It’s a bit of a catch-22 for Vineet Rao, CEO of Jaipur-based e-commerce startup DealShare, which sells groceries, essentials and home care products. He is not sure whether to hail or condemn the recently imposed 5% GST on some unbranded, packaged food items like rice, wheat, flour and pulses notified by the government this month. GST will be levied on pre-packaged and labeled (non-registered brand name) goods and will be applicable on a single package of food items like cereals, pulses etc. weighing up to 25 kg.
“Overall, this is a step in the right direction as you can trace the entire supply chain with GST and ensure standardization and quality products for the consumer. However, the timing of the move is completely off as consumer wallets, especially among those buying non-branded products, are already stretched due to high prices of essential commodities. It will be an additional financial burden,” he said.
Rao should know. Their target consumer comes from low- and middle-income households in India, as DealShare sells through a community group buying model in Tier-II, -III and -IV cities. What’s more, their platform procures local brands and products directly from factories to keep them affordable for their less affluent customers.
Rao said the middle class and lower income groups are already trading in discretionary products to meet the rising prices of essential commodities. In this consumer group, they have seen increased purchases of low-priced products and increased spending on staples. While the change in consumption has benefited DealShares as consumers move towards downtrading, i.e. buying cheaper products or smaller packs, Rao said there is a clear slowdown.
Another online platform that acknowledges the moderation in demand in the price segment is Snapdeal. The company pivoted in 2018 to address the value segment focusing on home, fashion (apparel, footwear and accessories) and beauty and personal care. The company primarily counts its primary customers among middle-income, price-conscious buyers residing in smaller towns. It receives over 86 per cent of its orders from outside metro cities.
Snapdeal Ltd President Himanshu Chakraborty said that the latest survey by the Retailers Association of India shows a 14% growth in sales in the apparel and footwear category in June 2022 as compared to June 2019, but there is no need to break down the numbers to get a picture. needed. , “Premium to the super-premium end of the market where brands like Calvin Klein or Tommy Hilfiger operate has been unaffected and continue to do well. However, the mass-premium or mass-prestige segment has been impacted to some extent,” he said, adding that overall, there has been a moderation in demand in the mass segment. “But we are confident that we will be able to achieve our planned growth,” he said. They said.
Chakraborty’s confidence stems largely from consumers finding more options online, which keeps Snapdeal’s business strong. “A section of value-savvy buyers are also downtrading from premium brands largely as they get better options in the price range,” he added. Additionally, he expects growth as “the number of online shoppers is going to double in the next four years.” Or five years, and most of it is going to be from the price segment,” he said.
Researcher Ipsos CEO Amit Adarkar agreed that as the economy recovers post-Covid, uneven growth patterns are seen. “Relatively affluent consumers, especially those whose lives were largely unaffected by restrictions on the offline world, have continued to do well in the past few months despite inflationary pressures. While the consumers whose income and livelihood were badly hit during the pandemic were hit hard due to inflationary challenges,” he said.
To that extent, the current recovery resembles a K-pattern. It is therefore no surprise that premium and prestige segments are less affected across all categories. “The price segments are definitely under pressure. In the first quarter of the current financial year, many marketers do not pass on the impact of inflation directly to consumers through SKUs (Stock Keeping Units) across price segments. But volume growth could be limited in the second quarter.”
The pressure on household income is visible in both the curbs on discretionary spending as well as the decline in FMCG volumes reported by companies such as Hindustan Unilever Ltd. “Therefore, the declining trend in consumption is quite secular across categories,” Chakraborty said. The next 12 months seem unpredictable.
Suchi Bansal is the Media, Marketing and Advertising Editor of Mint. The Ordinary Post will look into the important issues related to the three. Or just fun stuff.
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