Festivities missing from this festival season
Last weekend our team did our annual festival market check. This year, besides the main markets of Delhi, we visited some local markets in predominately lower middle class areas; and some markets in rural areas of North Delhi. We managed to speak with some very large importer and traders of consumer goods; auto dealers, farmers, real estate developers and owners of leased properties. Based on my observations, interactions and information, We would like to share the following feedback with readers:
· The overall demand situation this festival season is materially worse than the last year. It is pertinent to note that the last year was also not good per se.
· A large importer and trader dry fruits, mainly almonds and walnuts, indicated that global dry fruit prices are down over 25-30% as compared to last year. In India despite supply disruptions due to broken logistic chain, the prices are lower as compared to last year. The retail demand for almonds and walnuts has seen sharp rise as these are seen as immunity boosters. However wholesale demand from sweet and confectionary makers is very poor. Overall, he expects 30% lower volumes this festival season.
· A large importer and trader of confectionary, mainly chocolate, lamented both supply and demand issues for poor business. As per him, import of confectionary was greatly restricted due to breakdown in global supply chain and slow clearance of consignments at Indian ports. He cited 3months delay in clearance in his inbound shipments. On demand side, the festival gifting demand is very slow, especially the corporate demand. Retail sale is gradually picking up but still materially lower than last year.
· Two famous sweet shops in Delhi have witnessed gradual pickup in demand in past two weeks. The sales are about 50% lower as compared to last year. The delayed and curtailed marriage season and minimal corporate gift bookings are major sentiment dampeners. They see a definite trend in lower affordability.
· Textile traders, both wholesale and retail, also cited very slow return to normalcy. None is expecting to reach the 2019 level of demand even in 2021. The demand from rural markets in neighboring states is very poor. Shorter marriage season, restrictions on number of guests, poor affordability, slow return of migrant laborers, and high inventory are bothering the textile traders. Most of them are staring at significant inventory write off.
· It is well known that in many communities, the marriages are arranged with a pre-determined budget for the bride side. The people from these communities are indicating payment of more cash & jewelry, higher end automobile and communication devices to compensate for the lower spending on ceremonies.
· Building material and furniture dealers appeared more sanguine about return to normalcy. They are seeing better than expected retail demand for home improvement and replacement. For the wholesale demand, inquiries are good. They hope for better start to 2021.
· Auto demand has picked up well. Two wheelers strong due to non-availability of normal public transport and fear of using public transport. Cars at pre lockdown level which was not great per se. Tractors and SUVs continue to see strong demand, reflecting the faster recovery in rural demand.
· Home decoration item importers and traders are staring at a washout. With little fresh arrival and low inventory, they expect festival sales to be 50-70% lower. Contrary to popular expectation, the demand for Chinese items remains strong.
Marigold flower prices at Rs70-75/kg, are one third of the last year. Even at these prices demand is poor.
· The scene at local markets in lower middle class colonies and slums, is that of despondency. The need for clothing, utensils, and other household items is visible but the demand is lacking due to poor affordability. The markets are crowded as usual but the sale is much less. People are constantly looking for deals to suit their pockets.
· The markets in rural areas are though much better off. The sale is brisk and people are not averse to up-trading.
· The real estate developers and dealers highlighted that the number of inquiries has increased significantly in past one month. These inquiries are however not yet converting into deals. They feel it will pick up strongly once registration offices begin working normally.
· Owners of leased real estate let out as PG accommodation, working women hostel, shops etc indicated significant vacancies. They do not expect normal tenancy at pre lockdown rental to be restored even in 2021.
· Almost everyone complained of poor working capital financing. NBFCs and Private sector banks have materially curtailed working capital and small capex financing due to poor quality or illiquidity of the collateral and tighter credit norms.
· Almost everyone is working with lesser number of workers compared to pre lockdown period. No one indicated returning to normal workforce level in 2021. Most traders are focusing on survival for 2021. Growth does not seem to be a priority for now at least.
· Farmers in Delhi villages were surprisingly well aware of the implications of the latest legislative changes relating to agriculture sector in India. Most of them believed that these changes are structurally positive for the sector; regardless of the noise being made by the opposition parties and some NGOs. (Caveat: The infrastructure, resources and access available to these farmers is very different from an average farmer in the hinterland. Their opinion may therefore not be reflective of the mood in general.)
· Most people I interacted with and observed seem to have accepted Covid-19 as an uninvited guest in their house which cannot be wished away. They have learned to live with it and are willing to suffer some losses (monetary and human life) for their freedom to work and move around. The public campaign for safety against corona is totally ineffective in most cases and counterproductive in many cases. For example to avoid listening to Corona caution played before each phone call, most of the people prefer to use Whatsapp call now. Inappropriate, dirty and unhygienic face masks are hanged around chin to avoid monetary fines and harassment by authorities. Hand sanitizers have vanished from most public offices. No water is available in the tanks placed in public places for hand washing. No one could care less to discuss whether the government handled the pandemic efficiently. They just want to move on to lead their normal life.