Fuelled by festive spent, adex recovery accelerates to 80% of pre-Covid levels

In a positive news for the economy, India's adex has started recovering from the impact of the pandemic and may reach the pre-Covid levels this month riding on the back of festive spending.

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According to experts, the overall adex for this year is now likely to be in the tune of Rs 58,000 crore as against the earlier predictions of Rs 55,000-Rs 56,000 crore.

A similar recovery is also visible in GST numbers for September, which touched nearly Rs 1.05 lakh crore, almost similar to what it was in February this year.

"Adex is a reflection of economic recovery. The GST collections have already touched pre-Covid levels. So adex will also. However, a full recovery won't be possible unless the pandemic is controlled," said a leading media planner.

He said that the adex is currently at 80% of pre-Covid levels, with a near full recovery for TV and digital and a partial recovery for print and outdoor.

The adex prediction for the current year, before the pandemic hit, was Rs 75,000 crore. The prediction was later downgraded to Rs 55,000 crore as the lockdown impact was expected to last longer.

The next two weeks of the peak festive season is likely to bring better news for the industry.

Nisha Sampath

Nisha Sampath, Brand Strategy Consultant, Bright Angles Consulting LLP, expects that at least in the coming quarter, consumer sentiment will be buoyant, and this will be reflected in spending of discretionary goods.

“This trend has been observed in international markets like China where ‘revenge spending’ on luxury goods like cars and designer handbags was on an uptick when restrictions eased.”

“Some categories of discretionary spending like foreign travel and fine dining are still severely restricted. So, people will compensate by spending on other products like fashion, gadgets or home décor,” she said.

Some categories have also assumed new importance during the pandemic, she said.

For example, people will spend more on furniture and interior design because they are spending more time at home. Hence, there is more pride in the home, and more desire to make it comfortable.

From late March till May, while Pepperfry couldn’t really conduct business because of restraints and logistics issues, it started picking up from June-July. And as it gets into the season today, it is doing better than last year in terms of festive season. Which means that this season is 40% bigger than January and February of 2020.

Kashyap Vadapalli

“We were kind of recovered by August, almost back to earlier numbers and from September we had marginal growth,” said Kashyap Vadapalli, Chief Marketing Officer at Pepperfry.

He said there has been a fundamental shift in consumer behaviour when it comes to the décor and furniture category.

Two things are driving this category. People are spending more time at home and want more furniture pieces. As markets opened after a long time, behaviour of people has changed. While footfall probably is coming back, more people are still online.

Kashyap said, “For us, given that we have an omni-channel presence, we will have a 25-30% increase from last year’s festive season, which is a strong rebound."

Urban markets still hold the largest proportion of ultra-rich or HNI consumers, who can afford to spend, even during a downturn. These consumers are definitely generating some demand.

But at the same time, Sampath believes that in urban markets there may be a dip when it comes to spending by the aspirational middle class, seeking to upgrade lifestyle. Salary cuts and job loss have put pressure on this segment.

Also, luxury and non-discretionary retail had grown disproportionately in urban India, seeking to target these ‘aspirers’. Now, with supply greater than demand, many of these retailers may be forced to shut down or scale down operations till things revive.

She said, “Hence, it is likely that rural demand was less depressed, and will revive faster.”

Vibhas Sen

Vibhas Sen, VP, Marketing and Sales in Cozy Corner Patio (A US based ecom brand), said that because of Covid-19, there has been a massive movement of people preferring to move from urban to rural largely due to WFH culture.

“As a result, the spending capacity of the consumer has moved to rural to a large extent as high as 20%,” he added.

This quarter, for every category, advertising spends will be the largest, Kashyap said.

“This quarter, every manufacturer and retailer all are betting big. And we will see a spike in adex. Inventories are not easily available, but adex growth is definite,” he added.

Sampath said that to some extent, this category will be able to push adex growth but it will be slow.

“Clients are prioritising digital spends and performance marketing, trying to get the maximum bang from their buck. They are seeking channels where they are most likely to get their audience attention,” she said.

For Sen, OTT and social media are going to be bigger in the coming days.

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