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    Visible transition towards digital platforms, contactless formats: Deloitte State of the Consumer Tracker

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    As the global economy is gradually transitioning from the respond phase to the recovery phase, India is also looking at riding on the festive wave and positive consumer sentiments to return to normalcy.

    According to a survey titled ‘Demystifying The Indian Consumer Behaviour: Gleam Of Festivities Overpowering the Pandemic-Induced Gloom’ Between the complete lockdown, the relaxed stay-at-home orders, and the gradual unlocking of the economy, quite a few things have changed in the consumer industry landscape and economic activity has picked up. Although economies across the world are in various stages of re-opening, workplaces and factory floors in India have again started bustling with increasing levels of activity. However, the normal acts of visiting a store, eating out, staying in a hotel, or taking a flight have become a cause of concern for people across different age groups. Consumers are likely to spend with caution and save more to prepare for worse times.

    On the other hand, businesses will likely be averse to investing in capital-intensive projects and have curtailed hiring due to economic uncertainties. The journey to resume normalcy seen before COVID-19 hit the economy will be fraught with challenges related to personal and financial well-being. The interplay between personal safety and consumer sentiment is affecting consumers’ spending behaviour.

    This report captures a few interesting findings for India. It reveals that overall anxiety levels are dropping noticeably for the first time since the onset of the COVID-19 pandemic. After spending the most part of 2020 indoors, people are warming up to the idea of visiting stores for shopping to get a feel of festivities and prepare for the wedding season. This season seems to have lifted people’s mood, spirit, and sentiments, compelling them to leave the comforts of their homes and flock to stores to check out festive deals.

    Improvement in Net Spending Intent

    The pandemic has not only taken over the world economy by surprise but has also altered spending and shopping behaviour and plans of consumers for both discretionary and non-discretionary items.

    Economies across the world are at different stages of recovery and reopening and have varying spending intent. However, India, along with the US and China, reported positive spending intent as the country has approached the festive/holiday season.

    The following figure confirms that household goods and groceries still account for a major part of the consumer spending plans in wave 12.

    Intent to spend more over the next four weeks

    • Clothing/ footwear >> -21%
    • Electronics >> 25%
    • Furnishings >> 9%
    • Groceries >> 51%
    • Household goods >> 52%
    • Medicine >> 40%
    • Restaurants/Take-out >> 1%

    People are still prioritising purchase of household goods and groceries. Expenses on medicines and health care have gone down, implying less anxiousness amongst people from what was observed in wave 5 and 1. For more discretionary items, such as clothes and footwear, and electronics, net spending intent has improved in wave 12 as people have joined in the festivities of Durga Puja, Diwali, and the upcoming wedding season. Now more people are queuing up in stores to buy clothes and footwear.

    One noteworthy observation is that in the 55+ age group, spending intent that was negative for some discretionary items, such as furnishing (-25 percent), restaurant/takeout (-34 percent), electronics (-20 percent), and travel (-30 percent), in wave 1, has now turned positive in wave 12 (34 percent, 20 percent, 31 percent, and 23 percent, respectively). This could be attributed to the higher anxiety level at the start of the pandemic − the elderly people were bracing themselves for the worst.

    Overall, the purchase intention has increased across both the discretionary and non-discretionary categories as well as the online and offline channels.

    E-Commerce to Transform the Consumer Market Landscape

    In the retail segment, there is a visible transition towards the e-commerce and digital platforms, and contactless retail formats, such as buy-online-pick-up-in-store (BOPIS). E-commerce is picking up as consumers prefer touchless transactions and are averse to using point-of-sale terminals to avoid risk of catching infection.

    Since the onset of the pandemic, some retailers have started offering the BOPIS option. The trend of BOPIS is consistently increasing as this option offers a win-win proposition for both consumers and retailers. Customers can get better deals and find it convenient as they may return the item on the spot if needed. After the COVID-19 crisis, a furniture retail company and a hypermarket chain have started offering BOPIS service as it leads to decreased delivery cost and time, and fewer complaints (related to returning or replacing an item).

    When consumers visit stores to pick-up their goods, some may be tempted to look around and fill their cart with things they did not originally intend to buy.

    The factors fueling this transition include health and safety concerns, convenience, increased tech-savviness amongst people across age groups, especially the 55+ age group. In this age group, the number of stockpilers has increased by 20 percent to reach 75 percent in wave 12, compared with 55 percent in wave 1. The same age group prefers giving more weightage to locally sourced items even if they cost more (80 percent in wave 12 and 69 percent in wave 1). Bargain hunters have also increased from 72 percent in wave 12, compared with 41 percent in wave 1, as more elderly people have started exploring internet for shopping. Interestingly, this category has seen a deceleration in the other two age groups that are considered more tech-savvy. In wave 12, only 49 percent bargain hunters (65 percent in wave 1) exist in the 18-34 age group, indicating that people are not increasing their spend on non-discretionary items.

    After unlock 5.0 and due to the festive season, the number of active cases is increasing. This is leading to a rise in online purchases. One thing is common across age groups − preference to spend more on items of convenience and opting brands that have responded well to the crisis.

    The Path Forward for the Consumer Industry

    Although it has become evident from our past surveys that the retail industry will keep on encountering challenges on the road to recovery, retailers’ traditional approach to attract customers may become obsolete in this “new normal” scenario. Here are the top five suggestions that may help the consumer and retail segment to thrive in the new normal:

    • Resetting priorities: Realigning and rebooting their business models and adapting (by being agile) to changes faster are what retailers need to rebuild a growth path.
    • Going beyond traditional hiring models: The pandemic has introduced a transformation in the work culture. Quite a few organisations have permanently moved to the work from home models, cutting their real estate cost (rent, etc.) and administrative overheads. This transformation has also brought about a change in the new hiring processes. Now organisations are actively engaging gig economy (freelancers) and contractual workers and roping them in projects to avoid increasing their fixed cost and burden.
    • Adopt an omnichannel approach: The retail segment should embrace this approach that involves a mix of the offline (physical stores) and online (e-commerce, digital) channels. In other words, retailers need to connect with consumers at every touchpoint and offer them a wholesome “phygital (physical+digital)” experience to attract and retain them. This has become even more important in the present times when people need to maintain social distancing and take other precautions required for flattening the pandemic curve. Our survey findings reveal that the share of e-commerce is expected go up further in the overall retail channel mix. If used effectively, e-commerce and digital channels have the potential to put retailers out of their misery and accelerate their growth to help them return to normalcy in the post-pandemic world.

    Credit: Porus Doctor, Partner and Consumer Industry Leader, Deloitte Touche Tohmatsu India LLP