It is that time of the year when festival gifts are shipped, shopped and stocked for distribution. But this year, vendors and companies specialising in corporate gifts are a worried lot as orders have shrunk by nearly 30 per cent as big buyers cut down on non-essential spending.

Apart from the slowdown effect, several MNCs are cutting down on their gift budgets to adhere to international corporate governance practices, which stipulate that gifts should be a goodwill gesture, not a bribe.

Big corporate names in sectors such as automobile, real estate, information technology and big public service undertakings are understood to have slashed their ‘gifting’ budgets.

Although the exact quantum of the cut in discretionary spending is difficult to predict, analysts note that it could be anywhere between 40 and 50 per cent.

Paresh Parekh, partner, Retail and Consumer Products, EY, said, “Increased corporate governance has put companies in a watertight situation. Companies, particularly MNCs and private equity-funded entities, are careful not to violate the norms and send out gifts as a mere goodwill gesture or are even omitting it. Companies in the durables and lifestyle segment are anyway going slow on inventory as consumers are going slow on buying. The festival season will be a good indicator.”

The corporate gift market is estimated at Rs 3,000 crore and is growing annually around 20-25 per cent. Domestic companies spent around Rs 500 crore on gifts last Diwali, the largest season for corporate gifting.

Traditionally, the festival season is associated with North India, which accounts for the largest corporate orders.

However, in the last decade or so, gifting has spread to other parts of the country. Companies usually order gifts for employees as well as for clients as a goodwill gesture.

Uday Chug of Vriddhi Specialty Foods, which imports gourmet products, says the corporate gifting segment has been rather slow this year. “Usually orders are booked as early as July. But even by October, corporate orders are yet to be placed,” he said. Chug said his company had reduced imports by nearly 50 per cent and was even asking suppliers to hold stocks.

Pawan Gadia, CEO, Ferns N Petals, said the company had posted a 50 per cent growth last year but this year growth had been only about 20 per cent. The revenue from corporate gifting is about 4-5 per cent. “Big institutional orders are slow this year,” he added.

It is not just organised players but wholesale dealers, too, who are seeing a dip in corporate orders.

Order flat

Anupam Bansal, a dry fruit seller at Delhi’s wholesale market, Khari Baoli, said orders are flat compared with last year. “Prices have gone up almost 30 per cent. But the budgets for companies are the same. This has resulted in slow offtake. While volumes are same, the value is much lower,” he says

Popular gifting options such as pens, wines, crystals and small appliances have hit a slow track. Players operating in the high-end gifting options segment, however, note that the impact has been minimal.

Sukanya Duttaroy, Managing Director, Swarovski Consumer Goods Business, said, “We received many corporate interests and are potentially looking for an increased business volume. We realise there might be some trade down in value and accordingly have widened the range and made it more affordable and personal with functional pieces as candle sets, jewellery sets, watch and cufflinks.”

(This is the first part of a series on festival season in the time of slowdown)

>bindu.menon@thehindu.co.in

Related Topics