Offline retailers of consumer goods hit by third wave of Covid-19

Sector sees volume decline of up to 25%; e-com firms do brisk business

Offline retailers of consumer durables, packaged goods, and two-wheelers have been hit hard by the third wave of Covid-19, even as e-commerce companies are laughing all the way to the bank.

Spooked by uncertainty and a persistent inflationary trend, consumers are curtailing the purchase of discretionary items but continuing to lap up non-discretionary items such as groceries, medicines, and Covid self-test kits.

In the third quarter of the current financial year, which included the festival season, the sector saw a volume decline of 20-25 per cent, along with a value erosion of 5-10 per cent, said Kamal Nandi, business head and executive vice president of Godrej Appliances.

This is despite a 15-16 per cent price increase. “People have not spent money on non-essentials this year. Sentiment has also been low along with an inflationary trend in the economy. Consumers have largely spent on essentials and have been conservative with spending on non-essentials,” said Nandi.

Even among the essential items, cheaper alternatives are gaining traction with shrinking household budgets. As a result, mom-and-pop stores are stocking up on more regional brands, said Prem Kumar, chief executive officer of SnapBizz, a digital solutions provider to kirana stores across the country.

Eric Braganza, president of the Consumer Electronics and Appliances Manufacturers Association, said sales were down by 15 per cent since December as the third wave began. “Dealers have reduced their buying as there is uncertainty over lockdowns,” Braganza said. Dealers fear their cash flow will get impacted if there is lockdown, he added.  

Amid Covid-induced curbs, as consumers remain home-bound, e-commerce firms have got busier. Flipkart, for instance, has witnessed a significant increase in demand for products such as health test kits, oximeters, digital thermometers and groceries in the past 12 days, said a company spokesperson. “While oximeters and health test kits saw a surge of over 3.5 times and 22 times overall, the grocery category saw 1.6 times growth in demand during this period,” the spokesperson said.

Similarly, SoftBank-backed internet commerce platform Meesho is seeing an increase in demand for health and wellness products. It has seen the orders for sanitizers double, while demand for masks has seen a 34 per cent jump.

Quick commerce platform Zepto, too, is seeing significant sales growth, expanding 36 per cent week over week. Consumers have been doing some pantry loading of categories like cooking essentials and packaged food. Sales of cooking essentials like atta, rice, oil, and dry fruits have grown by 49 per cent. Within cooking essentials, pulses sales have grown by some 76 per cent, cereals and rice products by 54 per cent, and atta and oil by over 35 per cent.

Aadit Palicha, CEO and co-founder of Zepto, said packaged food categories like biscuits, noodles, breakfast cereals, and ketchup have also posted similar growth.

In a sharp contrast, sales are under pressure at offline retailers of packaged goods and essentials, shows the data compiled by Bizom, a retail intelligence firm. According to Akshay D'Souza, chief growth and insights officer at Bizom, even as the overall consumption has taken a hit during the ongoing third wave, packaged foods sales are the worst hit and are falling by almost a quarter, driven by lower sales of ‘ready-to-eat’ products.

Unlike what e-commerce firms are seeing, sales of hygiene products at retailers have remained muted. “With very limited control and lockdown measures, it does seem that business activity won't be affected as much as previous waves this time. Commodity products are showing steady demand driven by consumer focus towards ‘need’ products rather than discretionary ones,” said D’Souza.

Meanwhile, in anticipation of the demand overshooting like last year, e-commerce firms are scaling up their operations. Take Udaan, India’s largest business-to-business e-commerce platform, for instance. It has streamlined its business strategy and has augmented its supply chain and logistics infrastructure to cater to any foreseeable demand. It has restructured its inventory planning process on a daily basis to ensure there is sufficient and continuous supply. The company said it is experiencing high demand for diapers, laundry and personal care products.