While discounting is down, the emphasis is on freebies, offers, promotions and financing schemes
If the initial signs are anything to go by then companies across categories such as consumer goods, retail, auto and real estate could be in for happy times this festive season. Consumers in general have begun thronging stores in the last few days as the decibel levels around offers and promotions grows.
The last weekend saw a flurry of ads by manufacturers and retailers in the run-up to Dussehra and Diwali. But unlike last year when sentiment was low, the government's reforms push this year is bringing consumers back to the shop floor.
Retailers and manufacturers contacted by Business Standard indicate that this year is likely to be better than last year in terms of sales throughput. Yasho. V Verma, director, home appliances, LG Electronics, says that the company has been seeing a sales growth of about 30 per cent so far, and is expecting to continue growing at this pace. Last year, sales growth was a little lower for LG at about 20-25 per cent in the run-up to Diwali as consumers cringed on account of high inflation and high interest rates. It didn't help that the rupee was depreciating against the dollar putting pressure on companies to take up prices every now and again.
This year with the rupee appreciating against the dollar by almost 6-10 per cent in the last one month, the cycle of price hikes has stopped for now, says a Samsung Electronics spokesperson. Manufacturers admit that had the rupee continued its downward slide then price hikes especially in home appliances could have been a lot more than the roughly 10-15 per cent that it has seen so far.
Consumers have clearly benefitted from this move. Says Rajan Malhotra, president, retail strategy, Future Group, and head of its Ezone electronics chain, "We are seeing good double digit growth at Ezone. While the technology segment led by tablets and smartphones has been doing well, home appliances was lagging behind. From the last weekend, this segment too has picked up. We are seeing good numbers in air conditioners, washing machines and other white goods."
The best part is that consumers across markets from Mumbai to Delhi, Kolkata to Bangalore appear to be in a mood to celebrate. Consider what Sony India's senior general manager, sales, Sunil Nayyar, had to say about the just-concluded Durja Puja sales in Kolkata. "We never expected the market to be so buoyant there. We saw a growth of 65 per cent in flat panel sales in Kolkata this Puja. We are hoping this momentum continues across the country as we get into Dussehra and Diwali."
Says J Suresh, president, Arvind Retail, part of textile major Arvind, "Things are looking up from last weekend. It is festive time and people are buying." Between September end to mid November, the company is opening 20 odd stores across its formats Megamart, Arrow, US Polo and so on. Growth in sales so far has been almost 25-30 per cent vis-a-vis last year when it was lower, says Suresh.
For two-wheeler and four-wheeler manufacturers creating excitement in the marketplace by timing their new launches around the festive season is common. But even they appear to be pleasantly surprised with the response of consumers to their new products this year. Says a Maruti Suzuki official about the new Alto 800 launched this year, " Bookings for the new Alto 800 have crossed 21,200 so far. It has been fabulous to say the least and we are happy with the response."
Pune-based Bajaj Auto, the third-largest two-wheeler maker in India, says it is confident of posting a sales growth of 30 per cent this festive. K Srinivas, president, motorcycle business, Bajaj Auto, says, "The response for the Pulsar 200 NS, a new product launched this year, is amazing. The company is increasing production for the Pulsar 200NS to 10,000 per month from 8,000 per month presently. We are also increasing production of the Discover 125ST, also launched in the run-up to the festive season."
Discounting down, promos & financing up
Manufacturers and retailers say that price discounting is down this festive, with most counting on offers, promos, freebies and financing schemes to improve sales. The good news is that apart from non-banking financial companies (NBFCs) even regular banks have stepped in aggressively to lend to the retail consumer this festive. This obviously means that consumers have more choice available when seeking an auto or durable loan, not to mention home loans.
Banking sources say that growth in home loans so far has been around 20 per cent. Auto and consumer durable loans are up by about 10 per cent each. As interest rates begin to come off their peaks, banks and NBFCs say that the trend could improve going forward. "Demand for housing loans continues to be robust especially in tier two and three markets," V K Sharma, chief executive, LIC Home Finance Ltd says.
With the number of players growing, manufacturers say they are also actively pushing consumers to considers high-ticket items this festive. "With more financing options available, consumers are in a position to uptrade," say the Samsung spokesperson. Malhotra of Future Group adds, "We know that affordability is the key and prices of white goods in particular have gone up in the last six months. Hence it is important to offer such schemes."
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