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A Little Less Sparkle
2020 has been a tough year! And that is an understatement, we are at the start of the festive season but with predictions of severe contractions in GDP (Gross Domestic Product) globally, some of the sparkle seems to be missing. We dive into understanding firsthand how confident businesses are given the bruising the pandemic caused.
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As 2020 slips out of the Gregorian calendar on 31 December, a chorus of sighs may move heavenwards, for an official end to a year of woe ‒ even if the jinx remains unbroken. Humans as a race are hopeful creatures and may feel inclined to cheer the end of a year ravaged by a pandemic in every part of the world. Yet, the traditional merry-making will be mostly missing on the ground and 2020 may slip out surreptitiously as some parts of the world huddle back into another phase of lockdowns.
The spike in cases of coronavirus after the first phase of lockdowns were lifted, has induced governments in Europe and the United Kingdom to ban movement and mass public gatherings once again, prompting Goldman Sachs to slash Europe’s Quarter Four GDP forecast for 2020. World Bank economists reportedly see a 2.3 per cent contraction in the economy of the region in the last three months of 2020. As bars, restaurants and malls down shutters and businesses close down, the pall of gloom that set into the global economy through 2020 may show no signs of evaporating.
The season of festivals in India is already scarred by the spike in coronavirus cases and businesses find themselves dented and bruised. The World Bank expects India’s GDP to contract 9.6 per cent in the 2021 financial year.
Ad Spends Move South
Along with dwindling consumer spending has come a slash in advertising. The Pitch Madison Advertising Report brought out a mid-year review of advertising spends in India, which highlighted that AdEx saw a dramatic decline of 39 per cent in the first half of 2020, shaving off close to Rs 14,000 crore from the advertising pie. The report also suggests that the pandemic may set the industry back three years in terms of revenue.
The festive season evokes optimism. The report says should the festive season and consumer sentiment help the industry bounce back, then the Covid-19 outbreak may have set the M&E sector back by only two years. “I expect ad spends in India to definitely grow, but we must also see this in context to the GDP growth. Despite the decline right now, there is hope for the GDP to grow in the year ahead by seven to eight per cent, and given the usual correlation, ad spend should grow by 12-13 per cent,” says Shashi Sinha, CEO, IPG Mediabrands India. “With that, we will be back to 2019 levels. There are green shoots right now with the demand in the festive period, opening of some sectors with pent up demand, so there is reason to be optimistic on the ad spend outlook,” he says, adding, “but being cautious at the same time."
As a matter of fact, the festive season has seen a rise in advertising, especially digital advertising, with e-commerce emerging as the chosen platform for consumer engagement.
Never Say Die
The silver lining to this cloud is the sheer determination of business leaders and entrepreneurs to make the best of the heart-breaking situation and one innovation that has proved acceptable to all in times of social distancing is to move business to ecommerce platforms.
“Covid-19 and the lockdowns have had a profound effect on retail and also on consumer habits and attitudes on how they want to shop. But in rapid response, the industry has been extremely proactive, and creative, in continuing to serve customers and even reach out to new ones by boosting their online and mobile commerce services,” says Mary Turner, CEO, Koovs. “As the need continues for consumers to remain local and within their close community through the festive season, ecommerce and mobile technology are providing the platform for us in the retail sector to play our part,” she goes on to say. “For the festive season, we at Koovs have been expanding the platform as a service part of our business with our shopping apps and e-commerce platform, to help other retailers secure their future by moving quickly and expertly to put their shops online,” she says.
Similarly, beauty brand Kaya gave its consumers the option of consulting dermatologists online and reports over 3,500 online consultations till date. “This will continue and while consumers are now more confident to go to clinics, they are comfortable with online consultations ‒ hence they will want solutions that involve digital and physical connect,” says Pooja Sahgal, Vice President and Head ‒ Marketing, Kaya Limited.
“When it comes to beauty, consumers have to turn to the digital space with beauty content and beauty searches going up 2.5 times on You Tube. They are keen to try beauty solutions at home, using expert products,” she says. Kaya has developed more than 50 pieces of content on YouTube to educate and engage consumers on beauty. The company launched a campaign called MAskne, to educate consumers about acne. “Further, we noticed an increase in people searching for solutions to sensitive skin problems through Google search. As a result, we accelerated the launch of our sensitive skin care range. Kaya has pivoted to e-commerce and we see that almost 50 per cent of product sales and 15-20 per cent of the company turnover will be e-commerce,” says Sahgal.
