I have been doing market surveys during Diwali days for the past many years. Visits to various retail & wholesale markets in Delhi NCR and other nearby towns would usually provide useful insights into the latest economic conditions, consumer behaviour and consumption patterns. I could factor in these insights in my investment strategies to rebalance my portfolio in congruence with the latest socio-economic conditions.
I cannot claim that my assessment of latest market conditions, as deduced from my observations and interactions with the market participants, have always been correct; though I would say that these insights provided clarity to my thoughts and enhanced my confidence in my portfolio.
As usual, I have visited more than 50 retail (including shopping malls) and wholesale markets in NCR, Agra, and Jaipur in the past three weeks. What I observed this year is unprecedented. I have never been so confused in my reading of consumer behaviour.
The footfalls in the market were perhaps even larger than Pre Covid (2019) festival season. Almost all markets were overcrowded; most shops had good inventory; “Made in China” proportion was less as compared to 2019, but not insignificant by any measure; there were plenty of ‘new’ products in almost all categories – from luxury cars to small Diwali decorations; annual inflation appeared more in the range of 15-20% as almost everything was significantly more expensive as compared to the previous year; gifting trended more towards consumable (sweets, chocolates, snacks, juices etc.) than durables (crockery, silver coins, appliances etc.); down-trading was visible in food, sweets, textile, appliances, decorative items, whereas shoppers preferred expensive models in vehicles, phones, laptops & tablets, furniture & furnishing, footwear, eyeglasses, etc.; and home renovation and upgrade demand appeared to have plateaued a bit after two good Covid (WFH) years.
However, despite the larger footfalls in the markets not many shopkeepers and wholesalers appeared excited about Diwali sales. Almost everyone complained about poor margins, high inventory losses, higher costs especially rentals and interest, tighter liquidity and credit norms, surreptitious restrictions on Chinese consumable imports; preference of manufacturers towards organized retailers, etc. A decent proportion of whole sellers termed the current consumer enthusiasm unsustainable.
The following are some of the key takeaways from my market visits during the month of October:
· Most wholesalers indicated lower rural consumer demand as compared to the urban consumer demand. Despite a bountiful monsoon, the rural income is expected to be lower.
· Urban households have significantly increased buying of DIY kits, and appliances like bread & pizza maker, baking ovens, larger and better mobile phones and laptops, cameras etc. This could actually be an indicator of a much larger trend evolving in India that may include more households looking to save costs on food, bakery, repairs etc. and creating additional sources of income from baking, food delivery, social media posting, etc. Work from home may be gradually assuming an altogether different dimension in India.
· Aluminium and Steel doors and windows started to gain popularity in rural markets a few years ago. These doors and windows are relatively cheaper, convenient to buy & install, more safe & durable and require no maintenance. The trend is now catching up in urban clusters also. The trend is similar to when ceramic and vitrified tiles began to replace marble in residential construction. The manufacturers of steel and aluminium door and window panels are innovating and bringing the final looks closer to the traditional wood.
· The divergence in the urban consumer behaviour is more conspicuous than ever. They are definitely down trading on essentials and staples like food, healthcare, toiletries, etc.; but up trading on vanities like higher end vehicles (4W and 2W), mobile phones, footwear, and personal accessories like eyeglasses.
· Most shoppers indicated lower gifting this year. The money saved from pretentious gifting is likely to be spent mostly on vacationing and personal vanity.
· Chocolate had started gaining prominence in the middle class palate about two decades ago. It is now transcending to lower middle class households also; which are already larger consumers of noodles and pasta. A home baker from Ghaziabad, who operates mainly in an urban slum and shops for ingredients from Delhi’s Sadar Bazaar, indicated a 7x rise in orders for cakes from the local dwellers in the past two years.
· Online vs offline debate seems to be settling gradually. Almost everyone indicated a path of mutual cooperation where both mediums would leverage each other’s strength.
· In the NCR at least, the store composition has changed in favour of luxury. The space vacated by the mid and economy segment stores and restaurants during Covid are getting occupied by high mid and premium category stores, cafes and restaurants.
· Premium Lingerie stores at prime locations in most malls could also be indicative of some important social trends.
· Japanese and Korean stores and restaurants are becoming commonplace in most malls.
· The next generation of most wholesalers and distributors is least likely to carry the family business the way it has been running for generations. A significant proportion of whole sellers reported disinterest of the next generation in the family business. In many cases even parents do not want their children to continue the family business. The reasons cited were primarily – very poor returns as compared to the capital invested; extremely poor working conditions; rising competition from larger organized players; opportunities in global trading; etc.
· Textile fashion industry is growing deeper and wider. Many young designers are using technology and digital medium to create and establish their own labels and commanding premium prices. As per a famous fashion label owner one new label is being launched almost every week.
To sum up, I find it difficult to make a general assessment this year. But some of the micro trends are definitely useful. I am though inclined to lower my pessimism on consumer durables (auto and household appliances) and find opportunities in these sectors.
I will be happy to hear the experiences of readers from their own shopping trips; especially if their experiences sharply diverge from mine.
No comments:
Post a Comment