Festival Spending Study: With 100% improvement in consumer sentiment in 4 months, 3 in 5 Indian households will spend this festive season; Budget and Safety to be key criteria

October 1, 2021, New Delhi: The major festive season commences in India in the months of October and November bringing with it the cheer of high spirit and positive sentiment – with people prepping up their homes for Durga Puja, Dussehra and Diwali, buying various discretionary items, gifting families and friends. In the aftermath of the 4 months of the brutal 2nd wave of the COVID-19 outbreak, citizens across the country have started moving more freely given that most public places from shops, hotels, malls, markets to parks and religious places are now open. During these festive months, Indians usually spend on major purchases from making big-ticket purchases such as smartphones & consumer electronics & whitegoods to fashion and beauty-related products, along with festive foods & groceries, and a festival or pooja-related products, to name a few categories.

While some companies and retail consultants have given their estimates on what they expect to see, the one question in everyone’s mind is: “What is it that the consumer is going to do?” LocalCircles reaches out to consumers 2-3 times a year to understand their pulse via its “Mood of the Consumer” survey. The survey, referred to by various Government and industry organisation, gives a glimpse of the current sentiment of consumers. The September-October survey done ahead of the festive season focusses on capturing what percentage of household consumers are likely to spend during the season, what is the important criteria for them while shopping, and categories of products that they are likely to spend on. Also, with rapidly growing digital payments, the survey tracks what percentage of consumers will use it as their primary payment mechanism. In addition, with the pandemic still being a reality and many people still being careful about their social interactions, the survey seeks to find out how gifting is likely to take place. The study received over 115,000 responses from over 38,000 households located across 396 districts of India. 63% respondents were men while 37% respondents were women. 44% respondents were from Metros/tier 1 districts, 31% from tier 2 and 25% respondents were from tier 3, 4 and rural districts.

60% households will spend during the festive season this year

The first question in the survey sought to find on an aggregate basis the percentage of households who would be shopping during the upcoming festive season. In response, 60% of the households surveyed said “Yes”, and 40% said “No”. This question in the survey received 13,300 responses.

The above finding indicates that there has been a strong improvement in consumer sentiment from May 2021 when only 30% households in the LocalCircles survey had indicated that they plan to make discretionary purchases in the next 12 months. With 60% households now planning to spend during the festive season, it indicates that the economic uncertainty that was prevailing in May at the peak of 2nd COVID wave has greatly reduced.

100% rise in consumer sentiment in 4 months with 60% households now planning to spend this festive season

A response to the similar survey by LocalCircles published in May 2021 had indicated that 30% of households planning to spend, which has increased to 60% in the September 2021 survey. This indicates that there has been 100% rise in consumers sentiment in 4 months with 60% of households now planning to spend this festive season.

“Budget” and “Safety” to be top criteria for households for their festive season shopping this year

The way Indian households’ shop and purchase has significantly changed in the last 18 months of the COVID pandemic. With markets completely shut during the March – May 2020 lockdown, many consumers took to digital channels like eCommerce platforms and websites, coordinating with local stores via Whatsapp and phone and making home deliveries. Many started using digital payments in lieu of cash due to the fear of infection and took “no-contact” deliveries. Though physical stores resumed operations post the 1st lockdown and again after the 2nd lockdown this year, the way many consumers go about shopping has changed permanently. Also, with the pandemic, a set of households have been impacted financially due to loss of a job or reduction in earnings. Then there have been others where 1 or more family members experienced COVID and its financial burden.

The following question in the survey asked households about the most important criteria when shopping during the upcoming festive season. In response, 18% of households said “convenience” will be their top criteria for shopping this festive season. 35% said it will be “budget/value”, another 35% said “safety”, 10% said “selection or range”, and 2% cited “other aspects”. On an aggregate basis, “budget/value” and “safety” are likely to be top criteria for households shopping for festive season this year. This question in the survey received 7,980 responses.

The results of this question clearly indicate that for many households, budget/value will be the primary focus while for several others safety will be of paramount importance. Though COVID cases have reduced in most parts of India, with what India experienced in March this year and what countries from around the world are experiencing, for many people shopping with safety continues to be a top priority.

