Nov 25, 2020
Was it really a Happy Diwali for Indian SMEs?

In India, end of monsoon marks the arrival of the festive season with back to back festivals from October to January. The peak of the season is Diwali which is traditionally a period of consumption boom as consumers tend to increase spends, while brands scramble to catch their attention. Even this year, the festival of lights brought happiness, laughter, and the feeling of togetherness, but the celebrations were a lot different and a tad scaled down.

Undoubtedly, the Coronavirus pandemic has taken the whole nation by storm. For most of us, the Coronavirus impact has been arguably the most significant and dramatic experience of our lives. It has disrupted lives in many ways - people are living differently, working differently, thinking differently and even buying differently. Consequently, products and brands are getting seen through a completely new lens. It has created a new set of challenges for MSMEs on an almost unprecedented scale andthe knock-on effects of the virus are seemingly endless.

While the first half of the year was quite unusual, Diwali brought an opportunity for brands to reconnect with their consumers.They reminded the customers to help bring light and joy not just inside their homes but also outside their lives by sharing a little part of their happiness. After all, that is what festivals are all about.The good part was that Make in India was a major winner as consumers preferred domestic products instead of imported products from China. According to Confederation of All India Traders (CAIT), it has recorded sales of around Rs 72,000 crore this year on Diwali across major markets in the county, at the same timeChina lost approximately Rs 40,000 crore in business.In general, coronavirus did not hamper India's festive spirit instead it just shifted priorities.

Many people believed getting things delivered at home is the safest and the most convenient way of shopping at these times and therefore, the number of Online shoppers grew 32.8%, higher than the pre-Covid projection of 29.7%.Thefear of contracting the virus during shopping trips shifted the customer spending to online channels and caused sharp decline in Offline Sales which declined by 1.9% as against a pre-Covid estimate of 9.4% growth, according to data analytics firm GlobalData.E-commerce behemoths- Amazon and Flipkarttogether raked in $3.5 billion (about Rs 26,000 crore) during the first four days of their flagship festive season sales events.

Sale of apparel, smartphones, electronics, and consumer products grew about 7-9% during this time of the year.The maximum discounts were offered in categories that had seen inventories pile up such as high-end smartphones, fashion, and furniture. For categories like televisions and home appliances, the discounts have, however, been much lower due to stock shortages.On Snapdeal, the home products category selling kitchen appliances, linen, homedecor and LED lights grew 30% over last year, the value-focused e-commerce platform said, overtaking fashion, traditionally the top-performer during the sales period.

Brands, including Samsung, Apple, LG, and Xiaomi, had seen sales increase by 80-100% across smartphones and consumer durables through e-commerce channels during Diwali sales as compared to the same period last year.LG saw a 100% growth in business, led by addition of first-time buyers from tier 2 and 3 towns, and increased demand for premium products across categories, said Deepak Taneja, its India head of online business to ET.On the other hand, brands in the smartphone space, like Honor ,Huawei, and Asus, and TV makers like BPL and Vu which used to offer big discounts during the festive season to push up sales volumes missed action this year, industry executives said, alluding to supply chain issues or import restrictions from countries like China.

Long-tail categories, including home and home furnishings, showed improvements as people spent more time at home.Big ticket, one-time purchases didextremely well as a lot of people have also moved back to their hometowns and are buying more products across several categories for their family.

Diwali also brought some good news for the tourism sector.According to a report by Goibibo,"Travellers including young couples and group of friends took leisure trips during Diwali break. Over 50 per cent of the reservations were made for premium or mid-premium hotel properties."The festive season witnessed a spike in demand with more holiday-goers showing zeal to plan their trip with their families stated Sabina Chopra to Hindustan Times, co-founder and COO, Corporate Travel & Head Industry Relations, Yatra.com.

For the Indian film industry, the Diwali release is indeed one of the high points of the year, when big stars and big releases line up to attract moviegoers inundated with their Diwali bonuses and festive good cheer. This year OTT platforms stepped in but unlike the previous year, there were no big releases.Another casualty was the Firecracker sellers who suffered a loss of around Rs 10,000 crore due to the ban on the sale of firecrackers in several states to helpcurb pollution.

At Finovate Capital, we are looking at the silver lining and are actively focusing ion supporting SMEs in sectors that are showing a recovery. While being cautiously optimistic, we continue to monitor the consumer sentiment for these sectors actively to get insights into the post Diwali behaviour. We are hoping that India sustains these green shoots of optimism, and eventually unlocks more sectors that we can support with working capital.To conclude, the overall market sentiment was a tad upbeat during Diwali 2020. Though the markets were alive, the festive buzz was missing leaving Indian SMEs with mixed feelings.