India’s economy is in focus globally, and is also at an inflection point.

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Oil shocks, financial market crashes, localised wars and even medical emergencies like SARS pale when compared to the speed and the scale of the mayhem created by SARS-CoV-2. In recent decades the world has become far more interconnected through travel and trade, so the viral disease – medical and economic – now spreads faster than ever. Airlines carrying business and leisure-travellers have also quickly carried the virus. Businesses benefitting from lower costs and global scale are today infected deeply due to the concentration of manufacturing and trade.

A common defensive action worldwide is the lock-down of cities to slow community transmission (something that, ironically, the World Health Organization was denying as late as mid-January). The Indian government implemented a full-scale 3-week national lockdown from March 25. The suddenness of this decision took most businesses by surprise, but quick action to ensure physical distancing was critical.

Clearly consumer businesses are hit hard. If we stay home, many “needs” disappear; among them entertainment, eating out, and buying products related to socializing. Even grocery shopping drops; when you’re not strolling through the supermarket, the attention is focussed on “needs”, not “wants”. A travel ban means no sales at airport and railway kiosks, but also no commute to the airport and station which, in turn means that the businesses that support taxi drivers’ daily needs are hit.

Responses vary, but cash is king! US retailers have wrangled aid and tax breaks of potentially hundreds of billions of dollars, as part of a US$2 trillion stimulus. A British retailer is filing for administration to avoid threats of legal action, and has asked landlords for a 5-month retail holiday. Several western apparel retailers are cancelling orders, even with plaintive appeals from supplier countries such as Bangladesh and India. In India, large corporate retailers are negotiating rental waivers for the lockdown period or longer. Many retailers are bloated with excess inventory and, with lost weeks of sales, have started cancelling orders with their suppliers citing “force majeure”. Marketing spends have been hit. (As an aside, will “viral marketing” ever be the same?)

On the upside are interesting collaborations and shifts emerging. In the USA, Jo-Ann Stores is supplying fabric and materials to be made up into masks and hospital gowns at retailer Nieman Marcus’ alteration facilities. LVMH is converting its French cosmetics factories into hand sanitizer production units for hospitals, and American distilleries are giving away their alcohol-based solutions. In India, hospitality groups are providing quarantine facilities at their empty hotels. Zomato and Swiggy are partnering to deliver orders booked by both online and offline retailers, who are also partnering between themselves, in an unprecedented wave of coopetition. Ecommerce and home delivery models are getting a totally unexpected boost due to quarantine conditions.

Life-after-lockdown won’t go back to “normal”. People will remain concerned about physical exposure and are unlikely to want to spend long periods of time in crowds, so entertainment venues and restaurants will suffer for several weeks or months even after restrictions are lifted, as will malls and large-format stores where families can spend long periods of time.

The second major concern will be income-insecurity for a large portion of the consuming population. The frequency and value of discretionary purchases – offline and online – will remain subdued for months including entertainment, eating-out and ordering-in, fashion, home and lifestyle products, electronics and durables.

The saving grace is that for a large portion of India, the Dusshera-Deepavali season and weddings provide a huge boost, and that could still float some boats in the second half of this year. Health and wellness related products and services would also benefit, at least in the short term. So 2020 may not be a complete washout.

So, what now?

Retailers and suppliers both need to start seriously questioning whether they are valuable to their customer or a replaceable commodity, and crystallise the value proposition: what is it that the customer values, and why? Business expansion, rationalised in 2009-10, had also started going haywire recently. It is again time to focus on product line viability and store productivity, and be clear-minded about the units to be retained.

Someone once said, never let a good crisis be wasted.

This is a historical turning point. It should be a time of reflection, reinvention, rejuvenation. It would be a shame if we fail to use it to create new life-patterns, social constructs, business models and economic paradigms.

(This article was published in the Financial Express under the headline “As Consumer businesses take a hard hit, time for retailers to reflect and reinvent”. 

B2B event companies don’t often think about consumer spending as something directly relevant to their business. However, consumer trends can allow industry event and exhibition organizers to get an advance view of where the opportunities can lie in the future. In this Keynote address at UFI’s Asia Open Seminar in Bangalore, Devangshu Dutta shares his views about the key consumer trends in India, and the implications for the events and exhibitions industry.

(This presentation was delivered on 6 March 2014 in Bangalore, India.)

About six years ago, Kishore Biyani of the Future Group and I were discussing a presentation I had delivered at CII’s National Retail Summit, during which I had mentioned “Purushartha”. This millennia-old living philosophy takes a balanced view of life. Aspects related to consumption are two of its major components including Artha (wealth, commerce) and Kama (sensory pleasure). Dharma (righteousness in society and individual life) and Moksha (liberation) are the other two. My point was that most “traditionalists” and certainly policy-makers in the country have tended to view the retail sector negatively or dismissively.

