Second wave weakens consumer sentiment: BCG
Premium- BCG’s study, sixth since the pandemic spread in India, spells uncertainty for more discretionary categories such as apparel, personal care, cosmetics, travel and out of home entertainment
New Delhi: The second wave of covid-19, during which the country reported high casualties, has once again weakened consumer sentiment as Indian households cut their projections on incomes and expenditure over the next six months.
This decline in sentiment is steepest among the less affluent income groups or those with annual household income less than ₹5 lakh, said a survey of 4,000 Indian consumers by the Boston Consulting Group (BCG) conducted between 23 May to 28 May.
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The consumer sentiment survey covered all socio-economic groups across urban and rural India.
The study, BCG’s sixth since the pandemic spread in India, spells uncertainty for more discretionary categories such as apparel, personal care, cosmetics, travel and out of home entertainment.
The report highlighted that consumer anxiety is at its “highest levels" since the outbreak of pandemic; concerns around economic outlook, health, and lifestyle are accentuated.
In fact, 58% of those surveyed expect their incomes to decline in the next six months—this is “significantly higher" than the 44% reported in the July survey, it said. Meanwhile, 51% consumers expect their spends to shrink over the next six months—again higher than the previous surveys conducted by the firm.
Overall, 86% of those surveyed cited concerns over an economic recession due to the virus. Over 80% reported feeling some sense of uncertainty toward their jobs and business—the highest ever recorded by the consulting firm.
Last year’s cautious behaviour has been replaced by uncertainty, despair and panic as India’s daily caseload spiralled in the months of April and May as the country faced a more virulent Delta strain, said Nimisha Jain, managing director and partner, BCG India.
“The second wave has hit consumer sentiments even harder. We had started seeing recovery in sentiments, but now the sentiment has taken a strong hit. Themes of resilience and caution which we saw last time around have gotten replaced with sense of uncertainty, despair and panic," Jain said.
The report also corroborates The Reserve Bank of India’s assessment of consumer confidence that fell to a record low in May as household perceptions about the economy and employment weakened.
Consumer mobility and sentiments had picked up earlier this year, with most companies reporting healthy business in the March quarter. This is especially true for retail and restaurants, that saw business dip in 2020. This year retailers are not expecting consumers to rush to stores as the unlock begins.
“This decline in sentiment is steepest among less affluent income groups (annual household income less than ₹5 lakhs) where 76% of consumers expect their income to be lower in the next six months. Unlike last year, sentiments have also been impacted more uniformly across large towns, small towns and rural this year with 55-60% consumers across all feeling that the worst of coronavirus is still ahead," BCG said in its report.
Close to 50% of those in the Rs10 lakh and above annual income bracket -- termed as “affluent" households by the consulting firm -- expect their incomes to shrink in the next six months.
Despite the bleak forecast, the survey reported that spends on essentials, in home entertainment, and health continue to remain robust.
"Travel, out of home entertainment continue to show negative sentiment with expected cutbacks reaching all-time highs," according to findings of the survey.
Meanwhile, the pandemic has brought about some permanent changes when it comes to consumer behaviour. “Now that we have been into the crisis for over a year, the shape of new normal for consumer behavior is also beginning to emerge. Many of the newly adopted behaviors ranging from online shopping, digital content and payments—have continued to stick. However, others like ‘do it yourself’ regimes, online doctor consultations have showed high sensitivity to the pandemic situation," said Kanika Sanghi, lead, centre for customer insight for BCG India.
Businesses that have opened up after facing weeks of restrictions are more hopeful.
Shopping Centre Association of India (SCAI) estimates malls to see pick-up in business over the next four to six weeks compared to the eight weeks taken during the first phase of unlock. Mukesh Kumar, SCAI chairman, and chief executive of Infiniti Malls, said that since e-commerce worked under restrictions this time around, consumers could walk into stores once restrictions are lifted, suggesting some level of pent-up demand.
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