The Covid19 period has had several types of impacts on our life. It has pushed the local industry to support the life in this pademic crisis period and hence there is a voice rising for self-reliance. “Atma-Nirbhar” in mattress industry is the new challenge and the new opportunity.
The COVID-19 global pandemic has truly disrupted our lives like nothing else ever did in the past many decades. As the scourge of virus that emanated in China and spread over the world refuses to abate, countries have had to evaluate their position in relation to the epidemic. The epidemic has been an unequivocal disaster for the Indian economy. The condition of our economy was already in a vulnerable state when the epidemic struck India. With quarantine measures in place that resulted in the world’s biggest and stickiest lockdown the economy took a big hit, like some collateral damage. Experts opine that with the traditional supply and demand chains broken, the country is likely to face a protracted slowdown.
The length of the COVID-19 pandemic will dictate the scale of the economic hardship, the longer it stretches, and the worse the impact will be. Recently the World Bank had stated that based on financial performance, India’s economy in the current fiscal year is expected to contract 3.2 percent, downgraded from its previous forecast of 5.8 percent positive growth. The World Bank’s report mentions, “stringent measures to restrict the spread of the virus, which heavily curtail activity, will contribute to the contraction.”
Amidst the gloom and doom, Prime Minister Narendra Modi on May 12 addressed the nation and spelt out a plan for economic revival. He urged Indians to follow the route to ‘AatmNirbharta’ or self-reliance. And so, he launched the Aatmnirbhar Bharat initiative. This appeal was made along with an announcement of an economic stimulus package of Rs. 20 lakh crore that is around 10 percent of the GDP. The primary intention behind the scheme was to boost demand and improve the supply chain in different sectors of the economy. During his speech, PM Modi spoke about how “India stands today at a point where it has to decide to become self-reliant”. He also gave a slogan, i.e. “Be vocal to be local” which practically means to adopt and use products made in India instead of foreign ones. This would lead to import substitution and lead to growth.
As part of his policy announcement, PM Modi also laid down five pillars for Aatmnirbhar Bharat initiative:-
First pillar: An economy that takes quantum jumps and not incremental change
Second pillar: Infrastructure that should be world-class and becomes the identity of India that is synonymous with the idea of modern India.
Third pillar: A system that is based on the technology-driven arrangements, fulfilling the dreams of the 21st century, not the policy of the past century.
Fourth pillar: Demography which is the source of energy for a self-reliant India. Fifth pillar: Demand, whereby the strength of India’s demand and supply chain should be utilized to full capacity. He underlined the importance of strengthening all stakeholders in the supply chain to increase, as well as fulfill, the demand.
Avoiding dependancies The Micro, Small, and Medium Enterprises (MSMEs) sector is at the heart of this domestic push by the Modi government. The MSME sector employs close to 40 percent of the Indian workforce and has a significant contribution to the GDP and export sector. Little wonder, even in his speech PM Modi emphasized the role played by the MSME sector and how it will play a critical role in the economic revival. The industry too included the Atma-Nirbhar Bharat Abhiyan, with the Finance Minister subsequently making announcements for the sector. The idea is to shore up the industry, and use it as a catalyst for economic resurgence. If the segment is revived, it will contribute significantly towards employment and increasing liquidity flow in the economy.
The push for Atma-Nirbhar Bharat is also very relevant for the mattress industry, as many of the manufacturers, distributors, etc. fall into that category. Many manufacturing companies fall under the ambit of MSMEs. The importance of this sector can be gauged by the fact that even under the lockdown, the Ministry of Micro, Small and Medium Enterprises (MSMEs), Government of India, had issued a notification asking all business entrepreneurs and suppliers to inform the government whether they are dealing with essential items required for fighting coronavirus outbreak. The ministry has released a list, and the mattress industry fell in the auxiliary supplies list. This was especially necessary as governments were ramping up the hospital to create beds for COVID-19 patients. And hence bedding or mattresses were an essential commodity.
