It’s festival time now and India is busy celebrating two of its biggest festivals - Durga puja/Dussehra and Diwali. Like last year, this year too Durga puja was not about hopping pandals and meeting friends and families to exchange greetings. It was partly virtual and about being there and celebrating the spirit of festivals. Diwali too is not likely to be any different.
Understandably, the Covid-19 pandemic has changed the way Indians were used to celebrate festivals, but the spirit of festivals has remained unaltered. India is a land of many cultures and together, there are festivals all round the year. The rich and vibrant festivals of India are a testimony to its diverse tradition and culture. Festivals in India revolve around traditional myths, seasonal changes, relationships, and much more. Festivals are celebrated irrespective of religion or caste in the country, bringing people closer and creating a strong bond of humanity.
Festivals play an important role to add structure to our social lives and connect us with our families and traditions. They all serve the purpose of bringing togetherness to our lives and strengthen our sense of community. Festivals help us to teach principles and ethics to our next generations. All different religious festivals bring the same message of love, tolerance and understanding.
Economic importance of festivals
The significance of festivals, however, goes much beyond the social and cultural integration of a country as it has a huge impact on the economy. Festivals like Diwali are considered by the traders as auspicious moments to offer puja at their shop, open new accounts. The farmers can be seen to throng their shops with their newly harvested crops. This is the time when new products are launched and special sale offers are made by corporate and companies, all with an aim to gain market presence
All over the world, consumer sentiments and religious beliefs, often underlying festivals, play an important role in the economic activities of buying and selling of goods and services. Durga puja, Diwali, and their preceding weeks are traditionally a period of heightened consumption and investment in India. Demand and sales during this period are often seen as a barometer of the vitality of business and the economy.
Traditionally, sale of dress materials, consumer durables, electronic goods, jewellery and even big ticket items such as real estate and automobile picks up during the festival times. The tourism sector also sees growth since holidaying to different destinations is common during Durga puja and Diwali.
But if sales of organised sectors rise during this period due to their huge marketing network and large advertisement spending, the unorganised sector too benefits by offering newer and exclusive products. Artisans, who mostly reside in rural areas, see significant rise in demand for their exclusive products, especially from the new generation buyers during festival times. Youth of new India are now using and promoting mostly products made in the country, especially during festivals, which directly impacts the unorganised sector. The artisan industry is the second largest employer in developing nations after agriculture and employs women in large numbers. Their earnings go up during the festival season.
The economic impact of festivals is, in fact, too big to ignore. The total economic worth of the creative activities involved in Durga puja festival is about ₹32,377 crore and the festival contributes 2.58% of West Bengal’s GDP, reveals a study carried out by the British Council.
The first of its kind detailed study of different aspects of the Durga puja festival commissioned by the West Bengal Government’s tourism department looks at ten creative industries related to the pujas such as installation, idol making, lighting and illumination, retail, sponsorship, advertisement and food and beverages. The project was done between September 2019 and January 2020, with fieldwork completed in an intense three-week period around the time of the festival, and the report recently released.
The report ‘Mapping the Creative Economy around Durga Puja 2019’ points out that the economic value of the art and decoration segment was ₹860 crore and Kolkata accounted for 15% share of the pandal-making industry in West Bengal.
Consumer sentiment improves
After a distressing start of fiscal 2021-22, when the second covid-19 wave wreaked havoc, Indian consumers have found their buying sentiments back in the run-up to the festivals. According to a survey by community social media platform LocalCircles, consumer sentiment improved 100% over the past four months, with three in five Indian households expressing their intent to splurge during the festivals.
According to this report about 60% households surveyed in September, 2021, said they were set to spend on purchases of different goods during this festive season against 30% households in May who were willing to make discretionary purchases in the next 12 months.
YouGov’s Diwali Spending Index conducted in September 2021, an indicator of the spending intent among Indian consumers, reveals a spending propensity of 90.71 among urban Indians this festive season. Even though it is below average (of 100), the intent to spend is higher than last time (80.96), indicating a recovering appetite to spend among urban Indians.
