Consumer Durables: Companies bank on big festive season

By Arnab Dutta , Business Standard, New Delhi | In Marketing | October 13, 2016
After two years of mixed to subdued sales, 2016 is turning out a bumper one of sorts for durable makers.

The phone of Anirudh Dhoot, director, Videocon Industries, hasn't stopped ringing. "Business is booming," he says. "And, my executives are keeping me informed of the goings-on. I am pleasantly surprised to know that sales traction has been good across markets, urban and semi-urban. Towns that I haven't even heard of are seeing inquiries from dealers and consumers. I am not complaining."

After two years of mixed to subdued sales, 2016 is turning out a bumper one of sorts for durable makers. The long and hot summer meant air conditioner and refrigerator makers were laughing their way to the bank. The AC market, in particular, grew in double-digits (over 20 per cent), according to industry estimates vis-a-vis last year. Refrigerators are estimated to have grown 15 per cent this summer over last year.

"In many respects," Dhoot says, "The trend was set in the first half of this year and the good monsoon season, coupled with hikes coming from the Seventh Pay Commission and One Rank One Pay in the second half means consumers who were delaying purchases earlier, will get into the market now. My targets are high this festive season."

Apart from Dhoot, chief executives of most other durable companies expect sales growth of at least 25-30 per cent this festive season.

Kim-Ki-Wan, managing director, LG Electronics India, says. "The consumer economy is buoyant. Macroeconomic factors favour growth. We have registered good growth and will continue to do so, on the back of our strong product portfolio."

According to Ranjivjit Singh, senior vice-president, Samsung India, what will aid growth going forward will be the government's rural and infra push. "Samsung has created a strong product portfolio across price points and segments. The idea is to develop new categories and drive affordability, especially in rural areas. We expect demand from rural markets to grow in the future because existing consumers may trade up and new consumers may come into the market. That is a big opportunity for all of us," he says.

It helps that the central bank's recent rate cut of 25 basis points (bps) could lower cost of funds for buyers of durables. "The festive season generally sees a wave of consumer finance schemes and offers but I think this year the thrust has been higher on these avenues," says Dhoot. "We are, for instance, offering consumers the option to pay up in small equated monthly instalments. So, imagine if a product costs say Rs 40,000 to Rs 50,000, equated monthly instalments extend into next year, with zero processing fees and charges. Plus the warranty period on the product is five years. As a prospective buyer what more can you ask for."

Most executives are feel the party could extend well beyond the festive season, as rural demand shows signs of recovery. Most companies are believed to be silently working on a road map for the future, which will see them extend their distribution reach into rural areas and target products that are affordable to the rural consumer.

The spoilers could be rising raw material prices and currency fluctuations which could make imports expensive, thereby pushing up product prices. Already, the prices of panels going into television sets, for instance, have begun inching up, putting pressure on operating profit margins of companies.

"The increase in cost will have to be borne by consumers at some stage. The question is when. Right now everyone is in wait and watch mode. Somebody will blink," says Eric Braganza, president, Haier Appliances India.