If you have to look at any of the past lockdowns due to viral outbreaks, it is quite clear that it generally takes around a quarter’s time for the markets to get into business as usual. Although, these previous outbreaks were limited in their geographical footprint and hence they were limited to certain cities or countries, this time it’s different!
We are talking about a worldwide pandemic that has spread across almost each and every country, and each and every market including retail. The only survivors who are barely hanging by their fingernails are the FMCG, specially the food and grocery section in which they themselves are struggling with limited staffing, restricted transportation and absolutely broken supply chain. When we started working on this blog, we were hoping to find data that would give us some insight into how each and every market reacted to all of the past pandemics. We were wrong. What we did find were repeated references to the SARS outbreak of November 2002. Just to give you a little background of the same, similar to the Covid 19 breakout, even SARS originated in China way back in November of 2002, but it was not reported to the W.H.O. until the February of next year.
Between February and March, the virus managed to reach Germany, UK, the US, amongst many others. The total number of cases reached 9000 and around 800 people succumbed to death. Eventually, W.H.O. declared the outbreak to be contained by 5th of July. That’s more than eight months of either partial or complete lockdowns and economic disturbances. Just this scale of the outbreak caused the Chinese retail market’s growth to almost half during the same period. This was during the Chinese GDPs upswing. Some estimates show that China’s growth could have been half to one percentage points higher had it not been for the SARS disruptions. It is also worth noting that this was the year that the US attacked Iraq and got hold of Saddam Hussein. So while the world was recovering with SARS, it was also very much distracted with all of the world events. To us right now, 9000 cases and 800, that’s kind of seem pale to the numbers that we are used to.
As of 20th April, we have registered more than 23 lakh cases and 1.6 lakh deaths globally. And the worst part is that all of these cases are now distributed across the globe among the largest nations in terms of geography and economy. What this is meaning to be is that as time goes by, this virus is bringing us dangerously close to a recession, if not a depression. Due to the expansive coverage of this virus, not only have the manufacturing hubs being disrupted, but also the supply chains are completely obliterated. This chain of action is leading to a ripple effect across industries, which is why this kind of pandemic is not even close to anything that we have seen or experienced, even on a miniature scale. Which is why I feel that the comparison to SARS might give us a small window into the way the markets are going to recover, but that is nothing close to what is really going to happen right now. Model example for the way industries might recover slowly is the FMCG itself. These corporations are increasingly understanding the importance of local sourcing, e-commerce enablement, omnichannel and community relationships.
We are looking forward to look at each of these aspects in detail in our future blogs. So you might consider bookmarking our website. From what we see right now, the worst hit strata of the society is of course, the lower or the working class. The lower class or the daily wage earners are hardly the target market for any of the retailers or even when it comes to taxes for the government. Also side note did you know that the Indian middle class consists of just around 14 million people? That is around 3% of the entire population of India? That’s right. So instinctively, this 40 million or 4 crores of population is the de facto target market for any of the established brands with urban or suburban physical presence. Now, while it’s true that most name brands are trying very hard not to cut any salaries during this pandemic, but I have also personally seen some small and local brands cutting salaries in tranches wherein the co-founders or the directors themselves are not taking any pay at all.
Now, while this does help in the survival, but at the same time it is also decreasing the purchasing power of your target market, meaning people will not only be mentally exhausted once they’re out of the lockdown, but they will also be cash trapped. It will be difficult for humans to shake off the habit of purchasing only essential items, or in some cases. May be forced to do so by their wallets. We believe that during this recovery period, the true value of a particular product will be reevaluated in the consumer psyche. Purchases would probably be more value driven and not instinct driven. Now, don’t get me wrong. Just because something is valued does not mean that people will actually bank towards just buying something cheap. No, I mean we have already seen how a normal sanitizer used to be at the start of the lockdown and how we got literally watered down versions by the end of the first 15 days. And that kind of an experience is not always the most ideal. No matter what your buying power is due to these micro experiences during the lockdown period, we feel that more and more people would be banking towards the quality and longevity part of the purchases, which means that as brands, we now need to focus more on the need part of the product then the want.
This small exercise may be able to reaffirm the purchases into consumers minds as not being wasteful, and more being towards the need factor. In other cases, especially luxury products and lifestyle experiences, you can focus on forgetting the lockdown part of it all, but you might want to be careful with it because at no point do you want to actually trigger the PTSD of the entire incident. This will have long term effects on your brand perception. Make sure that your brand doesn’t get too desperate trying to get on the curfew, quarantine, or lockdown bandwagon and end up leaving like a bad taste in the consumers minds.
Just a quick tip since consumers have actually dipped into their savings, I think it’s time that you reconnect with your banker to get credit card offers with zero interest EMIs for them, in order to encourage some more purchases. In addition, if you could get them zero interest EMIs even on the debit cards, I think that would be the best thing that you could do for your business and to give the jumpstart that you, as well as the consumers need in this slightly depressed market. I hope it helps. Take care. Stay home and stay safe.