Given that 2021 witnessed a devastating wave of Covid-19, despite excitement among the public for Diwali this year, the consumer sentiment is yet to match the pre-pandemic times. Data shows that only 17% of the respondents said they were likely to spend more than last year during Diwali in 2020. In 2021, this number has increased and now 29% said they will spend more this year. While the spending intent is yet to go back to pre-pandemic times, there is a marked improvement since last year and this is good news for brands trying to woo consumers this festive season.
The Reserve Bank of India in its bi-monthly Consumer Confidence Survey for September, 2021 round too has appeared optimistic. According to this survey people are less pessimistic about the state of the economy on all fronts and are optimistic about spending. When it comes to future expectations, consumers are optimistic about the economy, employment and income and spending. The bi-monthly consumer confidence index was estimated at 57.7 in September 2021 against 48.8 in July 2021.
Festive sales set to surpass past records
A normal monsoon for the second year in running and the prospect of a generous harvest has given hope that the festive season will bring cheer for the industry with rising rural demand. The improvement in consumers’ sentiments has strengthened such prospects. To add to it, multiple sectors affected by a slowdown have now deployed their own tools to push sales. Discounts and deals, EMI payment option as well as special loan offers are on the cards.
According to RedSeer Consulting, a management consulting firm, headquartered in Bangalore, the entire festive month of October last year garnered about Rs.39,000 crore ($6 billion) in gross merchandise value sales. The report also stated that there was a 30% increase in combined festive sales of Amazon and Walmart-owned Flipkart in terms of gross merchandise value in 2019 compared to what they generated in 2018.
Given the continuing negative vibe of the pandemic, a 30% rise in festive sales was considered a big success. Based on these findings, India is hoping for a better performance in 2021, the economic slowdown notwithstanding. Maybe, the mode of marketing would shift in favour of e-commerce in a bigger way this time around as a large section of the buyers would still want to avoid direct purchasing in malls and open markets.
Despite the regulatory environment in India getting stricter, India’s e-commerce industry is estimated to clock $55 billion in sales during 2021 with the addition of 40 million new online shoppers. The number of online shoppers for CY2021 is pegged at 190 million compared to 150 million last year, Consumer Internet at business consultancy firm, Redseer, said during its flagship event Ground2.0 last July.
A RedSeer report says that Amazon, Flipkart and other ecommerce platforms are expected to clock more than $9 billion gross merchandise value (GMV) in the 2021 festive season, a 23% rise compared to $7.4 billion grossed in 2020.
On the other hand, a Forrester report expects $9.2 billion in sales during the 2021 festive month, up 42% year over year from the previous estimate of $6.5 billion in 2020. From the total estimated GMV, reports have predicted that the ecommerce giants are likely to clock 70% of the sales in the first week of the festive season (October 3-10).
“Since its launch in 2014, Flipkart has led spending during the festive month due to its strength in the smartphone and fashion categories, which account for over 50% of total online retail sales in India. Meanwhile, Amazon is focusing on its Prime members to buy in more categories and buy more frequently during this month,” the Forrester report states.
According to the company, smartphones and fashion will account for 50% of total sales in the festive month of 2021, allowing Flipkart to maintain its lead. In 2020, Redseer had pegged Flipkart’s and Amazon’s festive season sales at $4.1 billion, but the ecommerce giants claimed to have reached that target in just five days. Total net sales grew by 55% YoY to reach $4.1 billion in 2020, from $2.7 billion in 2019.
Reflecting the trend the first week of online festive sales from October 2 to 10 saw 23% sales growth in 2021 with different e-commerce players selling $4.6 billion or Rs.32,000 crore of goods online, according to RedSeer Consulting. Last year, the total sales stood at $3.7 billion or Rs.26,000 crore.