Atma-Nirbhar Bharat is also very relevant for the mattress industry, as many of the manufacturers, distributors, etc. fall into that category. Experts opine that with the traditional supply and demand chains broken, the country is likely to face a protracted slowdown
The changing market
The mattress industry in India has changed much in the last couple of years. Accounting for more than Rs. 11,000 crore, it is projected to reach Rs. 14,000 crore by 2021 with a CAGR of 9 percent. The growth of the industry has been boosted by the expansion of the online retail industry that has aided the manufacturing to grow at a healthy rate. This is a sterling achievement. Because the industry has gone a significant shift over the last few years from a mostly unbranded market to a branded one. The branded market comprising large, mid-size and smaller manufacturers constitute around 34 percent of the market, with about 20-25 players spread across the geographies. The branded mattress market is expected to grow at a CAGR of 13 percent over the next five years to constitute 37.5 percent of the market by 2022. Prompted by economic growth over the past couple of years, the home and decor industry grew in strength as well. Interior decoration as a career option has become viable and fashionable only in the past few years. Yet, a mattress, which plays an essential role in a person’s life, used to be the last thing on priority. People were unaware of the different types of solution that are available, and more importantly, they were ignorant about the impact the right mattress can have on their sleep patterns and thus their health. Thankfully, the scenario is changing now, people are becoming aware of what a mattress is, and the difference between buying a cheap local brand versus buying a branded product. Primarily, the organized mattress markets comprise three types of mattresses, namely, coir, PU foam and Spring mattress. All the popular names like Orthopedic Mattress is a generic term and any bedding that provides lumbar support is ortho mattress.
According to ‘India Mattress Market Overview, 2016-2022’, market share of unorganized players is expected to drop drastically in the coming years. Nowadays, consumers have even started buying from international brands because of their high-quality and contemporary products. In India, organized players sell mattresses through two mediums, one is offline, and the other is online. Offline mattress market consists of retail sales of mattresses from dealers/ distributors or own franchised stores. On the other hand, the online mattress market consists of transactions which occur through e-commerce websites like Flipkart, Amazon, Snapdeal, FabFurnish, Urban Ladder etc. or the company’s personalized website.
Generally, Indian customers have an inclination of going to the showroom, feeling the product and then deciding on the purchase. The Indian buyer is also very price-sensitive, and any last-minute price cuts can be a deal-clincher. This is one of the reasons why the offline channel is very popular with consumers, and this is the reason why big brands have also expanded their retail footprint across the length and breadth of India. Branded mattresses are broadly sold to two end users viz. residential and institutional. With the spurt in the housing sector, demand for branded mattresses has been on the rise, as this segment of customers is keener on quality than merely on price. According to the survey, among various sizes available, King size mattresses are the most preferred one, and comfort is an essential factor while choosing them.
Institutional demand comprises products sold in hospitality, real estate and other segments. For instance, as of now, the most significant demand for mattress is coming from the medical side. As hundreds of beds are being created across India to deal with COVID-19 patients, there is an enormous demand for mattresses that are the right fit, namely, cost-effective and also good quality.
Here is how the new definition looks like:
Micro units: MSMEs will now be called Micro units if they have investments up to Rs 1 crore and turnover of less than Rs 5 crore. The definition earlier was on investment criteria of up to Rs 10 lakh for Service MSMEs and Rs 25 lakh for manufacturing.
Small units: For an MSME to be defined as a Small unit, its investment limit has been raised from Rs 5 crore to Rs 10 crore with a turnover of fewer than 50 crores. This applies to all MSMEs including the Service enterprises which earlier came under the investment of up to Rs 2 crore.
Medium units: Enterprises with investments up to Rs 20 crore with a turnover of less than Rs 100 crore will now be called Medium units. Earlier, the investment limit for Medium units was up to Rs 10 crore and Service enterprises up to Rs 5 crore.
Based on these definitions, the government has announced some exciting benefits that can be availed by the companies:
• Collateral-free automatic loans of INR 3 lakh crores will be provided for business, including MSME’s which are badly hit by the pandemic and requires new funding to meet operational liabilities, buy raw materials and restart the company.
• Following benefits are provided under the collateral-free loan scheme: the companies:
• Emergency Credit Line to Businesses/ MSMEs from Banks and NBFCs up to 20 percent of entire outstanding credit as on February 29, 2020;
• Borrowers with up to INR 25 crores outstanding and INR 100 crores turnover eligible;
• Loans to have 4-year tenor with a moratorium of 12 months on principal repayment;
• Interest to be capped;
• 100 percent credit guarantee cover to Banks and NBFC’s on principal and interest; and
• This scheme can be availed until October 2020.
