Compiled by Yamini Sequeira
SAFEGUARD LOCAL INDUSTRY
Ahamed Aroos spots a window of opportunity to revive the national economy
Q: How did the consumer goods and retail sector fair in 2019/20?
A: Consumption levels remained low through 2019/20 with volume declines in many categories and visible value growth led by price increases. High food price inflation was also a reason that probably triggered this trend.
However, markets signalled a positive trend towards the end of last year, which suggests that the consumer goods and retail sector could shift to a rapid growth trajectory.
We witnessed strong consumer confidence triggered by the nation’s new political leadership at end 2019. According to Nielsen, business and consumer sentiment improved to record the highest levels in a three year period.
Unfortunately, COVID-19 heralded a period of unprecedented disruption in all facets of life and business, forcing us to think along the lines of survival instead of growth. With consumption coming to a virtual halt and the cancellation of export orders, the impact on the sector has been severe.
This has prompted us to adapt to the ‘new normal.’
Q: Do you see signs of cautious spending on the part of consumers, many of whom have had to undergo salary cuts?
A: Yes, we see clear signs of a reduction in spending. And reports suggest that more than a million Sri Lankans are likely to be unemployed or underemployed as a result of COVID-19.
According to the last available statistics from 2016, daily wage earners numbered approximately 1.7 million and the self-employed around 2.6 million – together, they make up the most vulnerable group, according to economists.
Salary curtailments in many corporate houses have led to reduced spending patterns across almost all categories including essentials.
Q: Did it become necessary to switch your business model online during this period?
A: We did not completely switch to an online business model; our efforts and focus were on driving online platforms, both as a revenue led business model and a complete interface for many of our clients, customers and consumers to keep engagement high during the curfew.
Initiatives such as home deliveries, online ordering systems, and tying up with multiple national and local e-commerce players to deliver what consumers needed became integral to reaching customers.
Q: Do you believe that more customers will now opt for e-commerce?
A: We strongly believe that e-commerce will drive change in the consumer goods sector like never before.
Having analysed its customer data, e-commerce player Daraz released an e-commerce index, which indicates that purchases in the fast-moving consumer goods (FMCG) category doubled in March and are expected to grow from 20 to 70 percent.
Q: So what is the potential of the consumer goods and retail segment – and how can it be achieved?
A: The e-commerce led consumer remains largely untapped in Sri Lanka.
Currently, the size of e-commerce in Sri Lanka is estimated at between US$ 85 million and 90 million dollars. Given the internet and digital infrastructure in the country, e-commerce activity needs to be much greater.
Research undertaken by Asia Securities predicts the full potential for the Sri Lankan online retail market to provide an opportunity of between US$ 450 million and 500 million dollars over the next five to six years.
To reach our full potential, research suggests that we should address payments and last mile logistics. Moreover, building trust and reliability with consumers is also important if Sri Lanka is to achieve its full potential in e-commerce.
Q: Do you see signs of recovery in the market? And if so, what are the first products to witness demand?
A: Certainly, we have begun to see the signs of recovery along with some activity in the market. Beyond the commercial capital, the recovery took root around mid-May and a month later in Colombo.
There are strong indications of local goods being purchased. According to a Kantar LMRB study, 48 percent of consumers say they are buying local products in the event a regular brand is out of stock.
In addition, products that address the hygiene and health concerns of consumers – such as hand sanitizer face masks, products that help consumers prevent spreading infection including immune boosting local beverages and vitamins – and even umbrellas have been in demand in the early stages of the recovery.
Q: And last but not least, are cheap imports a major threat in your business segment? And if so, how would you address this as a policy maker what remedial measures are there?
A: Certainly, cheap imports from any country are detrimental to our business segment and the sector as a whole.
As an umbrella and allied product manufacturer competing in the global arena, we need healthy and high calibre competition to challenge us.
We have seen Sri Lanka ending up as a dump yard for so-called cheap non-standardised imports by not having mandated controls especially when it comes to FTAs or preferential trade agreements.
Therefore, we insist on minimum quality and functionality standards by the government involving standard setting institutes in the country, to strengthen local industries and protect consumer interests.