| The Diwali celebrations this year have just ended, and with this, consumer goods companies and retailers across the country are just finishing taking stock""literally and otherwise""of how this particular festive season went for them. Traditionally, for most consumer products businesses, the three-month October-December festive (and wedding) season accounts for 40-50 per cent of their annual revenues. Hence, a good "season" can make or break the annual financial performance for most of these companies. |
| This time, surprisingly to some, the reports have been a mixed bag. In major urban retail markets, especially the so-named "traditional high streets", the general sentiment has been one of below-expectation consumer spending. The reasons given are not so difficult to guess""ranging from bomb blasts and security concerns in Delhi to unprecedented rains in Mumbai (in the summer) and then Kolkata, Bangalore, and Chennai subsequently, and many others. Yet, at the same time, automobile and consumer durable companies have reported sales growth figures for the period way beyond their most optimistic projections. |
| What is going on? Is there any slowdown in consumer spending in the offing or are we poised for another major consumer spending growth? In my view, the answer is that there is going to be a slowdown for many, while many others will see increased consumer spending. First, I would like to list out who the winners and losers are likely to be in the coming years, and then try to offer some possible reasons behind such successes and failures. |
| In terms of product categories, the trends have been very clear (at least in urban India). Traditional items of consumer spending such as textiles and clothing, footwear, and even food are giving way to larger ticket, lifestyle products or to services, e.g. leisure and entertainment. Consumers have been investing heavily in ownership of homes and automobiles for some years now. As a result, most of their spending is now getting influenced by their own lifestyle needs related to "home and travel". There is, obvious, growth in consumer durables (more/bigger-screen TVs, more/bigger-capacity refrigerators, DVD players, music systems, multi-function mobile phones, gaming consoles, IT hardware, digital cameras, etc.); home decor products including furniture and furnishings; second cars or bigger family cars such as the newly introduced Toyota Innova, etc. A younger, more health- and fitness-conscious family now wishes to spend more on keeping fitter, looking younger or better, and actually eating or seen as eating healthier. With noise and air pollution getting worse in major urban cities, a significant proportion of upwardly mobile Indians are now leaving their homes for "vacations" to places like Goa or to the "hills" to avoid pollution. Hence, part of the traditional budget for spending on festive seasons is now being allocated to travel on leisure. |
| As would be obvious from this shift in spending pattern, the traditional high streets no longer offer shopping options to this "new" consumer. Even shopping malls, with most of their tenants largely offering clothing and footwear options, see large footfalls but poor conversions (with exception of select department stores that have now diversified into other product categories including hard goods; and the few large format food & grocery supermarkets that now cater for consumers wishing to entertain at home rather than going out all the time during the festivities. |
| In a sense, fundamental shifts are now under way in "what people are buying, when they are buying, and from where they are buying". The reasons are many. Most often mentioned, and probably the most important one, is the change in the demographic composition of India. The very young population is now beginning to exhibit different priorities, even as their lifestyle and aspirations change dramatically from their parents'. The young consumer/consuming households are more driven by "me and my family" priority. In this paradigm, consumer spending is being reallocated on what is perceived to be good/desirable for me and my immediate family. It could be home, leisure and recreation, travel and vacations, education, health, hobbies and other extra-curricular pursuits, sports, etc. leading to reallocation of discretionary spending budgets, and, accordingly, shifting of time period and the market/channels through which this spending will be carried out. |
| The future trends portend radical shifts in shopping patterns. During festivals, new product and service categories will see a boom. In general, consumer spending will get more evenly spread during the 12 months of the year with some new "peaks" actually likely to emerge in April/May at the end of the school term/beginning of summer vacations/entry of first-generation white-collar workers into their first jobs after completion of college. There will be more weekend shopping as more couples join the workforce, leaving practically no time during the week day for shopping (other than that for the food and grocery items). Shopping malls/markets that can offer a wider range of product categories on the same shopping trip will do better since the consumer is already getting stressed for time, and the urban traffic congestion is prompting families to minimise the number of shopping expeditions they need to undertake each month. Convenience will be an over-riding trend, i.e. multi-channels including catalog and the internet and home delivery, bundled offers, better informed salesmen who can facilitate decision making, and an assured availability of merchandise, since consumers may not wish to visit the store again. Does the idea of another Diwali in April seem so far-fetched any more? |
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
