New-age companies seek growth areas as urban consumption slump grips

A slowdown in urban consumption is hitting new-age companies in sectors such as beauty, wearables, logistics, ecommerce and used-car sales, which are now seeking to ramp up growth by focusing on new areas of business. Delhivery chief executive Sahil Barua flagged the slowdown in broader consumption , telling analysts during the firm’s earnings call last week that the trend has now trickled to ecommerce. To counter tepid demand, the logistics firm is attempting to chase new growth areas such as quick-commerce, regional and air logistics.

The slump has exposed pain points for multiple new-age beauty brands. Mamaearth posted a loss in its second quarter, even as its stock hit a 52-week low on Monday reacting to the weak results . The Gurugram-based brand, which is undergoing a restructuring of its offline supply chain, said it was clocking slower-than-expected growth and that it needed to recalibrate the strategy for its flagship brand to grow.



“Persistent inflation has impacted urban consumer demand...

and as discretionary spends come down, companies will have to compete harder for the share of wallet. This is also likely to spill over across sectors ..

. whether a consumer will spend on food delivery or buy non-essential beauty products or electronics,” a Mumbai-based analyst at a global brokerage firm told ET. “Cash-rich companies will be better positioned in such a scenario to ride it out, as they can try out different things without worrying about margin dilution,” the analyst added.

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“I think the consumption slowdown is real. I think its impact on the ecommerce industry is real..

. from a Delhivery standpoint though, I think we've been biding our time, stabilising our operations and making sure margins are stable,” he said. “We will now start accelerating our share even if the market remains slightly sluggish,” Barua said, adding that the company will take several measures to chase growth, including setting up a third-party quick-commerce warehouse business.

A top executive at a new-age insurance aggregator said the consumption slowdown was more pronounced in the urban regions within a particular income class. “Our data show that those earning Rs 5-10 lakh per annum have been the worst impacted..

.that is primarily because of high inflation that is forcing consumers to cancel or delay discretionary spends,” he said. “The premium end of consumers are showing fast growth.

..the recent IPOs have made a lot of people at the top end richer and their spending patterns are only accelerating,” he added.

Next steps In an interaction with ET , Mamaearth CEO Varun Alagh said the impact of rising cost of living, rents and real estate prices has been the most on the beauty and personal care segment. The return-to-office scenario with many companies ending the work-from-home option is also adding to the cost of living, he said, adding: “Some of those pieces could, of course, be called out.” However, he said the slower growth at Honasa, the parent company of Mamaearth, had more to do with internal factors than external.

The company is now taking a deeper look at the offline strategy for its flagship brand Mamaearth, on which the growth of its younger brands depends. “Some of Honasa’s younger brands such as The Derma Co and Aqualogica are growing at a faster rate of over 25-30%..

.and these will need investments to compete in a market that is seeing a beeline of D2C brands coming up. But this remains contingent on how quickly the company is able to turnaround Mamaearth’s bottom line,” a brokerage analyst said.

Similarly, in other sectors taking the impact of consumers pulling back on discretionary spends — founders and industry executives said companies will need to accelerate spending or innovate into new areas to achieve growth. “Last year, we focused on rationalising our business operations to become leaner..

.and since then the market has settled. Consumers at the lower end of the spectrum are being priced out but we have to find ways to offload the inventory or our balance sheet can get stressed,” the founder of a used-car sales platform said, adding that the company was offering higher discounts to drive offtake.

On November 5, ET reported the slump being witnessed by wearables companies, some of which saw a fall in revenue and profitability. Varun Gupta, cofounder of Gurugram-based Boult – whose net profit halved in FY24 – said the company saw its bottom line contracting as it chased growth through new categories and channels..