COVID pandemic's effect on construction materials, equipment and furniture manufacturers & suppliers
Motivations, Clashing Behavior and Post-COVID trends
The COVID-19 outbreak has had varying degrees of influence on all construction industry stakeholders. These include proprietors, construction material, equipment. And also furniture supply chain producers, suppliers, and distributors. I agree that certain effects were more significant than others. However, the nature and scope of the implications are significantly impacted by the location of both the respective business and the underlying trends.
In today's globalised world, no industry has been spared of the effects of the Coronavirus pandemic. Similarly, the construction industry is in distress. Because the covid is an infectious disease, construction activity has been temporarily halted to prevent its spread.
Many construction enterprises have experienced financial difficulties. As a result, many organisations have laid off most of their staff. This virus also caused havoc in the transportation system. As a result, the supply of resources has been disrupted. Construction industries received nothing but losses, which impacted the global economy. Overall, the construction business took a disastrous turn.
There are range of consequences of this havoc–
1. Reduction in supplied materials and workforce.
2. Postponement and, in extreme cases, dissolution of organisations or complete projects.
3. Building activity in various states and municipalities is still in flux.
A lot of great areas depend on whether development is recognised as an indispensable activity or not. I mean, we have all heard about Delhi's Central Vista Project (of course we have, right?)
According to a report provided by the Ministry of Statistics and Program Implementation (MoSPI) in December 2019 on the status of 1701 centrally sponsored infrastructure projects, 355 were on track, 583 were postponed, 401 had cost overruns, and 205 had both cost and time overruns. Consider this, according to a KPMG “covid-19 evaluation economic impact construction sector” report, of the 583 delayed projects, around 21.95 per cent, or 125 projects, are delayed for 61 months or more. And 25 per cent between the time of 25 and 60 months. This is enormous. The covid crisis is especially harsh on labour-intensive industries.
So, what does any business person want? To maximise profit margins either by saving on raw materials or logistics, right? Everyone is aware of the lifestyle adjustments made during the pandemic's peak. We have a significant impact on how we work, shop, and conduct business.
This was a welcoming development in the furniture sector. The sustainable way, combined with an increasing emphasis on the importance of the home, was all that this business desired. A consumer who is motivated to develop their interior environment is a dream come true. COVID-19 caused roughly 58 per cent of the global population to remain at home. This led to a surge in work-from-home, homeschooling, and other house-related activities. An increase in functionality and ease has been witnessed. Emerging influencers, eco-friendlier backdrops, healthy trends are observed across platforms. Other activities such as congregation, movie-at-home, dining-at-home, contributed to the ease. With social separation becoming the new normal, consumer expenditure on furniture and home furnishings was predicted to scale up.
However, the construction material and equipment industries were severely harmed. The ceramics, sanitaryware, piping, and adhesives markets were all immediately impacted. There was a large decline in new project work, renovation, and commercial developments. During this time, revenue declined across the board for ceramic suppliers. One of the largest manufacturers reported a revenue decline of about 60 per cent. Steel output was reduced during the lockout, touching 50-60 per cent of output in some situations.
During this time, the cement sector experienced a fall in sales. Last fiscal year, the slowdown was approaching 25 per cent . To address these issues, cement makers increased cement prices by up to 19-20 per cent in May 2020. Prices then fell 1 per cent month on month in June-July 2020. Several factors, including the onset of the rainy season, workforce shortages, profit margins, and location relaxation, all contributed to costing and demand changes during this timeframe.
Three more motivations are included in the interventions of all construction material and equipment sector business people.
Prioritise important assessment actions to safeguard connections with key customers, critical suppliers, and strategic practitioners.
While retaining brand positioning and profitability, drive revenues and sales from large order quantities. However, to destock, it is necessary to know what pricing is to be set.
Businesses must decide what further discounts they can endure guaranteeing growth and customer base. As a result, the third motivation is financial stability.
Here, everything seems quite pleasant and healthy. However, there are various grey zones, very life-like. I mean, to increase profits, businesses engage in a variety of unethical practices. For example, there is no rate uniformity; instead, rates vary depending on order amount and business relationship. And this, in turn, distorts the market and causes price and material availability to be ambiguous. Several small-scale contractors and new architects find difficulties in competing with major corporations. Sometimes they have to choose between quality and profitability. It is not a reasonable or fair practice.
