entry-level vehicles has increased after economic slowdowns, as people had less money for discretionary purchases. Maruti Suzuki is considered a bellwether for India’s passenger vehicle industry, with more than 50% share in the passenger car segment. It is developing two models to be priced below ₹5 lakh. RC Bhargava, chairman of Maruti Suzuki, said that layoffs and lower incomes have hurt the salaried class, affecting their buying power.
“We expect the consumer to look for better bargains. The entry-level segment will initially throw up the volumes,” Bhargava said. “There seems to be greater buying ability among rural consumers, with growing income levels.” Venu Srinivasan, chairman of TVS Motor Co, said consumer confidence has dropped.
“I see lots of consumers postponing purchases and staying away from discretionary and large-ticket purchases,” he said. “I see these categories as losers, with a negative sentiment — at least in the short term.”
Daily commuters will likely avoid public transport for some time, probably boosting demand for mass-market motorcycles or scooters that even lower salaries could support.
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