The surge in e-commerce has indeed, given a lift to retail sales. “Seeing the positive consumer sentiment, we are expecting our pre-Diwali online revenue to be 120 per cent of what it was in 2019, and while offline retail is still taking time to pick up, we are expecting to make a 75-80 per cent recovery. Overall, we foresee a 100 per cent recovery in October,” say Tanvi Malik and Shivani Poddar, Co-founders, FabAlley & Indya. While there has been an increase in demand, consumers are also value-conscious, and are specifically demanding flexible cancellation or modification in bookings says Chinmoy Panda, CEO and Founder of DateTheRamp ‒ a members-only service that provides designer products for special occasions.
Customer is King
In addition to moving online and reaching consumers digitally, brands have come up with innovative methods to keep consumers engaged, especially during the festive season. ITC Hotels for instance, has come up with the E-Gift Card ‒ a selection of services across luxury stays, gourmet dining, rejuvenating spa services that guests can redeem easily. These secure, ‘cardless and contactless’ digital E-gift cards come with a validity of a year and can be customised as per individual needs and allow guests to curate their own experiences.
While staying safe is paramount, consumers are at one level tired of being cooped up at home and the festive season gives them a reason to organise meets with friends and loved ones in small groups. According to Anil Chadha, COO, ITC Hotels, “Festivities in India have always had a strong social and community connect and we believe that it will continue to be celebrated, albeit in a modified manner in adherence to caution needed under the current circumstances. Intimate celebrations that allow friends and family to mark an occasion without exposing them to risk will see an upsurge. This is where trust plays an important role, and at ITC Hotels, we assure guests of a memorable experience without forsaking their safety. So yes, there will be an increase in ‘revenge holidays’, smaller family and friends group get-together and destination weddings.”
The Automotive Sector
Automobile manufacturers, who were among the worst hit through 2020, find that the obsession with social distancing and hygiene, creates a demand again for private vehicles. Pent up demand and safety concerns amid the ongoing pandemic is giving automotive manufacturers a reason to smile. People want to avoid taking public transport, leading to an uptick in automobile sales. Commenting on the performance of passenger vehicles, Veejay Nakra, Chief Executive Officer, Automotive Division, Mahindra &Mahindra says, “We are happy to achieve a growth of four per cent in utility vehicles, despite certain supply constraints. Our brands Scorpio, Bolero and XUV 300 continue to do well, while the bookings for the all-new Thar has set new records within just a month of its launch. For Mahindra, the festive season has started on a positive note with deliveries and bookings being higher than last year. Going forward, this augurs well for a robust festive demand which in turn will help the industry in the short term.”
Most sectors that felt squeezed during the first part of the year, are hopeful that cash registers will start ringing in the second half. “The first quarter of this year has been tough for all businesses, especially retail. But with lockdown rules being relaxed in a phased manner since June, we are slowly seeing a more positive outlook in terms of consumer spend. There is also quite a bit of pent-up demand which is now positively impacting retail. Jewellery in India has always enjoyed an investment value position and is not viewed as a mere accessory. Hence, the demand for jewellery while much less than in the previous year, is not completely nullified,” says Dipu Mehta, Managing Director, ORRA
Mehta believes that the spend on jewellery, an important component of a wedding budget, got an impetus with the slash in other aspects of wedding budgets, as the scale of the celebrations turned smaller. “We witnessed a gradual uptick in diamond jewellery sales at our stores in July and August, with a strong September. While footfalls have been lower compared to the same period last year, the average bill sizes have been larger,” he says. “We are confident that the upcoming festive season will see pent up demand translate into sales as auspicious occasions such as Dussehra and Dhanteras are universally viewed as good days to buy jewellery,” says Mehta.
Mehta points out that daily wear and light jewellery are the current trend, and bridal jewellery is a need rather than an indulgence. “We as a brand are largely a diamond bridal jewellery, but recognising consumer needs, we have launched the Astra diamond collection, which comes with an EMI option at a zero per cent rate of interest.”
All in all, brands are hopeful that the festive season will help make up for the loss that 2020 piled on them. Yet, the harsh truth is that the pandemic is still here to contend with, so the health of both humans and their economies, may take a while to be back on an even keel.
|AT A GLANCE |