49% of households spending this festive season will only shop where they get value

Given the focus on maximising value and staying within a planned budget for their festive shopping this year, the following question asked households, “When you shop for this year’s festive season and if something you need to purchase is selling a Maximum Retail Price (MRP), will you be buying that product?” In response, 16% of households said “Yes” they will buy, and 49% said “No”, and 35% said “may be/can’t say”. This question in the survey received 9,269 responses.

This finding is of utmost importance as it indicates that 1 in 2 Indian households are value-conscious this year that for them it is a must that they get maximum value when they are spending. This means that whether it is retail stores, local markets or online platforms, they must offer their best possible price to the consumer to get their business.

52% of households that will shop this festive season are likely to do so by ordering online and via local stores for home delivery

One of the big changes post-COVID has been the rise in home delivery of goods, whether purchased from eCommerce platforms, local websites/apps or from local stores via Whatsapp or over the phone. A set of households in the country have completely taken to home delivery to get almost everything that they need. This trend has led to a rise amongst many retail and local stores to come online, either via eCommerce platforms or by starting their own website/app and integrating it with a payment gateway making it easier for consumers to order.

The next question in the survey focussed on understanding how households would purchase the majority of items they need for this festive season. In response, 40% of them said they “would like to visit the stores or market and buy”, 13% said they “would like to have the stores to have their catalogue online and order for delivery”, and 39% said they “would like to place orders via online sites or apps”. 8% couldn’t say. On an aggregate basis, 52% of households are likely to do their festive season shopping this year via ordering & home delivery while 40% are likely to do so by visiting physical stores and markets. This question in the survey received 9,381 responses.

For those making big-ticket purchases this festive season, smartphones and consumer electronics likely to be the top favourite category

One of the key questions that has been on the mind of many industry analysts and brands is what are the big-ticket items households are likely to spend on this festive season. When LocalCircles reached out to those planning to spend this festive season and asked about all the big ticket purchases they are likely to make, it found out that 33% of households will buy “(1) smartphones & consumers electronics such as mobile, tablet, laptop, printers, router, other electronics”, 15% will buy “(2) white goods and appliances such as AC, heater, vacuum cleaner, TV, fridge, air purifiers”, and another 15% will buy “(3) home renovation like furniture, decorative, furnishing, paints, sanitaryware, lighting”. Breaking down the poll, 11% said they will buy “1 & 3” categories of big-ticket purchase, another 11% will make all “1, 2 & 3” purchases this festive season. 15% of households couldn’t say. This means that for those making big-ticket purchases this festive season, smartphones and consumer electronics are likely to be favourite categories. This question in the survey received 9,325 responses.

55% of those making big-ticket purchases this festive season likely to spend on the smartphones and consumer electronics category

If choices made by households who are likely to shop for big ticket items this festive season are evaluated in the order of priority, it was found out that 55% will buy “smartphones & consumers electronics such as mobile, tablet, laptop, printers, router, other electronics”, 37% will buy “home renovation products like furniture, decorative, furnishing, paints, sanitaryware, lighting”, and 26% will buy “white goods and appliances such as AC, heater, vacuum cleaner, TV, fridge, air purifiers”.

With many people extensively using their smartphones and other consumer electronics during the pandemic and many households realising the need to upgrade one or more devices, it is not a surprise that this sector will see strong consumer interest. With COVID cases down, some households have taken up home renovation and upgrade work as well per inputs received, and hence 37% of those spending in the big-ticket category are likely to spend in the home upgrade and furnishing category.

Dry fruits, traditional sweets, bakery products & chocolates likely to be top category of consumer spending among food and groceries this festive season

One of the top categories that households spend on during the festive season is festive foods like dry fruits, traditional sweets, chocolates and off late even more bakery products. When households were asked about what all they are likely to purchase for the festive season, it was found that 9% will buy “(1) special groceries and fruits”, 34% will buy “(2) dry fruits, traditional sweets, bakery products, chocolates”, and 6% said “(3) gourmet foods and beverages”. Breaking down the poll, 17% said they will purchase “1 & 2” categories of food and grocery items this festive season, 6% will buy “2 & 3”, and 15% will buy all “1, 2 & 3” categories of items. 13% of consumers couldn’t say. This means that dry fruits, traditional sweets, bakery products and chocolates are likely to be top category of consumers spending among food and groceries this festive season. This question in the survey received 8,982 responses.

