India may be in the throes of food inflation which may have reined in discretionary spending, but Indians have been bitten by the travel bug that will sustain the boom seen by the aviation and hospitality sectors, through the current fiscal year.
Throwing light on the rather paradoxical behaviour of the Indian consumer, “Future of Retail” - a report by the multinational audit and consultancy firm, Deloitte, pointed out that Indians have not lost their exuberance for travel even two years since the Covid restrictions were eased off.
This is reflected in the numbers which show that hotel occupancy has only grown from from 66-68 per cent in January 2024 to 72-74 per cent in February 2024, driven by both business and leisure travellers. Likewise, domestic air passenger traffic is estimated to have grown by 13 per cent in FY 24. This has also propelled the luggage industry, with leading companies in the segment forecasting double-digit growth rates for the last quarter of FY 24.
Another segment that has been experiencing remarkable growth is the high-end luxury products and jewellery, reflecting the rise in the affluent class, less prone to price sensitivity and economic downturns. In fact, the report found 6.1per cent rise in ultra-high-networth-individuals (UHNIs), behind this trend.
On the other end of the spectrum, food inflation, which saw vegetable prices rise by 30 per cent, cost of pulses by 18.9 per cent and spices by 13.5 per cent year-on-year (YoY), in February 2024, should have impaired discretionary spending. Yet, the report finds only the lifestyle category showing subdued growth in the same period. Interestingly, it blames this on higher spending on the segment in the previous two years and extra spending on other discretionary buys.
However, here too, the report found the premium products among consumer durables and electronics showing greater growth as compared to entry less or mass products. Overall, in the first half of FY24, sales of television improved by 18 per cent, refrigerators by 5 per cent, air conditioners by 35 per cent and washing machines by 20 per cent, before tapering down as the fiscal year progressed.
As per the report, the consumers have helped all retail formats to thrive, be it exclusive brand outlets, multi-brand outlets, large format stores, e-commerce, quick commerce or direct-to-consumer websites/apps.
The report estimated that India will lead global e-commerce development between 2023 and 2027 with a compound annual growth rate of 14.1per cent. With 880 million internet users, India is the world's second-largest internet market. The report has forecast that Innovations in payment systems and logistics will further streamline the e-commerce experience.
Going forward, it is a challenge to build a profitable business model amidst pricing pressures from different retail formats with varying commission structures, Anand Ramanathan, Consumer Products and Retail Sector Leader, Deloitte India told DH.
His colleague Praveen Govindu, Partner, Deloitte India underscored the need to upskill and cross-skill people's talent in retail to adapt to its evolution from being product-centric to getting service-oriented, focusing on customer experience, storytelling, and articulation.