Of course, at that time most businesses themselves hardly demonstrated any sense of balance, let alone any connection with the reality of India, whether in terms of the consumer’s needs, or in terms of the operating environment in the country. By and large the theme was: push explosive growth, margins be damned; promote “westernised” consumption aspirations, regardless of capability to fulfil those aspirations. Conversely, the four years after the global financial crisis in 2008 have been possibly the worst that the retail sector has faced in recent decades, whether in terms of total losses or the quantum of lost growth opportunity, and business sentiment has swung to the other extreme.

On its part the government has not done much to encourage the sector. After several policy flip-flops, approving investment proposals of some high-profile global brands is a positive signal to the outside world, but none of them so far have unlocked or grown the value of Indian retail businesses in any significant way. There is no doubt that foreign brands and retailers can and should be an integral part of India’s developing retail landscape, but they cannot be the prime drivers of the retail business in India or the saviours of its supply chain. That vision and energy needs to come from within, and the resultant growth will benefit all – Indian and international companies, consumers and the government.

From the ancient treatise Arthashastra, Professor Thomas Trautman quotes the concept of concept of “shad-bhaag” (the state having one-sixth share) as “entrepreneurial” because it has a sense of mutual interest, promoting production and the growth of everyone’s share. This spirit of co-ownership and entrepreneurial participation is largely missing in today’s governance. Direct and indirect taxation remains a complex net for all but the savviest evaders, not to mention all the other regulation and approvals that each business – large or small – needs to comply with.

Somehow the mandarins don’t seem to see that the retail business is a platform for the multi-fold growth of new enterprise, that it is a vehicle for urban renewal, and that it can help enormously in channelling the economy into visible taxable revenues. It also seems to escape them that the biggest drivers for this growth and change will typically be small entrepreneurial businesses, who themselves can only thrive in a simpler and non-adversarial regulatory environment.

The wishlist is not large, but needs some bold steps: enact policies that free up unproductive real estate to reduce costs, reduce regulatory hurdles, remove tax traps, reduce import duties. For instance, one estimate for illegal imports in watches is 75 per cent, where the beneficiaries are the smugglers and those who oil the wheels for them, not the consumer, not the brands or retailers, not the revenue department.

It is an important budget year politically due to impending elections but also economically due to the dismal GDP growth. The animal spirits that the Prime Minister has referred to in the recent past are more in the nature of a “bheegi billi” right now rather than a roaring tiger. The caged golden bird will not lay any golden eggs. Will the Finance Minister choose to crack the whip this year, or cut the chains? We watch with bated breath.

(An edited version of this piece was published as in Daily News & Analysis – DNA on 19 February 2012, under the title “Foreign brands can’t be prime drivers of retail”.)

An article by Shailesh Dobhal and Bhanu Pande in The Economic Times today refers to a growing inequality of income in India. (“India Rising, Bharat awaits for the trickle to turn flood”)

The change for all of urban India is reported to be 15%, which is quite visible, especially in the larger cities where the change is possibly greater. What is worrying is that even in rural India the change is 13%.

And these figures are for 2004-05, from a report authored by NCAER’s Dr. Rajesh Shukla. My guess is that the difference would be even higher now, 3 years later.

Obviously at a personal level this should concern all. Each person is part of the ecosystem – there is only so long one can hide in ivory towers behind tall walls and locked gates. We are most secure and content when our neighbour is secure and content. Stark disparities that grow even more stark are not a way to develop security.

However, one might ask, why should business managers in consumer goods and retail sectors concern themselves with this phenomenon from a business perspective?

The answer should be self-evident – as shared in a presentation at the Confederation of Indian Industry (CII) National Retail Summit in 2006 – a retailer can grow its market by encouraging the development of smaller enterprises, especially those in lower income areas. As these enterprises grow, so does prosperity and available income.

“Grow your wealth by growing someone else’s.” That may seem like an odd notion. But think – is it so odd?

In May 2007 Arun Maira, Chairman of the Boston Consulting Group’s business in India, presented scenarios that were developed in an exercise a few years ago, about the possible developmental trajectories of India. These include:

• “Atakta Bharat (India Stuck)” described as ‘Buffalos Wallowing’,

• “Bollyworld” (the crazy mix of glamour and tragedy) described in two parts as ‘Peacocks Strutting, Birds Scrambling’ and ‘Tigers Growling, Wolves Prowling’ and

• “Pahale India” (India First), subtitled Fireflies Arising.

Here’s his very thought-provoking article (India: Many Million Fireflies Now) that is well worth a read.