During the festive season, people try to push their purchasing capacity and that acts as a major economic impetus. The purchasing drive by a consumer can be divided into three stages - learning, exploring, and buying. The last stage largely depends on their disposable income.
Consumer behaviour in the upcoming festive season is vital for the Indian economy. According to Soumya Kanti Ghosh, Group Chief Economic Advisor of State Bank of India (SBI), the Covid-19 crisis might lead to a 5.4% drop in Per Capital Income (PCI) of Indian citizens in FY 21. Particular states or Union Territories (UT) that had better PCI than the national average, can perform worse. He also admitted, “The closure of markets, shopping complexes and malls adversely affected the income of these areas. Even after the opening of markets (in a staggered manner), the number of customers is still 70%-80% less than the normal times.”
Demand for the yellow metal
Small scale gold traders are in distress because of the unexpected escalation of gold prices which is now almost 30% higher. On MCX, gold futures rose by 0.08% to reach `51,810 per 10 gram in the second week of September. Earlier in August, gold prices went to a record high of `56,200.
However, in the global market, the prices have started to fall slowly. Silver futures tripped by 0.07% to reach `68,921 per kg. But India’s official gold imports have touched a nine-month high of 58.5 tonne during August - just before the festive season. However, these imports were more than double in 2019. Now both jewellers and investors are waiting for a stable price trend that will help them fix their strategies.
Annargha Uuttiya Chowdhuury, Director, Anjali Jewellers, told BE, "The way the market is responding, it looks positive. Gold is always the best and safest investment. We are hoping that this puja, things will improve once the government provides complete relaxation towards the movement of everyone.”
Along with the decreased sale of the yellow metal, the jewellery segment is facing another challenge. The depleted working capacity and unavailability of workers (as most of them have moved back to their native regions) are formidable challenges for the sector.
An India Ratings and Research data informed that after the ‘huge fall’ of the textile industry in the first half of FY 21, the second half can expect only a ‘moderate recovery’. The market will have to wait till the next FY for a visible recovery. Being a labour-intensive industry and in absence of labour due to the pandemic, the sector might also face difficulty to meet the increased festive demand in October.
Naina Jain, Founder, Naina Jain Store, told BE, “It was indeed a difficult time initially for the fashion industry as we navigated through the troubled waters. Covid-19 had initially slowed down the market but thanks to the upcoming wedding and festive season, the market has picked up its pace. On the whole, the market situation of textiles is slowly and gradually recovering. Even though weddings have been delayed or reduced in size, the brides are going all out and shopping their favourite pieces. So that’s definitely positive news. People are more conscious about what they consume and definitely there is a shift into more easy simple clothing and into more sustainable and evergreen pieces.”
Consumers favouring online
The pandemic has also shown a promising shift of consumer behaviour for online purchases and new businesses as well as existing players are shifting to online modes. Commenting on the trend, Jain said, “With low investment and fast turnover, this platform is a boon. India’s forced shutdown encouraged faster adoption of e-commerce as customers get accustomed to ordering more online. This will push more fashion brands in India to embrace e-commerce.”
During the festive season, household appliances along with white goods (TV, refrigerator, air conditioners, microwaves etc.) and gadgets are also expecting a boom in online sales with big festive offers. Industries across sectors are likely to invest more in their advertisements to influence the consumers.
Significantly, 53% Indian citizens made their first purchase online in the last few months and 40% of them originate from tier II or tier III towns. Not only cities, but quite a few villages are now getting the scope to purchase digitally. With a good harvest on the cards this year, rural India can turn out to be a major consumer component in festive sales.
The pandemic has changed consumer behaviour worldwide and it is important for the manufacturers to understand specific needs. People are now way more concerned about their healthcare investments than anything else. Recently an IHS Markit data about India’s Purchasing Managers Index (PMI) revealed that the index has increased from 46.0 in July to 52.0 in August. An enhanced customers’ demand has led to this development. Consumers are now indicating ‘value-buying’ due to salary cuts, loss in businesses and an uncertain job market. But this positive PMI trend is a healthy development.