Economic meltdown: Retailers feeling the pinch?

By Mala Raj

India Inc has taken a cautious and prudent approach to the downturn, but the outlook is not completely negative for the current fiscal, says Cartesian Consulting’s Economic Meltdown Survey, November 2008 report, that covers sector wise analysis of the impact of global economic meltdown on retail, FMCG, entertainment and media, consumer durables, healthcare and some other service sectors. The Survey was conducted amongst 146 middle/senior business professionals across all sectors. It was found that across all the sectors taken into consideration, business ran on course albeit with tightened administrative policies. This was with reference to targets for the current financial year. Airlines and auto are the most severely affected sectors, while banking/financial services shows moderate impact and consultancy/insurance shows low impact.

The survey further found that the strategy being followed across industries included rationalisation of marketing and communication budgets, a freeze on manpower hiring and deferring of capital expenditure. Customer acquisition however continued to be a focus area for most sectors. While mass media or ATL spending is beginning to show a decline, spends on direct marketing, BTL and online are expected to remain more or less the same for the coming months when compared to the corresponding period of the previous year. Industry experts believe that direct one-to-one communication with the end customer is of prime importance in these months of uncertainty.

Of the total respondents in the survey, 75 per cent of the respondents spoke of business as usual with tighter controls while 12 per cent claimed that they did not currently see much impact of the economic meltdown on their business. 62 per cent of the respondents said their targets for the financial year remained the same, while 13 per cent revealed that it will be scaled down next year. In most of the cases, it had been found that the confidence level was shaken a bit. Consolidating operations, reviewing asset quality, review of avoidable and postponable expenditure, looking at fresh growth opportunities, opportunistic acquisition and high quality delivery were some of the key areas the companies were found working with. Of the total who had spoken about advertising and advertisement budgets, 55 per cent said that mass media spends have declined. But they said online and direct marketing spend was higher or remained the same.

In the FMCG segment, confidence levels were higher; no scaling down of operations was found and business targets remained the same. To tackle the situation of market meltdown, the industry has undertaken multiple measures — 100 per cent respondents of the sector stated that they had rationalised the marketing budgets; 50 per cent indicated deferred capital expenditure but said freeze on hiring was not a key strategy being followed. With respect to marketing and communication spends, mass media spends remained same in 82 per cent of the cases, online or web spends also remained the same in 87.5 per cent of the cases.

In retail, the sector overall displayed a cautious outlook as expected, but not unduly negative. Confidence levels were not low and uncertain. There was no scaling down in grocery retail, whereas other retail sectors saw a minimal down scale which was reflected in their business targets as well. The strategy being followed to tackle this meltdown were 100 per cent rationalising of marketing budgets, significant deferred capital expenditure for non-grocery retail and consolidation of operations. While the focus was entirely on customer retention for grocery retail, there was a balance between acquisition and retention for non-grocery retail segments. In terms of marketing spends, BTL had increased for grocery retail while it dropped down for other retail. Significant importance is placed on one-to-one communication with end customers across all.

Mala Raj is a consultant at Cartesian Consulting. views expressed are personal. View Profile