Cash-back offers, usually associated with the consumer durables industry, are now available in a core commodity segment such as steel. In its latest ‘ Ghar Banao, Cash Pao ’ (build your home, get cash) campaign, Tata Steel is offering 2 per cent cash back on every purchase of Tata Tiscon TMT bars.
As steel-makers such as Tata Steel and SAIL stare at an inventory build-up, alongside a slowdown in sales volumes in a weak market, they are trying different discount strategies to woo consumers.
Steel prices have corrected by about Rs 2,000 a tonne in the past few weeks on slackening demand.
Through this first-of-its-kind attempt, a commodity producer is connecting directly with the end-consumer. While Tata Steel did not comment, Sanjay Daga of Northern Steel and General Mills, authorised distributor of Tata Tiscon for Delhi and Haryana, said: “We were finding that our competitors were offering attractive prices and this campaign is just to correct that (prices).”
The 2 per cent incentive, which translates to Rs 500-800 a tonne, is on the recommended consumer price. Later this year, Tata Steel will add capacity of 2.9 million tonnes per annum at Jamshedpur.
Typically, the demand for steel dips during the monsoon as the construction industry comes to a virtual standstill.
And the steel makers did not register great sales volumes in the April-June quarter either. “There appears to be some inventory build up as demand is weak,” said Bhavesh Chauhan, analyst at Angel Broking. Offering discounts to dealers is a common practice in this cyclical business. In fact, JSW Steel recently hiked the dealers’ discount by 2-3 percentage points for different product categories to a total of 12-13 per cent of the price. Sources at SAIL said the company has had an ongoing discount scheme for dealers for the past one-and-a-half years. The discount proportion varies for different products and is linked to sales volumes.
Satish Agrawal, Chairman and Managing Director, Kamdhenu Ispat Ltd, said Tata Steel was the first company to make such an offer. He, however, maintained that his products were still competitive.
Steel consumption grew 7.7 per cent in the April-July period at 24.36 mt, while domestic production grew 3.3 per cent at 25.01 mt. Imports were up 36 per cent at 2.5 mt.