Slowdown blues: Durables' offline sales feel the pinch this festive season

Offline stores are unable to attract consumers, while e-tailers clocked sales of Rs 9,000 cr during Sept

The first festive season following demonetisation and the introduction of the goods and services tax (GST) is turning out to be painful for a number of consumer-facing businesses. A two-part series, beginning with consumer durable, will look at the impact on these sectors.

M Nanubhai, proprietor at SL Electronics, a popular consumer durables and electronics store in the suburb of Santacruz, Mumbai, is a worried man.

A rack of online festivals between September 20 and 25 and a pre-GST stock clearance in June have meant he is finding no takers for his products now in the crucial Navratri to Diwali period.

“This one-month stretch is critical,” he says. 

 

“Consumers typically time their purchases of durables around this period owing to its auspicious nature. But this time the walk-ins have been thin and I am not sure what is likely to happen as Dussehra and Diwali near,” he says.

As consumers, both in urban and rural areas, tighten their purse strings owing to the stress they are undergoing, offline stores selling durables are feeling the pinch. Many regional, local, and national retailers Business Standard spoke to admit the excitement is missing in stores this year and that sales growth for them vis-a-vis the same time last year is flat. 

“I went out shopping with my family over the weekend,” says Mumbai-based Sumit Malhotra, managing director, Bajaj Corp, the maker of brands such as Bajaj Almond Drops Hair Oil. “It didn’t seem like the festive season had begun. There were hardly any people. And the trend I believe is no different in other parts of the country,” he says.

Experts say the disruption caused by demonetisation, in which 86 per cent of the currency in circulation was no longer legal tender, and the GST regime, in which excise, sales tax and value-added tax were subsumed, have taken its toll on people, especially in rural areas. 

“But urban areas have not been spared, either,” says YV Verma, a consumer durables expert based in Delhi. “The salaried class is grappling with job cuts and poor increments while the rural sector has had to contend not only with the cash ban and the GST but also drought and flash floods,” he says.

All this has meant, says Verma, that people are barely spending, and even if they do, it is limited to channels that offer them deep discounts. No wonder the online festivals by e-commerce majors, during September 20-25, touched sales of Rs 9,000 crore, a growth rate of 40 per cent over last year.
 

“Driven by their sharp advertising, robust offers, and great execution, e-tailers have managed to largely match their pre-sales expectations,” said Anil Kumar, chief executive, Red Seer, the firm which released the above-mentioned figures. Categories that did well this year during the online festivals included not only apparel, fashion goods, and mobile phones but also large appliances.

“While the online channel is not more than 10-12 per cent in terms of penetration when it comes to large appliances, this year has been peculiar because people had limited funds,” says B Thiagarajan, joint managing director, Blue Star.

“There is an impact (on the) offline (channel) as a result of people buying online. But you also have to factor in the advancement of sales that happened in June this year. The offline channel benefited from that spike. But yes, the motivator was the same: Deep discounts,” says Thiagarajan. 

News is that e-commerce majors are contemplating another round of online festivals closer to Diwali, implying that the going may be tough for their offline counterparts. But are they giving up yet?
 

“I am looking forward to a good festive season,” says Nilesh Gupta, managing partner, Vijay Sales, a consumer durables retailer that has stores in the west and north of India. “We may just see a rush in the seven to 10 days prior to Diwali, so I am not writing off this period yet,” he says.

Kamal Nandi, business head and executive vice-president, Godrej Appliances, which supplies to offline stores like most other brands, says, “We are looking to clock good growth on the back of various products and offers we have lined up for the festive period. We believe there is pent-up demand, which should translate into consumption during the festive period.”