All consumer durable companies eagerly await the festival season of October to December when sales usually spike. Diwali is considered the most auspicious time to invest in a new television, a refrigerator or for that matter any gadget. Consumer durable manufacturers leave no stone unturned to woo consumers with a host of new product launches. Their inventory during festival time is a good 10-15 per cent higher than regular inventory.
However, the festival season this year is unlikely to be business as usual for consumer durable companies due to the economic slowdown. The last year has been difficult for most consumer durable companies, with sales dipping upwards of 15-20 per cent in categories such as television. While sale of air-conditioners and refrigerators were good during May and June because of soaring temperatures across the country, they have known to have dipped across categories from July onwards. Washing machine sales usually see a spike during the monsoon months, but that too has grown in low single digits.
Though head honchos of all consumer durable companies express optimism for the upcoming festival season, one gets a clear sense of caution being exercised in terms of their festival plans. Manish Sharma, MD, Panasonic India, says, he is "cautiously optimistic" this season. He is optimistic because of the tremendous opportunity to grow in a market like India, but considering the mood of the economy, he wants to play it safe. He doesn't plan to stock up additional festival inventory. "We are cautious about managing inventories as we don't want to end up in a situation where will have high inventories post Diwali."
Categories such as television which occupy over 50 per cent space in most durable stores, in the last one year have registered a volume growth of just 3 per cent while revenue growth has been flat. TV as a category is known to have de-grown by 20 per cent in the past year with a large section of the consumer base wanting to consume content on smartphones. Add to this, the high GST of 28 per cent particularly for large screen TVs has further dampened consumption.
"We will definitely be thoughtful about our inventory this time," adds Neeraj Bahl, MD and CEO, Bosch Home Appliances India. Kamal Nandi, Business Head and EVP, Godrej Appliances, takes comfort in the fact that good Onam sales in the last one week could be a positive indicator of trends. He does agree that apart from the summer months, most of the year has been difficult in terms of sales. So, will Godrej be conservative about its festival inventory this year? "We are launching new models and new products this year as per plan," he says. Nandi doesn't admit of any inventory cuts this festival season, neither does Pradip Bakshi, MD & CEO, Voltas. "We expect traction to build up during this festive season, as a pent-up demand, especially for home appliances,"he says
Arvind Singhal, Chairman, Technopak, says consumer durable manufacturers due to the liquidity crisis prefer to keep inventory low at all times. "All of them are working on a tight supply chain. However, the moment they get an indication of an uptake in sales they are equipped to increase production by 10-20 per cent."
So, while one would assume that durable companies in all probability would increase their inventory as per demand this festival season, all of them seem to be going all-out to woo consumers to spend. Nandi of Godrej has partnered with consumer finance companies to offer more lucrative finance offers for his products. "We are offering lower down payments and much longer tenures of repayment to our customers."
Bosch is trying to woo consumers offering freebies such as movie ticket vouchers and smart watches. "Under the Bosch built-in, we will also be launching a new range of hobs and hoods which will come with discounts and easy finance options," points out Bahl. Walk into any consumer durable store in your vicinity, you will find sales executives of consumer finance companies rather over-active trying to push lucrative finance deals. In an environment where liquidity is a stress, the chances of a consumer getting wooed by easy repayment schemes are high.
No wonder Parag Rao, Country Head (Payments, Business & Marketing), HDFC Bank, is especially upbeat about the upcoming festival season. HDFC, he claims, has close to 150 offers at a national level this festival season and around 10,000 offers at the merchant level. "As far as consumer durables are concerned, we have trained salespersons across stores trying to disseminate relevant consumer information. Consumers can walk in and avail EMIs by merely swiping their debit or credit cards," explains Rao.
So, will the upcoming festival season bring back cheer into the lives of the consumer durable companies? Lets wait and watch.