Priyanka Sarvotham, a Chennai-based hotelier, decided about six or seven months ago to change her 12-year-old washing machine when she had to call the service engineer for the third time. But since prices had increased by about 5-6 per cent around that time, she decided to wait till the festival season when, she thought, prices would come down or at least companies would offer good discounts.
But, she is yet to buy a new machine.
“The discounts were not really attractive this time, so I changed my mind,” she said. “I have decided to buy only when the one I am using now completely breaks down.”
Bitten by slowdown pangs and rising prices, like Priyanka, not many seemed to have opened their purse strings this season.
The slowing economy, along with the weak rupee and the resultant price increase, took its toll on festival sales this year. Usually, the festival season — beginning with Onam in Kerala and going on to Durga Puja in the eastern States, and Diwali almost across the country — contributes 35-40 per cent of the annual sales of any durables company.
But this year, thanks to dampened consumer sentiment, the trade reports a drop in sales compared to the last year. Not only that, prices of durables have gone up by at least 17-20 per cent.
Below expectations
According to retailers and durables manufacturers, consumer sentiment still remains bleak, and the overall sales during the ‘festival sale’ was way below expectations.
This trend is despite the fact that Onam sales — though mostly confined to Kerala — were reported to be good, thanks to higher forex remittances into the State.
Major players in the segment such as LG, Samsung, Panasonic, Sony and Godrej are likely to report lower sales compared to last year.
“The depreciating rupee has impacted our bottom lines but we have passed on a minimal price increase so that we do not disturb consumer sentiments. However, the festive season was not all that encouraging. The category growth seen in the first half of this year, led by premium products such as panel TVs, frost-free refrigerators and split air-conditioners, seems to be slowing down in the second half,” said a senior official of a leading Korean brand.
In fact, to beat the slowdown blues, many leading brands came out with discounts and some special offers this year. Some gave scratch cards carrying cash-back offers, free warrantee cards and some assured gifts with every product. But, all this failed to attract buyers.
Flux in appliances
Godrej Appliances, one of the leading home appliances brands had a growth target of 20 per cent and a sales turnover of over Rs 700 crore this season. “But, the reality is different,” Kamal Nandi, executive vice-president (sales and marketing) of the company, said adding, “It was below our expectation.” The company had lined up a series of new ‘Best in class’ product launches in practically all its categories and sub-segments. Apart from the innovative products, the company has also launched attractive gift schemes on key products “to make this festive special for its customers”.
The appliances industry has been going through flux lately. While the depreciating rupee, increase in commodity prices and infrastructure issues added to the complexity, manufacturers were expecting that lower penetration, changing lifestyles and growing aspirations would result in increased sales.
Nandi says, “Even now, we do not see any indication that the situation will improve in the next couple of months. We can only hope that the new year sale will be better.”
Korean majors LG and Samsung Electronics too launched a series of new products across their premium television and home appliance categories. LG announced that as part of the festive bonanza, customers could get a chance to win more than two lakh gifts on the purchase of any LG home appliances and consumer electronics product. Besides, this season, even public sector banks such as Indian Overseas Bank and Indian Bank launched special loan schemes for the salaried class to facilitate the purchase of consumer durables. IOB slashed interest rates by 200 basis points “on easy terms and conditions” to encourage consumers to splurge. Indian Bank offered a special combo loan product under which a customer availing himself of a home loan would also be offered a consumer durables loan at a special discounted rate. It also waived processing fees on all retail loans.
But the end result was not as expected, say retailers. “We only hope that the new year sales will be better this time, as there should be a pent-up demand in the market,” said Kodandarama Setty, chairman of a major durables retail chain, Viveks.
Gaurav Gupta, Senior Director, Deloitte India, said that since there was a drop in sales during Dasara and Dhanteras, “I do not expect any remarkable change in consumer sentiment in the next couple of months.”