OEMs have already been struggling with weak demand and compliance headaches. Due to the outbreak, they have paused or reduced production to weather the storm. Major slippages in the current fiscal year are anticipated to bring the production back to six-year-old volumes. To reduce inventory due to falling demand, Indian auto-component businesses have previously slashed manufacturing by 40 – 50 per cent. Many local manufacturers are on the verge of collapse because of the complete lockdown restrictions since most function on razor-thin profits. As a result, OEMs are pushed to sell the most profitable equipment technology or product rather than the most suited solution.
Consumers are increasingly purchasing high-priced products online. Contactless commerce is on its way to becoming the norm. Material providers are now attempting to digitise their sales. In a post-pandemic world, digitisation also reduces the need for physical presence and experience centers. This lowers operational expenses and provides a more resilient mode of operation in the face of economic volatility.
During the COVID-19 lockdown, there has been a generational shift toward Millennial and Gen Z e-commerce familiarity. During the months of global quarantine, there was a 12 per cent rise in first-time internet purchases. Furniture producers, in particular, have seen an increase in internet interest. As a result, to reach to the digitally connected consumer, this industry will need to grow its online presence. Correct? Price transparency, delivery speed, and product quality are also becoming increasingly important. Consumers are astute and knowledgeable; they conduct extensive research before completing orders.
Augmented reality is helping furniture and construction firms all around the world. Some of the most well-known brands for spearheading this shift are Dulux, Asian Paints, and IKEA. Aside from increasing conversions and decreasing returns, these experiences completely eliminate the need to visit a physical store. According to a Deloitte research from January 2020, more than one billion smartphones and tablets are now AR equipped, with 100 million users projected to buy using augmented reality.
Infrastructure initiatives, including government projects and health-care upgrades, will receive a considerable boost following COVID. The government is expected to open up new industries to corporate engagement in order to reach its INR 111 lakh crore infrastructure expenditure target by the financial year 2025. Over the next few quarters, construction materials will be in higher demand. The key areas would be railway lines, solar farms, highways, hospitals, smart cities, and telecommunications.
Construction supply companies in India are also experimenting with technological innovations. Online procurement solutions are being investigated by the suppliers. This will aid in increasing profits and optimising promotional reach. They are also taking advantage of digital building materials platforms like buildsupply, tracxn, etc. This will facilitate scale-driven purchase fulfillment and maximise the exploitation of their materials inventory.
Now is the moment for construction companies to begin looking for local suppliers in big cities. Building construction enterprises must find capable local suppliers. And they should avoid high-risk vendors to avoid supply disruptions.
Know your competition and upcoming projects. It is difficult to predict when establishments will resume normal operations, but whenever they do, many will rush to obtain goods. As a result, a plan is required to minimise the demand concerns during the inevitable rush later.
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About the Writer
Anchal Srivastava is an architect, urban planner, writer, researcher and scholar. She is a certified GIS specialist from IIRS, ISRO, Dehradun. She is a graduate of the School of Planning and Architecture (SPA), Delhi and Dr. A.P.J. Abdul Kalam Technical University (APJAKTU), Uttar Pradesh. She has experience working at the Town and Country Planning Organisation Delhi, Jabalpur Smart City Limited, Suresh Goel & Associates (SGA), APS Green Architects & Associates, and as the head architect at SSAP and Shantiniketan Buildtech Pvt. Ltd.
About the Editor
Srishti Mehta is the author of From the Land of Mist and Snow: Haikus from Antarctica. She is a creative writer, editor and publisher. She is the Editor-in-Chief at Zeyka. She is a graduate of the St. Xavier College, Ahmedabad, and the H.R. College of Commerce and Economics, University of Mumbai (MU). She has been the India Ambassador of the International Antarctica Expedition (2018) with 2041 Foundation. She has diverse volunteer experience in natural field studies, explorations, and journalism with numerous organisations including the Bombay Natural History Society (BNHS), Mumbai.
About the Illustrator
Shruti Bhagwat is an undergraduate architecture student at the Sir J.J. School of Architecture. Shruti has a keen eye for art, design and detail and a passion for books and movies. As the head of public relations for her college, she has organised and hosted multiple events for the institute’s talk series- ‘Manan.’ She was a finalist of Spacematrix’s Designathon 2020.