Our shopping habits greatly affect India’s GDP. This is because the contribution of private consumption to India’s GDP is a massive 58%. The implication of this is that India has to boost consumer spending on goods and services in order to revive the economy.
In the 58% share of private consumption in India’s GDP, 52% is contributed by services (education, healthcare, wellness, tourism etc.) and 48% is contributed by merchandise retail (grocery, fashion and apparel, electronics etc.).
Given the significance of the retail sector in the Indian economy, Innoviti has a 3-part series which will shed light on the shopping trends emerging post lockdown. The purpose of this 3-part series is to help retailers and merchants revive customer sentiments in the post lockdown period and promote spending.
This article will cover three key shopping trends emerging –
Affordable indulgence – the need to feel joy, but at a reasonable price
As lockdown eases up, it is anticipated that consumers will want to go out and partake in activities that give them joy. Shopping for apparel, fashion, and jewelry could be some of those activities. The possibility to spend small sums to treat themselves in the familiar environment of their favorite retail store, along with the company of reliable customer-relationship staff, could go a long way in restoring their confidence to spend on indulgence.
Currently, the key to shopping habits may be small joys. This is in stark contrast with the retailer’s need to liquidate stock and attempts to cover up for little to zero sales (due to lockdown) through schemes to increase basket size. However, being gentle on the consumer’s wallet for some weeks could go a long way in building a loyal consumer base. Putting a little extra in their hands by means of discounts, loyalty points, or cashback could prove helpful, but the ability to delight them with small joys may be more significant in the long run.
Our data from the first few days of lockdown easing up suggests this. The Average Ticket Size (ATS) in jewelry and fashion & apparel has dropped by 20% and 15% respectively from Jan 2020 levels.
Shop now, pay later – but in need categories
Traditionally, EMI schemes have been popular in product categories such as mobiles and durables, and aspirational categories such as wellness and tourism. Zero cost EMI schemes also boosted upselling, with consumers buying superior products as an exhibition of their social standing.
However, in the past, consumers had rarely taken up installment plans in need categories such as healthcare, professional development courses and education. Zero cost EMIs have not seen success in these categories earlier. Indian households always saved money for such need categories and had no need for EMIs.
In an environment of job losses, salary reduction, and unpredictability about economic revival, consumers may not part with their savings too easily and it is likely to see consumers embracing EMI in the immediate future. The consumer may also be prepared to take up EMI plans for need categories. Elective procedures such as dental and skin treatments could see a surge in EMI as consumers look to reduce monthly expenditure. Professional development programs for reskilling to improve employability could gain importance, resulting in consumers enrolling using EMI plans.
Immediate buying of branded high-value mobile and durable products – but from smaller shops
Smaller merchants are struggling to pay their suppliers, especially in the consumer durable, IT, and mobile categories. With cash locked in inventory, their primary goal will be to unlock it through deep discounting. As most of the products in these categories are branded, vigorous sales and deeper discounts could be seen from smaller shops than more established retailers in the immediate future.
Our data also suggests that. Within two weeks of easing lockdown, the sales in small shops in these categories jumped to 44% of Jan numbers, while organized merchants grew to about 21% in the same geographic area.
Look out for the upcoming part which will elaborate on increased spend in discretionary categories like mobiles, modes of payments used by shoppers and the blend of online and offline in the shopping experience post lockdown.
You can find Part 2 here.