Festive season yet to warm up for consumer durables sector

If we go by the recent study of Federation of Indian Chambers of Commerce and Industry (Ficci), the market is subdued compared to last year, due to a host of factors.

“As per the data on consumerable durable and electronics during April 2010 to April 2011, this year is facing acute slump in the sales in this sector. Compared to last year when the growth was in double digit, this year it is only 4 to 5 per cent,” said  Ficci Director Soumya Kanti Ghosh.

“A massive spike in interest rates, thanks to RBI, have really dampened the spirit of consumers who are opting savings rather than increasing their already ballooning equated monthly instalments (EMIs),” said Ghosh.

Consumer durable goods section of the IIP (Index of Industrial Production) reported a growth of 3.3 per cent in the June quarter (compared with 19.7 per cent in the same period last year), slowing down from a 15 per cent growth in the March quarter. Over the last five years, most companies in the home appliances basket have seen sales grow at a compounded rate of 25-30 per cent annually.

Uneven buying

Consumer goods and home electronics segment normally witness uneven buying sentiment during the festive seasons accounting for more than 40 per cent of sales.

Conceding slide in demand and skyrocketing input pressure, Whirlpool India VP (Corporate Affairs and Strategy) Shantanu Dasgupta hopes to reverse the fortune by offering freebies to customers. “We have  launched a special festive campaign ‘Sab ka Jashn Sab Ki Jeet’. Beside that consumer would be eligible for an assured gift on every purchase,” said Dasgupta.

“LG Electronics India is looking aggressively to enhance its market share by giving a few freebies with  consumer durable products,” said LG Communication Head Neeta. This has come after LG was recently forced to raise the price due to cost increases.

Policy changes

Not ready to put blame on the policy changes, Ficci’s Ghosh argues that consumer and electronic goods are under the vicious cycle of high input cost and low demand. “They are really on a precarious wicket this season that they are showering freebies to lure more costumers,” said Ghosh.

According to a recent Consumer Electronics and Appliances Manufacturers Association (CEAMA), over the next five years, rural India will consume 20 per cent of the consumer durable industry’s production.

“As the commodity prices are increasing, consumers from hinterlands of the country are ready to splurge. But companies with well oiled connectivity to these areas can only tap this demand and overcome the tide,” said Ghosh.

As the sentiments are down, some companies are adopting different strategy. TTK Prestige, for instance, did not reduce the price but started loyalty programme as part of the Prestige Festival Dhamaka at smart kitchen outlets. “We hope to achieve a target of 40 to 50 per cent growth during this festival season,” said TTK Prestige Executive VP Marketing Chandru Kalro.

To reach out to consumers, Samsung Electronics Co Ltd is all set to spend Rs 150 crore on free gifts during its 45-day promotion Samsung Smart Utsav. The company is also offering gifts like 50 blockbuster DVD pack, 3D titles, DVD and Blu-ray players, or a Samsung Soundbar as part of promoting its LCD and LED televisions. It also assures cashback of denominations between Rs 200 and Rs 15,000 on the purchase of goods such as washing machine, air conditioner, microwave, etc.

Even though market sentiments forecasts a gloomy picture, industry players are putting up a brave front banking on changing demographics in society where more nuclear families and increasing percentage of floating population are aspiring for global products on affordable price range.