Inflation in the times of COVID

When people get out of the lockdown in India and get back to work/shopping, the one noticeable change that they are going to find is in the prices. 

All the discounts have disappeared! 

A meal that I would cost me about Rs. 300 now costs me Rs. 550. The cab ride which I would have got for Rs. 150 is now Rs. 290. Even the cost of FMCG products is up by 10%-20% now. What gives?

Businesses have changed after COVID

Behaviour – There was a need to change behaviour prior to the lockdown. E-Commerce companies were still trying to convince the last of the resistance that it was the future. That resistance was forced to shop online since it was the safest way and also the surest way to get what you wanted – Stores were not sufficiently restocked.

Absence of hope – Part of the force that was driving all of the discounting by the startups was the hope that they would be able to extract value from those customers in the future. That future has become quite distant now and the search for value has been more current.

Tightening of Capital – The absence of easy private capital given the current environment is going to mean tightening the belt and looking for margins. It is not going to be viable to sell at a loss anymore.

COVID Being a real Reset – Till you have momentum, you don’t want to lose it by doing something stupid like raising prices suddenly. So price increases would very gradual. With the lockdown having served as a reset, everyone starts from ZERO. Also, everyone is under the same pressure. So you can price it right.

All these factors are now moving startups towards real pricing for real profits. The question really is, how many of their customers were using their services only because of the discounts and not because of the convenience? Also, how long before the competition heats up once more to a point where cutting prices makes sense?

Till such time for many of us, the costs we were confronted with before lockdown and the costs we will see after are going to be starkly different!






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