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Outdoor sector losses could range from 25-40%

09-November-2017
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Outdoor sector losses could range from 25-40%

Prime Minister Narendra Modi on November 8, 2016 declared Rs 500 and Rs 1000 currency as invalid. The decision had an impact on almost every industry due to cash flow crunch. The PITCH MADISON ADVERTISING REPORT 2017 showcased that Rs. 1,650 crore were knocked off from the entire advertising expenditure. As part of ‘One Year of Demonetisation’ series, Exchange4Media reached out to some OOH companies to know how much the sector has recovered after a year and if there are any long-term effects of the same.

The initial few months...


Industry experts say the initial few months were so bad that it can be termed as one of the worst phase in the history of OOH sector. According to the estimates of some agency heads, the sector faced a loss of 25-40% due to demonetisation.

“Complete industry was bleeding. The impact was the worst it could have been. Graphisads faced 25% cancellation on immediate basis during the second week of November and December was at 60% occupancy,” Alok Gupta, Managing Director, Graphisads, recalled the November of 2016.


Dhanwinder Singh, Chief Strategy Officer, Grey Parrot, however, said that the move did not impact the 
the midsize agencies like it hurt the big ones. " As a Zero Delegation agency, we have a lean structure, with no unnecessary and fancy expenditures,”
        
Suresh Balakrishnan, CEO, South Asia and Middle East, Kinetic Worldwide, also spoke on the same line and said, “Kinetic WW didn’t get much affected. If the sector lost around 25%, the impact on us was 10%.”


Completing one year...

Since most of the OOH players deal in cash, demonitisation adversely affected their advertising budget. “Advertising is the first casualty in any slowdown since clients want to cut down on budgets,” Gupta explained. “Thankfully January onwards things started to pick up as government advertising helped in media bookings,” Gupta said with a sigh of relief.
“Sector has yet not fully recovered, it is still in a damage control mode and trying to cover up for the losses that it has made in last one year,” Singh claimed.

It is arguably known that Out-of-Home advertising is extensively used by real estate players, jewellery companies, and politicians, and much of the transactions are in cash. Both Balakrishnan and Singh spoke similarly about the impact on OOH sector due to the RERA and restriction on cash flow in real estate.“We had a little slowdown in the last quarter, but we were back,” said Saxena.

Road to recovery- not so smooth

Almost all companies exchange4media spoke with said that there were no long-term impacts of demonetisation.  But, while the sector was trying to recover from the effects of demonetisation, the government introduced the Goods and Service Tax (GST). “The bigger setback came with GST, there was a 90% drop in the business,” Malhotra said.

Speaking on the same line, Gupta said, “Demonetisation was followed by RERA, then GST. All these have been kind of reset buttons for all businesses.” “We expect July 2018 to be the turning point as currently everyone is adjusting to GST and first quarter of FY usually is strategy creation,” Gupta said.

The ad spends of real estate companies had gone down with the implementation of RERA. “First, demonetisation and then due to RERA regulations lot of real estate players either had to pull down ongoing campaigns or shelf the campaign till they comply with,” Singh asserted.

Even Balakrishnan said that by the time the sector recovered, GST hit again. And on the strategy to deal, he said, “When bullets fly it’s better to duck. So we waited and watched.”

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