The online shopper base in the festive season grew by 20% to 62 million compared to 52 million last year with tier-II-plus cities contributing 60% of all shoppers. Around 40 million shoppers came from tier-II-plus cities. The gross merchandise value or the average sales per shopper grew to Rs.5,034 in 2021 from Rs.4,980 in 2020.
Mobiles, electronics and appliances remained strong this year driven by new launches, EMI options and smart upgrade plans of brands and mid and high-end brands became more attainable due to the pay options. Mobiles accounted for 46% of the total sales or about `14,720 crore. Other electronics and appliances grabbed a share of 27% or Rs.8,640 crore.
Fashion made a comeback with 17% share of the sales against 14% last year. Fashion saw resurgence on the back of a largely vaccinated population, which is looking for a wardrobe refresh for social gatherings and vacations
Real estate and gold look forward but automobile in distress
But if the improvement in consumer sentiment as well as improvement in macro fundamentals has boosted the prospect of higher merchandise sales in 2021, the residential property sales too are expected to see a significant rise in the festive season. Housing sales jumped over two-fold at 32,358 units during July-September, 2021 period across seven major cities as demand bounced back with unlocking of economic activities and lower Covid infections, according to property consultant JLL India.
Sales of residential properties stood at 14,415 units in the year-ago period and 19,635 units in the previous quarter. JLL India released its Residential Market Update Q3 2021 that tracks housing sales data of seven cities -- Delhi-NCR, Mumbai, Kolkata, Chennai, Pune, Bengaluru and Hyderabad.
The fall in interest rate and the subsequent decline in EMI amount have led to prop up demand and the builders are now offering flexible payment plans and several other freebies that are typical of their festive offer marketing pitch to make most of the improvement in consumer sentiment.
In contrast, the story of the automobile industry this festive season is of helplessness; there are buyers but no cars in showrooms. The global semiconductor shortage issue has ruined the festive season for the auto sector. The Federation of Automobile Dealers Associations (FADA) said that while the demand is high, the shortage of vehicles has caused a lot of dissatisfaction among consumers.
FADA has said that “it is the worst ever festive season a dealer or a customer can think of and we entered this festive season with the lowest of stocks, which were only 15 to 20 days. Moreover, there is no clarity on the current month’s production as well and so, as of now, the festive season is not looking very festive and it is actually looking like a lower-than-normal month.”
“If one were to compare figures of this Navaratri to last year’s, we are already down in the passenger vehicle category by 24 percent, which we were growing regularly for the past four, five months or six months post the second lockdown. However, the semiconductor shortage and the last two months' de-growth in production has hurt us badly. More than the dealers, it is hurting the customer point, because this is the time when there is positivity and happy sentiments at home and customers want to buy passenger vehicles but they are not able to,” FADA has remarked.
At the other end, gold jewellers in India are pinning hopes on the festival season, with dealers offering discounts to lure customers back. In a push to revive the market, jewellers are launching new ranges that offer buyers good value and are even selling gold digitally to attract a younger demographic of tech-savvy customers.
The gold imports recovered to pre-Covid levels in April-September, 2021 due to revival of domestic and export demand and the start of the festive season according to the Gem & Jewellery Export Promotion Council. The volume of gold imported has come back to the same level at 432.5 tonnes as of April-September, 2021, when compared to the import volume of 420 tonnes before the pandemic outbreak in 2020.
Despite the pandemic and a slowing economy the sale of gold on the auspicious occasion of Dhanteras in 2020 was 30% higher than that of the previous year. People bought gold worth a staggering Rs.20,000 crore during the festival in 2020, according to the India Bullion and Jewellers Association (IBJA). In absolute terms, as much as 40 tonnes of gold was sold on Dhanteras 2020 against 30 tonnes in the previous year. The conditions this year are different with improving macro fundamentals and sharp rise in vaccination drive and gold jewellers are hoping for a record sale on Dhantera 2021.