Entry-Level Consumers Cut Back on Discretionary Spending, Retailers Focus on Premium Offerings
Even as the trend of premiumisation gains momentum in the Indian market, mass consumption remains sluggish, particularly among entry-level and middle-class shoppers. Companies across various sectors, including apparel, jewellery, and food, are struggling to stimulate spending despite festive seasons and tax cuts. Industry executives noted that the anticipated surge in discretionary spending during the December quarter did not materialize as expected, with many attributing this to high gold prices and a lack of sustained demand following initial spikes in response to GST reductions.
Challenges in Mass Consumption
The current economic landscape presents significant challenges for mass consumption in India. Despite a strong push towards premiumisation, companies are finding it difficult to engage entry-level and middle-class consumers. According to Kavindra Mishra, MD & CEO of Shoppers Stop, while there was a noticeable increase in demand immediately following GST cuts, this momentum quickly waned. He described the quarter as “tough,” with muted demand conditions affecting the value segment. This sentiment is echoed across various sectors, indicating a broader struggle to maintain consumer interest in lower-priced goods.
Jewellery Sector Pressures
The jewellery market, particularly in the sub-Rs 1 lakh segment, is facing notable pressure. Tanishq, a leading brand in this space, has reported difficulties in attracting buyers within this price range. Arun Narayan, CEO of Titan Company’s jewellery division, emphasized the brand’s commitment to making jewellery more accessible to consumers. The company is ramping up marketing efforts to draw back shoppers who have been hesitant to spend. This trend reflects a wider concern in the jewellery sector, where high gold prices have dampened consumer enthusiasm, further complicating efforts to stimulate sales.
Shifts in Consumer Behavior
Consumer behavior is shifting, particularly among urban low and middle-income households. Experts suggest that a genuine boost in demand will depend on improvements in wages and overall income levels. Interestingly, rural India has been leading the way in fast-moving consumer goods (FMCG) consumption, with companies like Hindustan Unilever reporting stronger demand trends in these areas. As mass-market sales lag, retailers are increasingly focusing on premiumisation strategies to cater to consumers willing to spend more. Bata, for instance, has begun showcasing higher-priced items prominently in its stores, aiming to enhance the shopping experience across all price points.
Flat Growth in Eating Out Sector
The informal eating out sector is also experiencing stagnation, with companies like Westlife Foodworld, which operates McDonald’s outlets in India, reporting flat growth in the third quarter. Saurabh Kalra, MD of Westlife Foodworld, noted that while there have been some signs of increased consumption, the overall growth remains modest. The company is cautious about declaring a sustained recovery, emphasizing the need for consistent momentum over the coming months before making any definitive claims about a revival in consumer spending.
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