Fighting Fit Brands’ Saji Abraham looks at the events that have transpired over the last two years of a global pandemic and what implications they hold for the coming year.
As 2021 draws to an end, a year that was supposed to pull us out of the COVID-19 crisis, it is useful to look back and see how people and brands behaved during this tumultuous time. Given our tryst with uncertainty in the last 18 months, let's see with what degree of certainty we can foresee what 2022 holds.
The last 18 months have thrown a few curve balls at us, going against the grain of what we would expect.
The initial reactions to the pandemic and the lockdown were expected. The stock markets nearly halved, shops and showrooms shut, product lay stacked and unsold. But, slowly, as the lockdown became the new normal patterns of behaviour started to emerge. Of the many, three stood out for me.
The Golden Years Syndrome
During the last 18 months we’ve witnessed a strengthening of old wisdom and the phenomenon of nostalgia. Ayurveda, yoga, grandmother’s recipes, especially when it came to health and wellness has touched most of us.
Whether it be the benefits of turmeric or Kaada for immunity or rediscovering pranayam, all of it points to an interesting aspect of consumer psychology: the yearning for stability in the era of uncertainty. Especially because modern science didn’t really have an answer to the pandemic (yet) and contradictory information was circulating, even from official sources. Going back to your roots for stability was a natural response.
This response wasn’t peculiar to the pandemic. Nostalgia brands have always played on this aspect of consumers yearning for the old and solid. Jawa motorcycles, which relaunched after a gap of four decades, found the majority of its customers to be young, often people who had never ridden or even had a Jawa in the family.
Vinyl has seen a record (pun intended) upsurge with an 86% increase in the US (first half ’21 Vs ’20) and is set to beat that record again this year.
Nostalgia brands tweak a powerful emotion, the one that tells us the past was golden and perhaps the best time there was. For consumers across all age brackets, especially younger generations, this is a hook for solidity and stability which is why nostalgia and retro remain a strong branding pillars
The Lipstick Effect and Revenge
The pursuit of small pleasures and treats also grew over the last 18 months. From simple everyday pleasures like ice creams and biscuits (remember the Dalgona coffee trend?) to large ticket items like luxury cars or premium speakers.
Global luxury sales rebounded from a 23% decline in 2020 and are now set to grow by 4% beyond the pre-pandemic baseline, according to Bain & Company forecasts. For a while Bernard Arnault, Chairman of LVMH overtook Elon Musk as the richest person on the planet.
Both of these diverse phenomena point to a yearning for treats that provide some spark in an otherwise uncertain and sometimes gloomy future. A classic case of the famous Lipstick Effect where even cash-strapped consumers buy small indulgences to temporarily brighten up their lives.
For big luxury, there was an element of revenge spending, the frustration of not being able to live like one is used to. Seeing illness and mortality around you makes you wonder why you are postponing that indulgence. A ‘now or never’ mindset prevailed.
Digital Undivided and Divided
Digital broke new boundaries. This suddenly opened up new ways of doing things. Apart from the obvious e-commerce and payments applications, digital opened up a new market for many brands. Going online opened up new audiences to gyms and personal trainers. In fact, D2C brands became the rage across categories from apparel, footwear, pharmacy and of course beauty. The mobile truly became a wallet and the push that demonetisation gave, COVID-19 transformed into a mighty heave.
Was this really a breakthrough of technology? Yes, but the technology was always there. The real breakthrough was the adoption.
A leading agency CEO remarked that he had been trying his best to get people to use video conferencing software, but it took a pandemic to force adoption. When left with no choice, people adopted digital and then realised its advantages. It goes back to our brains preferring the path of least resistance. Consumers usually stick to their routine because that is a neural pathway that has been established. Making new decisions requires energy and without the right kind of motivation, that energy is hard to come by. Perhaps the pandemic has given brands the much needed leg up on digital adoption and this will only increase next year.
However, the case is not the same for lower income households and people in rural areas. The biggest pinch was felt in education. The rural and underprivileged lost nearly two years of school time due to lack of smartphones, their availability for school lessons, bad or non-existent broadband connections and the cost of data. As a consequence some of these children dropped out of the education system altogether, which will have personal and societal impact going forward. This is an opportunity for brands to innovate to ensure a level-playing field and tap into the next tranche of customers.
So what’s in store for 2022?
One would imagine that a life changing event like the pandemic would give pause to people and make them hit the reset button. It seems to have done so in the West with the Great Resignation where people have re-evaluated their priorities and are quitting en-masse to find a better quality of life.
The Great Churn
Similarly, India has the Great Churn. According to the Naukri Jobspeak report, hiring activity has expanded by 43% (year on year October ’21) led by the IT-software sector and along with retail (51%) hospitality/travel (48%) education/teaching (41%) and banking/financial services (39%). The sectors most affected by the pandemic are apparently bouncing back.
Add to this the startup boom with 34 unicorns in 2021 alone – a vote of confidence of entrepreneurship and the employment opportunities it provides. All this implies that the economy is getting back into its groove, and suggests that spending will be back to earlier levels. However, there is another side to this story.
The Confidence Trick
According to a nationwide poll by C-Voter, ordinary middle-class Indians are low in confidence. Some 67% believe their family’s economic condition will remain the same or worsen, 48% spent less this festive season than last year, 33% feel the threat of job losses has worsened, 41% feel there is no chance of getting a decent hike in salary and 38% of business people feel their income will go down.
To compound the gloom, they are witnessing declining industrial output and rising prices across cooking ingredients, energy and transport.
This implies that people will want to come back to ‘normal’ as soon as possible. The calls to get back to office are rising, vaccines are being taken, and blips like Omicron (as of this writing the numbers are still in double digits) will be faced with bravado rather than caution all in an effort to get businesses and brands back to status quo.
However, this also means that spending on brands could suffer as consumers tighten their purse strings. Some brands will look to value propositions in the mass market, driving a down-gradation from Prestige to Masstige segments as people find value in brands that offer similar functionality at a reduced price. First the essentials and then, depending on the macro situation, non-essentials could follow.
India has always been a country with varying levels of development. So, while it seems to be boom time for the markets and entrepreneurs raising money, the belly of the market will start 2022 cautiously. The implications for brands will depend on the fortunes of their target audiences. As with any uncertain year, one can only hope that caution gives way to optimism and not the other way around.