The impact of COVID-19 on Diwali: What's good and what's bad this year

Muted market activity was seen for the most part of this year but that’s giving way to hope, with store fronts lighting up for the festive season. However, it’s been a mixed bag. Here’s a look at how various sectors are faring in the festive season, as the unlocked markets witness a shakeout driven by the aftermath of the pandemic.

 The impact of COVID-19 on Diwali What's good and what's bad this year

COVID-19 has exposed the markets to some unprecedented changes, as shopfloor statistics will show. Interestingly, India’s festive season has coincided with the gradual rebound of economic activity as shutters open and consumer demand picks up steadily. However, this change appears to be different for different businesses. For some, the festive season has merely stirred excitement without any impact on actual sales/demand, while for others it’s not just business as usual but booming business. 

More and more people prefer to shop online

Brands typically woo customers during Diwali with attractive offers and discounts and the full impact of the pandemic is best seen in relatively lower ad spend during the festive season. Unsurprisingly, consumers have decided to shift to online shopping, with 51% of respondents in a survey[1] choosing to do so. This effectively means that small stores will witness fewer footfalls, while e-tailers will see a rise in figures. 

This trend has partly contributed to the way the cookie crumbles. Smaller stores have traditionally catered to the demands of shoppers during the festive season. Another reason for the slump has been the type of merchandise/products purchased online. Electronics and consumer durables continue to enjoy a great run, with major brands scaling up manufacturing to meet the demand. In contrast, other traditional festive purchases are experiencing a flattened demand.

Related: Aftermath of COVID-19: Which sectors will struggle, which won’t 

The slowdown slide and what the numbers really mean

Statistics reveal the complete story. Festive sales during Diwali are typically spread over a few categories – apparel, durables, electronic accessories, and the customary sweets and firecrackers. The slowdown of the previous year had a negative impact on festive sales of 2019, so the numbers for this year are naturally affected by this. The current resurgence needs to be seen in the context of the previous year’s sales. 

Big e-tailers and product categories

Industry forecasts peg online sales during the festival season at around Rs 47,900 crore[2] for the period between October 15 and November 15. Top-selling items on Amazon and Flipkart include cameras, smartphones, tablets, laptops, and personal accessories. The deep discounts offered by these e-tailers during the festive season were lapped up by consumers, with Amazon reportedly having its biggest-ever opening in the Great Indian Festival. 

Impact of COVID-19 on the festive calendar

The festive calendar typically witnesses increased footfall in places of interest. However, the pandemic has effectively dampened the fervour, with families preferring to stay home rather than risk travelling out of town to celebrate. This has, in turn, helped consumers take up deep discounts offered by brands during the festivities, contributing to the sales figures. 

That explains the change in buyers’ preferences and the performance of various sectors. Traditional buying involved crowded marketplaces and shopping by look and feel. Families loved the experience of checking out various products in person – such as trying out clothes for fit – before making a purchase decision. This has been curtailed, despite the lifting of the lockdown and the changed protocols in place. 

Additionally, traditional stores have been severely impacted by the pandemic and are unable to match the discounts offered by large e-commerce players. This, together with the need for social distancing, has resulted in traditional shopping taking a hit. The worst impacted are small stores. 

Related: How are millennials coping with COVID-19 crisis?

Preferred channels for traditional purchases

Diwali is one of the most colourful festivals of India. The festival of lights is all about promoting age-old customs and ethnic wear. The preferred shopping channel at this time is offline, so when the shopping channel is itself impacted as a result of the pandemic, the type of purchases made over the channel also take a hit. This explains the disparity in sales figures among products that are typically purchased during Diwali. For instance, retailers of ethnic wear have reduced their inventory, anticipating a slump in demand. Retailers and supply chains expect this trend to continue till the beginning of 2021.

Impact on dry fruits, sweets, namkeens, and gifts 

One of the highlights of Diwali is the exchange of dry fruits, sweets, and other gifts. This includes corporate gifts for employees. With many companies encouraging their staff to work from home, or enforcing staggered office attendance, traditional social activities during the season have also been affected. As a result, sectors that service this requirement – sweets, dry fruits, decorations, and corporate gifts – have taken a hit due to the pandemic. In Delhi, retailers reported a dip of almost 50% in sales figures. 

Strong showing from tier-2 and tier-3 cities

Surprisingly, tier-2 and tier-3 cities have driven online apparel sales. Flipkart’s Myntra recorded 100% growth during the festive sales[5], with tier-2 and tier-3 cities making up a sizeable chunk of the orders. This clearly indicates that the festive fervour for shopping has not changed; it has merely altered its course to fit into the pandemic-driven order of life. Retail stores that offer only in-person shopping are the worst hit, as customers looking to make purchases end up picking online channels. 

Related: COVID-19 is changing investor behaviour. Here’s how

Another area that is driven by festive shopping is jewellery, and the industry expects to achieve 60%-65% of total sales during the festive season. While stores have reported 40% of usual business, the sector expects to see increased demand during festive periods. Two important festivals that contribute to jewellery purchases have fortunately been spread across two different months, and jewellers expect brisk business at the end of both the seasons. 

Last words

This festive season is beginning to see shoppers return to the markets, but the buying narrative has been rewritten, with money being spent on products that aren't necessarily the same as those bought in the same period in previous years. If the pandemic has shown a distinct characteristic, it’s that the virus has affected different people and businesses differently. While it has impacted every individual on the globe in some way, the difference lies in the manner in which people and businesses have been affected. It’s had a debilitating effect on some, left others unchanged, and helped yet others to enjoy the benefits of a forced shift in shopping patterns and preferences. Did your income change during COVID-19 crisis? Here are some tips to get back on track



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