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Companies flag slowdown in discretionary spend as consumer sentiment gets hit

Consumer goods companies across categories are flagging a slowdown in discretionary spends in June quarter as Indian households battle acute health crisis in the midst of India’s second covid wave, delaying purchases of big-ticket items such as large appliances, apparel and beauty products.

Firms such as Metro Cash and Carry, Amul, Marico Ltd and Usha International, among others, said consumers are sticking to buying essentials even as they spend more on healthcare, a move that could impact overall consumer demand in the ongoing quarter.

Besides, with different states under varying degree of lockdowns and some allowing only sale of essential items couple with restricted timings for store opening, is also affecting sales.

Arvind Mediratta, managing director and CEO, METRO Cash and Carry India, said compared to 2020 lockdown, consumer sentiment in the second wave is depressed. “The mood is quite sombre so people are not expected to splurge money. When the lockdown was implemented last year, the cases were very limited, so the mood was still buoyant,” he said. Last year, consumers were baking at home, trying out new recipes, this year, they are struggling for essentials. “People have also lost their savings trying to get the best possible medical treatments,” he added.

Since over all demand is suppressed, Mediratta said cosnumers are unlikely to buy big ticket items like large television sets and pricey smartphones.

Compared to March weekends, May weekend sales were down by half at the retailer. “And we are a food and grocery retailer…On weekdays, business is down by 25-30%,” he added.

Mediratta, who is also part of various industry bodies representing the retail industry, said the definition of essential goods, too, needs to be expanded. The current focus on essentials is hurting scores of non-essential retailers, he said, adding that several of its own stores are working under restricted timings and largely selling essentials.

Saurabh Baishakhia, president, appliances, at electronics firm Usha International admitted that the buying behaviour of consumers has completely changed. “There wasn’t such gloom last time as people were safe at home. This time they are having to either spend on medicines or hospitalisation or they are keeping money aside for such exigencies,” Baishakhia said. “The consumer is in a saving mode,” he added.

The company that makes fans, air coolers and a range of kitchen appliances, said for the year it is expecting a 50% drop in business over 2019.

Mint earlier reported that several large consumer electronics firms scaled back production in April after a surge in infections led states to announce partial lockdowns. Most were geared for a strong summer season.

“We were expecting double digit growth in April-May-June. Even the first ten days of April were good. But if you ask me now, we are back to where we were in April-May 2020 when there was a complete lockdown. Even online sales are in a bit of a blind spot right now with only some states allowing appliance sales and others prohibiting all non-essentials,” Baishakhia said.

R S Sodhi, managing director, GCMMF, that sells Amul branded products, said large consumer durables and fast-moving consumer goods makers are likely to witness a difficult quarter. “People are spending less on clothes or eating out. So, when I’m reducing expenditure, I’m spending on bare minimum like small packs and not buying expensive brands or luxurious things. That will impact FMCG and durables in this quarter very badly,” said Sodhi. Demand for Amul’s packaged milk and dairy products, barring ice-creams and beverages, has, however, held strong.

The second wave has already pushed India to report record high number of new infections daily. On Monday, India reported 2,81,386 new covid cases in the last 24 hours.

Kolkata-based packaged consumer goods company RHS Global said consumers are also likely to down-trade to cheaper brands. “Discretionary consumption products will see a lesser amount of spending— either by downgrading to an economical option or by eliminating the consumption. In the personal care sector, there could be a depletion in consumption of items like lipsticks, nail polish and colour categories, etc,” said Sunil Agarwal, Chairman, RSH Global. “The wedding season consumption is also going to witness a dip due to fewer marriages, as well as limits on the number of guests allowed,” he said. Live Mint

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