Consumer demand is expected to be low over the coming quarters as inflation continues to rise, resulting in a further slowdown for startups in the country, according to a new report.
According to Redseer Strategy Consultants, there is an ongoing risk of further escalation in the war on Ukraine and the current wheat crop will be affected by hot weather.
As per the Reserve Bank of India’s Consumer Confidence Survey of January 2023, more than half of consumers perceive the general economic situation as worsening.
A difficult funding environment currently limits startups’ ability to drive growth through discounts and other levers, which worked well during an easier funding period.
According to the report, startups should focus on improving profitability by sticking to their core offerings and focusing on efficient unit economics.
Smaller stock-keeping units (SKUs) have been a successful strategy for FMCG players in the face of shrinkflation.
For startups focused on the Indian market, too, it is essential to overhaul their SKU strategy so that it fits the tighter wallets of the mass market. The second strategy is to double down on the premium categories, which have lower price elasticity and have performed well against market pressures across sectors.”
As a result of the Covid-19 pandemic, startups experienced phases of growth and slowdowns.
Therefore, most businesses experienced net growth spanning two pandemic waves.
In 2022, however, global inflationary pressures severely affected consumer demand, resulting in a revenue increase that was driven by higher prices, while volumes remained low.
Consumer demand is likely to remain subdued for the foreseeable future due to macroeconomic challenges, according to the report.
Consumer demand over the near future is expected to remain subdued due to high inflation, unemployment in the urban organised sector, and falling real wages in the rural areas.