As goods turn dearer, bargain hunters grow

Shailaja Sharma, Daily News & Analysis
MUMBAI, 29 September 2011

High prices and economic uncertainty appear to be turning consumers stingy, if not altogether unwilling to spend.

Going by sector analysts and retail companies, spending on discretionary items is definitely shrinking and even items of daily consumption aren’t quite flying off the shelves as they used to. In fact, consumers are increasingly hunting for more value for the price they pay at retail stores.

All this gives reason to believe consumer spending is set to decline in the second half of this calendar year.

“Commodity-led categories like soaps, detergents and tea will see downtrading to cheaper brands. In some other categories, the frequency of purchase will come down or consumers will move towards smaller packs,” said Gautam Duggad, an analyst at Prabhudas Lilladher.

Saugata Gupta, chief executive officer, consumer products, Marico Ltd concurred. “Lack of feel-good factor will result in a cut in discretionary spending. In the past couple of months, inflation pressure has led to a certain softening of discretionary spending.”

Automotive and consumer durable sales have already taken a beating this year, while many organised retail formats are not performing well.

“The moderation in footfalls at retail stores is not as pronounced as during the slowdown of 2008-09, but the kind of upswing in sales that retailers had expected will not be met with as consumers are very careful about how they spend their money,” said Devangshu Dutta, CEO of retail consulting firm Third Eyesight.

Going by sector analysts, though most FMCG categories are still showing healthy volumes, a possible slowdown in consumption cannot be ruled out.

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