Will the ‘Spend without end’ trend continue in 2023 as Lohri-Pongal nears?

Festive season in India is becoming a fast expanding space – from the traditional period of Raksha Bandhan and Onam (in the South) and the Dussehra-Durga Puja-Diwali period, more occasions have been added right from the beginning of the year. The first major festive period of the year is observed during Lohri-Pongal-Makar Sankranti-Magh Bihu in January. This is followed by Republic Day, when we have seen online and offline retail and e-commerce players becoming active. Of late, we have also seen Western festive periods such as Halloween, Thanksgiving, Black Friday and Cyber Monday being converted into sale season in India.

The industry is buoyant after a very encouraging buying period during the festive season in 2022, thanks to positive consumer sentiments. According to economists, the accelerated consumer demand is estimated to provide support to economic growth of nearly 6.5% in the fiscal year, which ends in March. Retail inflation reached 7.79% in April 2022, falling to 7.04% in the month of May and then further dropping to 7.01% in June. Online and offline sales have almost doubled as compared to the pre-Covid period and there has been a rise in discretionary spending.

“Consumption went up substantially. Consumers dipped into their huge savings and used the opening up of the market, as an opportunity to indulge, upgrade and consume to their heart’s content. In many cases, achieving ‘double was no trouble’!” quipped Jagdeep Kapoor, Founder, Chairman, and Managing Director, Samsika Marketing Consultants.

The key categories that saw huge traction included FMCG, consumer electronics, mobile, travel, leisure, home appliances, gold, home décor, health and fitness. Speaking on the categories that did well, Mayank Shah, Senior Category Head at Parle Products, said, “We have had significant sales of larger packs, partly because there was a good amount of rush in modern trade and e-commerce throughout the festive season, and there was also festive buying in terms of gift boxes in which we saw a good increase and demand ramping up. There were also good discounts and offers being run by companies on the larger packs, as most businesses were seeking to capitalize on this festive season. A spike in other categories across the consumer goods vertical was also evident. According to the Deloitte report, consumers’ intent to purchase clothing (13%), electronic and home furnishing (10%), and recreation, entertainment and leisure (13%), indicated a positive spending pattern which was triggered by the festive season.”

Several factors have been responsible for this such as bottled up demand, increase in employment and wages with the recovery of the economy, increase in advertising starting from the festive season to the holiday and wedding season. Online buyers have increased to around 200 million this year, showing the increasing online spending habit of the consumers during the pandemic period.

“Everything exceeded expectations – purchase, consumption, footfalls and of course, spends. It was like a rebirth of the market. In fact, cases of stock outs of brands were very common. But, the spends did not slow down because no one wanted to reduce their ‘share of voice’ and visibility,” said Jagdeep Kapoor.

According to the Federation of Automobiles Dealers Association, the sales of automobiles including that of two wheelers, increased by around 57% during the Navratri period and was around one-fifth greater in comparison to the pre pandemic period in the year 2019. The increase in festive period spends in India comes in the midst of the economic hurdles in other parts of the world, with increasing inflation rates in the wake of the Russia-Ukraine  war and increasing interest rates.

“When compared to 2021, our sales during the festive season have risen this year by 10-12%. We had always seen solid growth and rise in sales YOY during the festive season in the pre-pandemic era, but in 2020 and 2021, we had barely managed to record double digit growth,” said Mayank Shah.

Advertising spends have gone up by around 8-10% to around Rs 25,000 crore-Rs 30,000 crore during this festive period. Besides digital and TV, OOH and print spends have also increased, with television accounting to around 41-43% of the ad spends, digital at around 33-36%, print at around 15-17% and OOH at around 3-3.5% of the ad spends. The festive season was one of the prime motivations for the advertisers for spending.

The Indian ad market is estimated to reach $11.5 billion in the year 2022 from $9.7 billion in 2021. Both GEC ad spends and that of the sports genres is on the rise with events such as FIFA World Cup, T20 World Cup, and multiple reality TV shows. Digital has witnessed significant ad spends from the Tier 2 and Tier 3 cities in India, and businesses are realizing the importance of leveraging the digital platforms in the midst of the worldwide digital transformation.

Commenting on 2022 festive season for brands, Mayank Shah said, “This festive season was indeed an uplifting one for everyone. We witnessed a positive surge in growth and are practically back to pre-pandemic levels this year. This festive season has been quite profitable and successful for many brands, as evidenced by the sharp rise in their sales. This is primarily due to consumers overspending on products after the muted celebrations of the Covid-19 pandemic.” He further added “With high sales, this year’s festive season has been tremendously advantageous for brands. Inspite of concerns over inflation, people went all out with shopping after two years of lockdown and restrained festivities. Consumers were in the mood to rejoice, and we witnessed that in the market when we saw tremendous demand in numerous categories. People were more inclined towards the purchase of discretionary products during the festive season while coming out of the pandemic, according to Deloitte's Global State of Consumer Tracker. The report also states that consumers were willing to increase spending on travel, hotel stays and purchase of new vehicles.”

Jagdeep Kapoor remarked, “‘Spend without end’ was the feeling I got this festive season. Spends were flowing, sales were growing, with no sign of slowing! The ad spends kept pace with consumer spends. With a quest for growth in sales, profit and market share, ad spends went through the roof, because the companies war chests were full, not having spent over the last two years.”

“We have seen more growth in regional platforms in festive over last year versus national spends. Durables, FMCGs, and automobiles contributed major monies during festivals. Spends on discretionary products is going up,” noted Vanita Keswani, CEO, Madison Media Sigma.