72% of those spending on food and groceries this festive season likely to make purchases in the dry fruits, traditional sweets, bakery products & chocolates categories

If we are to add all households that are likely to spend in each category this festive season, it was found out that 72% will spend in the “dry fruits, traditional sweets, bakery products, chocolates” category, 41% will spend in the “special groceries and fruits”, and 27% will spend in the “gourmet foods and beverages” category.

For those purchasing beauty and fashion products this festive season, apparel/clothes likely to be the favourite category

Buying new apparel during the festive season has been a long-standing tradition in many parts of India. In many middle-class homes in tier 2 & 3 towns, it is the festive season when once a year clothes shopping takes place. Many also spend on beauty products and other fashion accessories during this time of the year as families and friends dress up and meet to celebrate the festivals. The following question asked households shopping during this festive season about the different categories within beauty and fashion products that they plan to spend on this festive season. Per response received, it was found that 40% will purchase “apparel/clothes”, 7% will buy “cosmetics and fragrances”, and 3% will buy “shoes, bags, other accessories”. Breaking down the poll, 10% said they will purchase “1 & 3” categories of beauty and fashion products this festive season, while 17% will purchase all “1, 2 & 3” products. 23% of households couldn’t say. This question in the survey received 9,006 responses.

67% of those likely to spend on the beauty and fashion category this festive season likely to spend on apparel/clothes

Further, if reasons given by households are evaluated in the order of priority, 67% are likely to purchase “apparel or clothes”, 30% will buy “shoes, bags, other accessories”, and 24% will buy “cosmetics and fragrances” this festive season. It must be noted that 17% of the households spending this festive season will spend on all the three categories of apparel/clothes, shoes/bags/accessories as well as cosmetics and fragrances.

For those spending on festival related products this year, diyas/tealight candles/pooja supplies to be the favourite category

Almost all homes in most parts of India are independent of their financial status, light diyas/candles on Diwali and many put lights on their home and some even decorate them with flowers and rangolis. Many buy these products locally in the local markets, haats or melas and since the pandemic began, now some are even buying these items online. The next question asked households about the categories of festival related products they are likely to spend are buying this festive season. In response, it was found that 6% will buy “(1) flowers,”, 27% will buy “(2) diyas/tealight candles/pooja supplies”, and 5% said “(3) lighting and lamps”. Breaking down the poll, 18% said they will purchase “1 &2” categories of festival related products, 10% said “2 & 3”, 3% said “1 & 3”, and 26% said all “1, 2 & 3”. 5% couldn’t say. The findings indicate that for those purchasing festival related products this festive season, diyas/tealight candles/pooja supplies will be the favourite category. This question in the survey received 8,651 responses.

81% of those likely to spend on festival related products category this festive season likely to spend on diyas/tealight candles/pooja supplies

If reasons given by households that will be spending during the festive season are evaluated in the order of priority, 81% are likely to purchase diyas/tealight candles/pooja supplies”, 53% will buy “flowers”, and 44% will buy “lighting and lamps” this festive season.

Summary of key categories in which households are likely to spend this festive season

Digital Payments to be the primary payment mode for 2 in 3 households when shopping this festive season

India has been seeing a rapid rise in the use of digital payments since the pandemic began. UPI payments experienced a 109% growth in the last 12 months, with 6.06 lakh crores worth of transactions in July 2021. Other forms of digital payments like credit and debit cards have also seen similar growth. When households were asked about how they plan to pay for the majority of their festival related purchases, in response, the majority of 67% of the respondents said they plan to use “digital payments such as UPI, wallets, credit or debit card, net banking” for majority of their purchases this festive season. There were 27% of households who said they will use “cash” as their primary mode of payment, while 5% couldn’t say. This question in the survey received 17,401 responses.

Convenience, Safety, Trust and Rewards are top reasons why many consumers want to use digital payments for their shopping this festive season

Similarly, the next question in the survey asked consumers about the primary reason they plan to use digital payments for their purchases this festive season. In response, 37% said “convenience”, 7% said “safe and trusted”, and 9% said “earn rewards, cashback and/or get easier access to EMI”. Breaking down the poll, 20% of consumers said “1 & 2” will be their primary reasons to use digital payments this festive season, while 27% cited all “1, 2 & 3” reasons. This means that “convenience”, “safety”, “trust”, and “rewards” are top reasons why many consumers want to use digital payments for their shopping this festive season. This question in the survey received 13,204 responses.

