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BW Businessworld

Rain On The Parade

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It may not be as festive a season for consumer durables as has been hoped. While most consumer durable firms hoped that festive season sales would cushion the effects of the overall economic slowdown, the buzz isn't quite what it was at this time last year. Blame the stubbornly high inflation and interest rates.

The September-December period — when durables companies sweeten deals and offer discounts and club purchases with offers that help push sales — alone accounts for 35-45 per cent of their annual sales. But for many, the season has been slow and sales estimates have been revised down.

"We are expecting sales from the season to grow by 25 per cent from the last year, however our marketing spend will be 10 per cent lesser this time," says Yasho V. Verma, chief operating officer at LG Electronics. The company has taken a cautious view, based on the flattish growth in the market this year.

Some analysts agree. "Going into the year, the companies had higher expectations from the festive season, but it is expected to be below the projections made by them at the start of the year," says Gaurav Gupta, director, Deloitte India, a consultancy firm.

Companies are being squeezed at both ends — rising commodity prices and low demand have put pressure on their pricing power; many have not been able to pass on the rise in prices to customers this year, besides being unable to absorb increases in costs. "There is some dampening in sentiment," says Kamal Nandi, executive vice-president of sales and marketing at Godrej Appliances. "A short and low summer has led to postponement of purchases this year. But that will help push sales this festive season."

Others disagree. "Initial results from Kerala during Onam are encouraging. We are expecting a good season ahead," says Gunjan Srivastava, senior director (marketing), Philips Consumer and Lifestyle India.

Many are betting on new products. Panasonic, which launched new ranges of refrigerators, air-conditioners and digital cameras, is expecting sales of Rs 1,000 crore during September-November. It is expecting a 100 per cent growth in sales from last year and is investing Rs 100 crore in marketing.

Samsung is targeting Rs 2,500 crore in sales. "Based on our new launches and the ‘Smart Utsav' offer, we are looking at a 30 per cent jump in sales during the promotion period," says Mahesh Krishnan, vice-present and business head (home appliances). Samsung will invest Rs 110 crore in advertising and Rs 150 crore on promotion campaigns.

Sony hasn't felt the heat. "I have only read about a slowdown for passenger cars, but it is not affecting consumer electronic companies," says its managing director Masaru Tamagawa.

Videocon is targeting business of about Rs 1,500 crore this festive season and plans to launch 3D LED televisions next month. Its marketing investment has gone up by 60 per cent.

But in certain categories, where consumers buy products on instalments, sales have been low. And with interest rates likely to go up again, there won't be much to cheer about.

(This story was published in Businessworld Issue Dated 26-09-2011)