India’s appliance makers and retailers are banking on cheap credit to boost festival sales more than ever before.
What that means: customers can now buy the gadgets of their choice with no cash upfront, said Nilesh Gupta, managing director at electronics retail chain Vijay Sales. The scheme is available on 70 percent of the products this year, compared with 5 percent last year, he said. Traditionally, buyers have to pay a third of the cost upfront.
The push to boost sales should come as no surprise with Asia’s third-largest economy growing at its slowest pace in three years. A central bank survey found that consumer confidence in September fell to its lowest since December 2013. This comes on the back of twin bumps of demonetisation and the Goods and Services Tax during the past year.
Non-banking finance companies like Bajaj Finance Ltd. offer no down-payment and zero interest schemes, helping retailers draw customers. The largest consumer electronics financier in India partners with retailers and manufacturers who bear the interest costs. It declined to comment citing the “silent period” before its earnings.
It becomes easier for consumer durable companies to sell higher-priced items on instalments, said Gupta. “Five years ago, the penetration of goods sold on EMIs was 15 percent, while today half the consumers prefer to shop on instalments.”
Gupta says what’s particularly driving demand for Vijay Sales is the falling prices of premium televisions. The electronics chain expects a 10-15 percent jump in sales during the festival season, driven by high-end panels, air-conditioners and mobile phones.
Sony India aims to capture the sentiment with an assured gift on the purchase of its BRAVIA range of flat panel televisions. The electronics giant plans to spend Rs 250 crore on marketing during the festive season that will peak with Dhanteras and Diwali next week, considered auspicious for buying.
“We are targeting 25 percent growth in August-November over the year-ago period,” Satish Padmanabhan, head of sales at Sony India, said in an emailed reply to BloombergQuint’s queries. The company is looking to sell 10 lakh televisions on the back of new products, discounts and finance schemes, he said.
Durable-goods makers also time their launches with the festival season to tap higher demand. Videocon is unveiling 21 new models of LED panels, washing machines and refrigerators. It has bundled offers and easy credit to draw customers.
“We are targeting an overall 20 percent sales growth across categories over the same period last year,” Rajesh Rathi, business head at Videocon, said.
LG Electronics India said its sales have jumped 30 percent so far and expects double-digit growth till Diwali, helped by better financing options available.
Mixed Sentiment Elsewhere
The Diwali boost isn't universal.
Affordable apparel and household products are driving sales for retailers like Future Retail Ltd. It pegs its like-to-like growth at 14-16 percent for the festival period. That’s in line with its performance in the previous few quarters, Rakesh Biyani, joint managing director of Future Retail said.
Brokerage Edelweiss Securities Ltd. expects India’s leading retail chain’s same-store sales to growth at about 12 percent over the previous year through its Big Bazaar, fbb and EasyDay outlets.
The brokerage, however, expects weak sales growth for fashion and lifestyle retailer Shoppers Stop Ltd., largely due to the disruption caused by the GST. Premium apparel is taxed at a higher rate of 12 percent, compared to 5 percent on items below Rs 1,000.
Shoppers Stop is optimistic. “We have seen double-digit growth in the east and demand has picked up after Dussehra in the other regions,” Govind Shrikhande, managing director at Shoppers Stop, said.
E-commerce sites are also eating into the demand. Bollywood actor Salman Khan-backed Mandhana Retail Ventures Ltd., which owns the Being Human brand, expects sales to drop 10-15 percent from last year, largely due to a slowdown in the economy and tough competition from online retailers.
“The share of the customers’ wallet earlier dedicated to apparel spends is now split between electronics and jewellery, adding to the slowdown,” said director Manish Mandhana.
Mall developers too are seeing mixed trends.
K Raheja Corp Group-owned Inorbit Malls said sales rose 8-10 percent in September compared to last year, on the back of electronics and value retail. Footfalls were up 5 to 6 percent, pushing up average sales per customer, said Rajneesh Mahajan, executive director at Inorbit Malls.
Festival season began earlier this year as the nine-day Navratri period fell in September.
Fewer people visited Infinity Malls for festive buying as footfalls fell compared to an increase of 8-10 percent the previous year. Sales have been 10 percent lower, said Mukesh Kumar, its senior vice-president.
. Read more on Business by BloombergQuint.