A lot of us love to toss the GDP acronym around in our conversations. Literally everything we talk about in economic terms seems to somehow find its way to the GDP as a metric of comparison that seems to measure just about everything in an all-embracing manner. The monetary value of goods and services made within a country during a year seems to define the economic efforts of many countries. As we look around at the world, in sheer GDP terms, the pecking order of nations is clear. The US ($20.4 trillion), China ($14 trillion) and Japan ($5.1 trillion) seem to be the top three.
As I think GDP, I cannot help imagine that the GDP of every nation is bound to contract in these pandemic times. This is true for every nation, but let’s think this out for India. A lockdown—a series of lockdowns, in fact, ranging from 1.0 to 5.0—has the entire economy on the back foot. The celebratory economy is dead and what we have is an economy on tenterhooks. An economy that is just about focusing on what is basic.
In the category of products, the biscuit is on a boom, the ready-to-eat category is doing well and products that talk hygiene and immunity are doing very well. As you climb the value chain in the category of consumption, however, there is trouble. There is lesser and lesser consumer interest for now. The consumer is on wait-and-watch mode. In the category of services, telecom is on a roll for once. Bandwidth is in demand as people are locked in.
The only way to talk to anyone is on the phone, and the only way to work is also through the crutch of bandwidth and what it offers in terms of work-from-home or work-from-anywhere solutions. Many categories that offer in-home solutions are doing well. Netflix, Amazon Prime, ALTBalaji and more are on a roll. Digital services of every kind are in zoom mode.
The point is clear. As we take tentative steps into the economy of the present, the caution signs are all around. This is a cautionary economy for now. An economy that is driven by the basics more than by the non-basics. An economy that is seriously thinking twice when it comes to making investments into products, services, homes and mutual funds alike.
An ongoing panel research exercise of mine, which covers a rather moderate sample size of 9,160 across the metros and the Tier 2, 3 and 4 towns of India, reveals a clear wait-and-watch mode at play. There is a postponement of purchase in every one of the 18 categories of typical buys we surveyed. Worse still, there is a reduction of consumption quantity as well across 39% of homes. In the category of soaps, there is a slide down to the middle-common-denominator brand from the premium category (87.1%). The loss of the premium brand has been the gain of the middle and bottom rung brands in this very critical category of hygiene. Remember, the soap has been defined to be the one thing that the coronavirus actually fears.
There is a bigger thought that has emerged in our study. Hard-working brands in the category of soaps at the bottom and middle-end are considered more efficacious in topping the hygiene game. This means that a Dettol and a Lifebuoy are considered tough fighters as opposed to brands at the cosmetic end of the soap category at the premium top end. The imagery that works in the minds of consumers today seems to be the imagery of brands that are more functional in nature than premium brands that have built cosmetic castles.
Let’s peep into the category of services of the domestic use kind. Homes in the biggest of metros have let go of the luxury of their domestic help. Cooks, maidservants, car cleaners and home masseurs alike have lost their livelihoods in the tumult of the pandemic. This is savings in terms of money at the end of the user, and loss of income for the service provider. Service category losses are even worse. A service category loss is a forever loss.
An airline seat that went empty and the months that your maidservant lost without a salary are forever losses to the company or individual for a start, and the economy in the end. We have shrunk the economy, not by choice, but by the push and shove of the pandemic. We are using a lot more soap, but cheaper brands. We are eating a lot more biscuits, but these are comfort-food brands that are more of a “Parle G” than a premium “Hide & Seek”. The current fear economy we live in is terrible for the GDP. The premiums are gone, as are premium products that caused better margins to manufacturers and the entire ecosystem of stakeholders that depended on it. And until there is a revival of sentiment, the GDP numbers in terms of value are shrunk for now.
Less money in the hands of all is nudging the sentiment that a rupee saved is a rupee earned. A car not bought for Rs 9 lakh is an earning of Rs 9 lakh for now. As every home becomes ‘Atmanirbhar’ today with their maid servants, cooks and car cleaners off, there sure is a saving every home is making. This saving is killing the economy at the end of the receiver. The end point is a real one. A rosy future in economic terms makes people buy. A glum one makes people save. The sad point is that when people save, the economy shrinks.
Harish Bijoor
Brand Guru & Founder, Harish Bijoor Consults
(harishbijoor@hotmail.com)