COVID-19 compelled and set an unanticipated row of changes in consumer’s mindsets and behaviors. Adaption of technology became a need of the hour and unknowingly this tipped many sectors on the path to a growth trajectory.
Every retailer big or small had to catch up and digitize operations in no time. In the year 2020, after the first wave, online sales witnessed a huge surge in numbers, coming from the pent-up demand. With more consumers now spending time indoors and working from home, demand for goods such as air-coolers, refrigerators, air conditioners, laptops, desktops, food deliveries, and all other essentials touched a whopping high.
Electronic products and appliances that made in-home living comfortably too, recorded an all-time high. In fact, demand jumped so sharply that India registered GDP growth after just two-quarters of negative growth — an impressive feat for a country that had been lockdown for months. Demand again peaked during the festive season and remained high till March 2021. This is why the government’s GST collection hit Rs 1 lakh crore for several months.
The second wave of Covid-19 in India has already started showing its effect on the economy and many rating agencies have downgraded the country’s growth, based on dwindling macroeconomic factors. The fact that it hit the consumer sentiments even harder made the matter worse, this time. Just like the first lockdown, the second lockdown also saw a ban on non-essential goods, this has further nose-dived the demand and sets it off on a downward spiral.
Consumers are forced to divert their money towards rising healthcare costs, fuel prices, and online delivery of goods, according to a recent SBI note.
Simply put, people are now spending more money on items that are unlikely to steer economic recovery in the future. Considering that household incomes have also taken a toll due to higher spending on healthcare and other essential needs, demand for discretionary items is likely to remain muted for a longer period.
Even after the relaxations were announced and the unlocking began, e-retailers did not see any pent-up demand spike in sales, unlike the first wave. One of the key reasons for this depression is the sharp fall in consumer sentiment due to a drop in household income and savings, triggered by higher unemployment and rising commodity prices.
According to CMIE (Centre for Monitoring Indian Economy), at least 97 percent of Indian households have suffered a loss in real income.
Like any other sector, LED TV sales are also witnessing a slump. Although the market potential of this segment stands very promising; LED TV has a market share close to 38 percent and in the next 5 years it is believed to have more than 65-70 percent which is huge in terms of the kind of growth we can potentially witness in near future.
However, it’s to be seen that how Indian manufacturers, home-grown brands, and e-tailers can tide over some of the following real-time challenges, to tide over this storm that has been constantly aggravating the situations.
Enlisted below are some of the reasons that are leading to a cut back on consumption:-
Supply Chain: Up to 400 percent increase in raw material and fuel charges is directly leading to rising in prices. Add to this, logistics growth both international and domestic which is at an all-time high.
The Devastation Caused by the Second Wave: Many middle-class people have lost their disposable income to health care. Causalities of the young earning members have left a big void and financial insecurity, making consumers hesitant about their spending.
The Inflationary Concerns that can Further Squeeze Discretionary Spends: Rising cost towards healthcare, higher fuel, and essential commodity prices are collaborative factors that may make the inflation basket jump up to 11 percent during this ongoing pandemic, leaving consumer to reduce expenditure towards non-discretionary consumption.
So, What can Save the Day for the E-commerce and the Indian Retail Sector?
Omnichannel Retailing: By creating a unified shopping experience for customers across different marketing/ sales channels, e-retailers can look at innovative ways with help of technology to improve sales. Some such examples could be setting up virtual trial rooms, video-based sales calls, etc.
Innovation in Financing: By giving easy financing or credit options to consumers to go for durable products, Indian retailers along with financial institutes and banks can enable and mobilize the consumer towards consumption patterns.
Increased User Engagement and Investment in Social Commerce can help Resurgence: Globally, the numbers show a sharp increase in shopping activity on social commerce platforms like FB, Instagram, WhatsApp, Youtube etc. Social commerce in India is still in its nascent stages and shows great promise of growth. This form of commerce brings in a natural cohesion of both social media and online shopping. With social media platforms witnessing exponential growth in India, the amount of time spent on it provides more opportunities for product discovery and a more personalized experience.
Contrary to expectations, a V-shaped recovery for India may not be a reality this time. Instead, the economy is expected to move towards a bit flattened curve making it a ‘U-shaped’ one. It is expected that a turn-around from the slump will start to happen not before mid to end of August. Meanwhile, as we cope and survive, it’s a time of inflection for e-tailers to revisit their plans and strategies and quickly bounce back with some of the suggested corrective measures, as it will go a long way in reinstating the consumer’s lost confidence and sentiment.