Five out of ten urban consumers to cut spending: EY report

At least five out of 10 urban consumers will continue to cut back on spending as economic recovery and market normalisation are unlikely before March next year, according to a report by Ernst & Young, based on global trends and primary research data. The report was shared exclusively with ET.

Most consumers will trade down towards value brands, over-invest in health and safety products, and fundamentally change their buying patterns towards home delivery and e-commerce, it said.

“Indian consumer products companies face a multitude of challenges...coupled with the radically changing consumer behaviour. Companies must formulate strategies including re-evaluating brand portfolio, expanding relationships with third-party e-commerce platforms, exploring shared warehousing and be ready to respond to newer habits that consumers will develop after living through the pandemic,” Pinakiranjan Mishra, partner at EY India said.

The lockdown phase of the pandemic has seen several consumer brands, including Britannia, ITC, HUL, ITC, Vishal Megamart, Spencers, forge opportunistic partnerships with online players like Dunzo, Swiggy, and Flipkart, but this strategy will need to have a long-term mindset, according to analysts.

"The ability of consumer brands to digitize fast, optimize the use of data analytics, build a more agile supply chain and inventory controls, will be the biggest differentiator in a post-pandemic world," according to Mishra.

At the same time, Flipkart, Amazon, Grofers and BigBasket, have also said that consumer buying patterns have gravitated towards affordable brands compared to months earlier, a trend that is unlikely to reverse as the lockdown gradually lifts.

While 39% of consumers will be frugal and make cuts in future, another 11% will be cautiously extravagant, which means they will pay a premium but only for certain products. Another 38% of the segment would be spending much more across categories as the economy opens up, the EY report said.