Festive season spurs consumer spending in smaller towns despite inflation concerns

As India's annual festive season unfolds, consumers in smaller towns and cities are cautiously opening their wallets. A good chunk of Indians plans to spend more this year, despite high prices tempering some of the enthusiasm.

The Bharat Lab Festive Report 2024 shows that 36% of small-town shoppers plan to spend more than last year, while 35% expect to maintain their budgets. But not for nearly 30%, for whom higher prices are a concern.

Despite rising costs, spending will be driven by key categories such as fashion, electronics, and home décor, said Bharat Lab, a thinktank founded by advertising agency Rediffusion and Lucknow University. New clothes and accessories top the list, with 86% of respondents planning wardrobe updates, followed by personal gifts (72%) and home décor (71%). Electronics are also popular, with 60% of consumers interested in purchasing gadgets, mobile phones, and home appliances.

Bigger, deeper, comprehensive

Sandeep Goyal, chairman of Rediffusion, said, "We started the Mood of Bharat study last year before the advent of the festive season. This year, the study is bigger, deeper, and more comprehensive—it covers much more on the media stimuli too for the planned purchases."

Goyal's insights point to a consumer base that remains optimistic despite economic pressures, fuelled by both tradition and evolving shopping trends.

Parle Products is seeing demand come back after a plunge during the pandemic, said Krishnarao Buddha, senior category head. "We expect an increase of over 25% during the festive season. To cater to this demand, we are launching various gifting options. E-commerce leverages the festive season extremely well, and huge sales like the ‘Big Billion Day’ are widely anticipated. This also helps us leverage cross-product and impulse-driven groceries/food shopping beyond just consumer electronics," Buddha said.

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One of the key findings in the report is the increasing role of discounts in influencing consumer decisions. For 63% of respondents, deals and offers are the primary motivation behind festive purchases, particularly in lower-income households where affordability remains a critical factor. Among those surveyed, 67% of consumers earning less than ₹50,000 per month consider discounts to be “very important."

The report also highlights that 49% of consumers are influenced by cultural significance, reinforcing the enduring tradition of Diwali as a time for family and heritage.

Inflation doesn't deter

Inflation, while concerning, does not seem to fully deter shoppers. 70% of respondents stated that inflation has not influenced their spending choices. However, some are exercising caution, with 21% anticipating pulling back on expenses and only a small portion willing to stretch their budgets by 50% or more. While electronics and home décor attract many buyers, higher-income consumers are looking at big-ticket items like automobiles and jewellery. 33% of respondents plan to purchase a new vehicle, and 48% are considering jewellery purchases, focusing on gold, silver, or diamonds, reflecting both cultural and investment value.

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In a recent interview with Mint, Lalit Agarwal, founder and managing director of V-Mart Retail Ltd, said, "Demand trends will be better than the first half of the year—definitely. Festive seasin is also early this year, and there are enough wedding days once the festive season ends. Monsoon has been building up well, and we should expect more money in the hands of consumers in rural markets. Winters may also arrive early. We are expecting to grow anywhere between 10-15% compared to the last festive season."

V-Mart has a significant presence in small towns and rural areas.

On Friday, industry body CMAI (Clothing Manufacturers Association of India) reported that consumer sentiment for apparel remains weak. 63% of retailers it surveyed for the upcoming festive season expect sales of clothing and apparel to be the same or lower compared to last year. Of these, nearly 25% expect sales to be as low as 75% of the previous year.

Eco-conscious shopping

Meanwhile, the Bharat Lab Festive Report points out that eco-conscious shopping is gaining ground, with 83% of consumers considering environmental factors, particularly in categories like fashion and electronics. This trend suggests that brands emphasizing sustainability may capture more attention during this season.

Additionally, the report highlights the growing preference for online shopping. 58% of respondents said they would adopt a hybrid shopping approach, combining online and offline channels. Digital platforms are particularly popular with millennials and Gen Z shoppers, with 85% opting for online purchases. Social media continues to be a strong influencer, driving decisions for 53% of consumers, especially in fashion and electronics, while traditional media such as TV ads still play a significant role for big-ticket items like cars and jewellery.

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The report further reveals that 49% of respondents are planning festive travels, with a majority opting for family trips. Destinations range from festival-centric locations to offbeat getaways, reflecting a mix of tradition and a desire for relaxation during the holiday season. Additionally, investments in gold and real estate continue to be popular, with 49% of respondents planning to invest in these assets during the festive period as a way to secure financial growth.

While festive shopping will see an increase, particularly in smaller towns and cities, consumer sentiment remains mixed. Inflation and economic pressures are making shoppers more discerning. Brands focusing on discounts, tradition, and eco-friendly options may stand to gain, but the overall outlook remains cautiously optimistic.