84% of those who plan to use digital payments as primary mode of payments for this year’s festive shopping list “convenience” as the reason

If reasons given by consumers are evaluated in the order of priority, findings of the survey indicate that 84% plan to use it for “convenience”, 54% find it “safe and trusted”, and 36% will use it to “earn rewards, cashback and/or get easier access to EMI”. One of the key takeaways of this poll is that while rewards are a way to attract new consumers to digital payments, it is the convenience that is the key driver for many once they get used to paying digitally.

Of households that will give gifts this festive season, 48% likely to order them online while 42% to buy them locally; 10% to gift digital money or e-shagun

Exchanging gifts during the Oct-Nov festive season has been a tradition amongst many Indian households. However, with the pandemic taking a toll across the country, many consumers last year limited their socialising during the festive season. With the COVID case load situation getting better this festive season, traveling back home and local socialising are likely to be higher this year in comparison to last year, though still at 50-60% of the pre-pandemic festive season, per LocalCircles’ festive socialising survey.

The next question in the survey asked households about how they plan to do gifting to friends, family, neighbors, others this festive season. In response, it was found out that 5% households will “(1) will order online and hand deliver”, 23% said they “(2) will order online and get shipped to them directly”, and 10% said they “(3) will do both 1 & 2 as will not be able to meet everyone”. Breaking down, 26% of households said they “(4) will purchase locally and hand deliver”, 2% “(5) will purchase or order locally and get it delivered/couriered”, and 7% “will do both 4 & 5 as will not be able to meet everyone”. There were also 10% of households who said that they “(7) will gift money through digital payment channels this year, almost like an e-shagun”, and 17% couldn’t say. Of those who will give gifts this festive season, 48% are likely to meet and hand deliver them while 42% will get them delivered directly. This question in the survey received 11,182 responses.

Of households that will give gifts this festive season, 1 in 2 likely to order it online

If reasons given by consumers are evaluated in the order of priority, the findings suggest that 33% “will order online and get shipped to them directly”, another 33% “will purchase locally and hand deliver”, 15% “will order online and hand deliver”, 10% “will gift money through digital payment channel this year”, and 9% “will purchase or order locally and get it delivered or couriered”.

In summary, there has been a strong improvement in consumer sentiment from May 2021 when only 30% of households in the LocalCircles survey had indicated that they plan to make discretionary purchases in the next 12 months. With 60% of households now planning to spend during the festive season, it indicates that the economic uncertainty that was prevailing in May at the peak of 2nd COVID wave has greatly reduced. However, the survey clearly indicates that budget/value and safety will be the top criteria for consumers when doing festive spending this year. This finding is revalidated where 49% of households indicate that they will be buying products only if they receive high value this year. Also, safety is another important criterion for a set of shoppers who believe that although COVID cases have reduced, the risk is still there, and will drive how they go about their festive shopping. With safety in mind, 52% of those shopping this festive season will take home deliveries by placing orders online or via local stores. Among the key sectors where consumers are likely to spend include smartphones & consumer electronics, home renovation & furnishings, apparel & cosmetics, festival foods like dry fruits, traditional sweets, chocolates and festival related items like diyas, tealight candles, pooja supplies, etc. One of the other key findings of the survey has been that 2 in 3 households that are likely to spend this festive season will use digital payments as their primary payment mechanism. Convenience, Safety & Trust have been the top reason given by consumers on why they plan to use digital payments for their festive shopping. Finally, with the reduction in COVID cases, the socialising during this festive season is likely to be higher than 2020 festive season which will lead to more consumers meeting friends and family and purchasing gifts. 48% of households that are likely to purchase gifts are likely to order them online while 42% are likely to purchase them locally. 10% of households are likely to gift digital money or e-shagun. All in all, the festive season this year will be marked by improvement in consumer sentiment and is likely to bring the much-needed cheer for brands, MSMEs and retailers across the country. The key to getting a major share of what households will spend this festive season would be offering tremendous value, something that they just can’t resist.