In a conversation with Kishore Biyani two weeks ago, the Future Group founder told me that he saw structural shifts in consumption patterns which the country is either not spotting or acknowledging. The precise words are not his but in effect, this is what he said.
"We are hitting all-time highs in our furniture sales," he said. "Why ?" I asked. "I don't know yet," Biyani said candidly, acknowledging both the diverse sets of data as well as the fact that there are new or different drivers to consumer needs and perhaps tastes.
I asked him about the sachet and biscuit economy taking a hit; essentially why were small ticket items such as these also losing out? Biyani said he was not sure but maybe people were not using sachets of soaps and shampoos because there were more toilets. "We are definitely building more toilets in the country and sachets are usually because of multi-use of same toilets," he said.
Maybe he is right, maybe not. We will return to the toilets later.
I was speaking to someone at the Godrej Group last week and they said they had a pretty strong first quarter (April-June 2019) though they were seeing signs of tightness in the current quarter. Their sales were clearly doing better than, say the auto industry to which I will come to in a moment.
The gentleman from the Godrej Group said it was likely furniture sales were doing well because people were realising that most of the imports from countries like Malaysia and China were not lasting. That was coming to roost now. Hence the likely shift in preferences. Which means imports of furniture should reflect this. Not to forget the role of e-commerce companies in heavy discounting and expanding the market which could potentially cause others like a Future Group to benefit.
Now to automotive.
Domestic car sales fell 41 percent over the last year to 115,957 units. Two-wheelers have fallen 22 percent and sales of medium and heavy commercial vehicles have dropped 54.3 percent to some 15,573 units, all for the month of August. In the first five months of the financial year, the sales of passenger vehicles fell 24 percent over the year-ago period to 1.1 million units. Sales of two-wheelers declined 22.24 percent to 1.5 million units. Sales of total commercial vehicles, including light commercial vehicles and goods carriers, fell 39 percent to 51,897 units. Every day there are headlines of plant shutdowns, from Maruti Suzuki to Ashok Leyland.
Automotive is an area of concern because it makes up 7 percent of national Gross Domestic Product (GDP) indirectly and directly as it does to a significant extent in most major industrial economies. In the USA, automotive contributes 3-3.5 percent of a GDP of $20.5 trillion. India's GDP is $2.7 trillion. Now one can do the relative contribution math.
There are two parts to the problem.
One is the government. What it is doing or not doing to fix the problem? That is a different discussion for another day.
The other part of the problem is you, or me: front line managers, sales representatives, marketing executives, field operations staff, entrepreneurs, founders and CEOs of businesses.
Take the example of auto again. The industry says the push towards electric is making buyers pause their purchases as is a high Goods and Service Tax (GST) rate and other increased or likely higher taxes like the road taxes. The fact that Non-Banking Financial Companies (NBFCs) who were large lenders at the margin — being where banks turn you down — and taking on more risk. There are other reasons as well.
All that is true in parts but no single factor seems to jump out.
Because what is jumping out to me is that the auto industry, in general, failed to see this slowdown was coming.
This is why.
- The frontline staff of let's say automotive companies, including at dealerships, did not latch onto sentiments among their customers or misread them badly. The same could apply to the frontline sales force of a biscuit manufacturer. Surely the early dips were visible a while ago and some feedback would have begun rolling back, from kirana stores and larger retail chains.
- If the above feedback was not noticed or fed back into the system, there is a very fundamental problem of listening at the frontline, whether digitally or physically. Clearly all the realtime roll-up of data and information using apps and the like is not helping when it comes to spotting the big picture.
- Worse, the sales or sentiment feedback is noticed but dismissed as a blip or attributed to other, temporary, factors. For instance, I could blame a slowdown in the last few months on heavy rains in many parts of the country. To give a specific example, the Kerala festival of Onam in the first half of September sees a consumer bump-up, but it got subdued because of floods.
- On the other hand, we saw floods last year too in Kerala and roughly around the same time. Moreover, the new weather patterns thanks to climate change indicate this as a longer-term challenge. For example, having lost 6-7 productive working days this season to rains in Mumbai city already, I am seriously thinking about how we will work next year or how to be prepared.
- Finally, the sentiment and numbers feedback is acknowledged but companies and their leaders failed to connect the dots. Maybe the younger generation is buying less cars because they are on Uber. This is a fundamental, structural and generational shift in preferences. But did we correlate the rise of ride-hailing apps with what was happening in my company in the automotive sector? Or dismiss it saying, "Sab theek ho jayega" or It will become alright soon.
- Equally, as an aside, do I have the skills to spot these links and make the connections? How many data scientists and economists does our firm employ? Do we have or consult a behavioural economist? How many people are looking at the very big picture and trying to piece together diverse trends? Even one? Of course, if you did and that person has been saying something, did you listen? Is that person encouraged to come up with tough insights?
I have often encountered CEOs who had said they are worried to speak up about their problems because the government does not like it. There is conceptually nothing new in this. India Inc. has always lived in a quasi enslaved existence to government. Everyone acknowledges this. So this is a way of life. You can't change that but surely you can listen better to your customer and respond to that.
The question is thus what were you doing about these signals in regard to your own organisation? Why were we so late in reacting to the problems? What did we listen or not listen to in the last one year when the early signals were surely out there? If we did hear these signals, what did we do to respond? Is our response, even now, sufficient enough?
India's economy will achieve a 6 percent (or thereabouts) GDP growth come what may. Because the macro factors in terms of labour input and output are stacked in our favour as a country. But that growth does not mean it is a given that every industry will grow within it, for whatever reason.
India's telecom industry has already seen tremendous structural shifts in size and number of players. The only difference is most players knew this would happen someday so they were mentally prepared to it even if not physically ready for the arrival of Reliance Jio. The battle is still on.
The rest of the industry..no hang on, the rest of us, those who face consumers, need to do some serious introspection and hard work. Before our business gets washed down the toilet as well. Yes, the government has built more than 90 million toilets and ensured toilet access to almost 99 percent of the population. Think about it.
Updated Date: Sep 13, 2019 12:23:10 IST