• Global tender to be disallowed up to INR 200 crores to benefit the MSME and other small institutions.
• INR 50,000 Crores liquidity to be given through reduction in TDS/TCS deductions.
• The government will facilitate the provision of INR 20,000 crores as subordinate debt for functioning MSMEs which are NPA or are stressed.
• Equity infusion of INR 50,000 crores through Fund of Funds (“FoF”). The FOF with a corpus of INR 10,000 crores will be set up. The FoF will be operated through a Mother Fund and few daughter funds. The fund structure will help leverage INR 50,000 crore of funds at daughter funds level. It will help to expand MSME’s size as well as capacity.
• Fintech will be used to enhance transaction-based lending using the data generated by the e-marketplace.
• MSME receivables from Government and CPSEs shall be released in 45 days.
In short, the government is very keen and desirous to promote the domestic industry. The slew of schemes it has launched should be taken in addition to the raising of custom duty on a range of products. The government increased customs duty on several products, including toys, footwear and furniture items, intending to promote ‘Make in India’ and boost domestic manufacturing. On furniture goods such as seats, mattress support, articles of bedding, and lamps and lighting fittings, the import duty has been increased to 25 percent from the current 20 percent.
Financial institutions also have been asked to promote domestic manufacturing through their investments. Hence, this is the best time for an Indian company to thrive in this period.
With the emphasis on domestic manufacturing and the benefits that will be provided to the MSME sector, there are a lot of players in the mattress industry who can avail the various benefits from the government scheme.
The Pandemic Break
It is often said that in Mandarin, the word for crisis is quite similar to that of opportunity. A crisis can also be turned into a positive way. While not dealing with the social and human cost of the COVID-19 epidemic, which is unprecedented. Businesses can not only survive the trying times but also thrive if they have the money. The mattress industry in India is in that positive play. Multiple factors are working in conjunction that seems favorable. First, among the many verticals that have been impacted by the epidemic, the mattress is one of the rare ones that have seen an increase. While companies are struggling to find customers for their products, mattress companies are in the unique position of actually having to work overtime to meet the demand. With thousands of beds being added to fight against the epidemic, there is a high demand for a mattress at the moment.
Not only that, but WFH has also compelled people to look at their sleeping patterns and appreciate the value the mattress plays in that regards. Thus, individuals too are purchasing a mattress, mostly online and primarily With the emphasis on domestic manufacturing and the benefits that will be provided to the MSME sector, there are a lot of players in the mattress industry who can avail the various benefits from the government scheme. Feature those from branded companies. Hence, be it institutional sales (hospitals & medics) or be it individual, the demand for mattress has been mostly unaffected by the epidemic, and on the contrary, has grown better. Yet, the industry is not altogether immune to challenges and the situation. To ensure that the business is not impacted by the epidemic, the companies need to pay attention to the following aspects:
Remember, the epidemic is still very much in circulation. Hundreds of people are dying every day, and thousands are infected. Thus, the customer is scared and wary. This is the time for the mattress companies to come out proactively and assure the customers with the kind of measures that are being taken to safeguard the customer. Not only should they employ and deploy such actions, but they should also highlight the same through media, like YouTube, Facebook, etc.
Though it may sound complicated, it is usually the crisis that brings out the best in each of us. The best way for companies to survive this period is to be on their toes, and innovate constantly. This is the time to reinvent. For could there be a medically treated mattress that is good for the user? There are many ways in which a service or a product can be refined. This is one of those times.
Care & Share
In these difficult times, it is easy to be heartless and firm. On the contrary, this is the time to care and share with fellow beings. The least that a mattress company is doing is treating its employees fairly by not sacking them. Also, this is a moment to share the pain of others and help them through various means like CSR.
With the government’s push for self-reliance through programs like AtmaNirbhar Abhiyan, it is incumbent about the mattress industry to make hay while the sun is shining. This is a great time to reassure customers and expand it at the same time. Companies that can do the same will thrive.