Team FE
Despite a slowdown in consumer spending this year, the 22-day festive period, which began with Dussehra and ends with Dhanteras in mid-November, is expected to see 25% increased consumer spending. Between consumer durables, jewellery, corporate gifting and chocolate companies, marketers have already fixed their sales targets of generating in excess of R15,000 crore in the October-December quarter. As per the latest survey by industry body Assocham, corporates are expected to shell out R3,200 crore towards corporate gifting this Diwali.
Durable majors, including LG India, Samsung, Panasonic, Sony, Phillips, Voltas and others are hoping to sell goods worth R11,000 crore in the third quarter of 2012-13, a growth of 15-20% over the same period last year. Both Samsung and LG India expect a 25% growth in consumer spending on durables this Diwali. Others like Sony, Phillips, Videocon aim at 25-30% growth. In value terms this simply translates into a per day average sales of R170 crore (Oct-Dec) as opposed to an average daily sales of R125 crore (Jan-Sept).
“Based on sales, the consumer durable industry size is pegged at around R45,000 crore. Around 30-35% of the sales happen in a short period of 90-days falling in October to December. And this is the reason the markets are flooded with festive offers, luring consumers to spend,” says a senior analyst who tracks FMCG and consumer durable companies.
India’s largest retailer Future Group, which operates lifestyle chain Pantaloons and supermarket chain of stores Big Bazaar, among others, is expecting this festive season to be better. ?We are looking forward to 18-20% growth this season. Till now the signs are very positive,? says founder and CEO, Kishore Biyani. Apparel companies are pinning their hopes on the pre-Diwali sales where they are seeing better off-take of fashion and apparel.
K Raheja Group company Shoppers Stop expects a like-to-like sales growth of 8-10% in the next two quarters, from the 5% growth in the second quarter on the back of festive sales. ?It’s definitely going to be a more buoyant Diwali than last year as consumer sentiments are much more positive. Generally the east sparks off the festive shopping season with Durga Pujo. This year, the east has shown good growth; followed by October which has also been a good month. This indicates that the festive season will move us towards an 8-10 % like-to-like growth,? says managing director Govind Shrikhande, adding that Shoppers Stop is seeing better demand in the apparel segment during pre-Diwali time.
Pantaloons Retail, India?s largest listed retail company by revenue, is saddled with a debt of R3,636.07 crore. Pantaloon saw single-digit growth in its lifestyle segment in the first and second quarters. Shoppers Stop, on the other hand, saw its net profit drop a steep 67% in the second quarter as an extended discount season and spiraling expenses pressured margins.
As growth remains muted due to a slowdown in the economy and low consumer sentiment, retailers extended their discount season to attract more footfalls. But this has squeezed margins at most companies this year. This time, both the retailers are not going in for discounts, ?We want to work on a completely new strategy of discount sales and beat the market. The market has been taking a path of discounting for too long and we don’t believe in that,? says Shrikhande. Biyani, too, has indicated that the company will not advance its discount season.
Bijou Kurien, president and chief executive (lifestyle) of Reliance Retail, says there are high expectations from the festival season as the economic climate is favourable now. Arvind Mills, too, is expecting a 20-25% hike in sales this festive season.
Electronics
Consumer durable companies, grappling with a thin demand over the past year, are now seeing a resurgence in demand, especially for smaller products.
Videocon, which is being aggressive on marketing during the season, is expecting sales of R2,000 crore, as it bets on better marketing campaigns. Videocon Industries director Anirudh Dhoot admits that they did see a slowdown in the past few months, but expect smaller appliances to make up for the lacklustre demand.
Rajan Malhotra, president, (customer strategy), Future Group, and eZone head, says mobiles and tablets are growing at a faster rate.
?We have been maintaining a double-digit growth in volumes this financial year, and we expect to maintain the momentum this festive season also,? says Pradeep Bakshi, EVP and COO-Unitary Products Business Group-Voltas Ltd, adding that he expects the market to correct itself this year despite the overall caution being exercised by the consumer.
However, LG Electronics is of the view that there is a change in sentiment due to government plans. ?This festive season we are very positive. But we are not giving freebies and discounts,? says a top executive.
Panasonic India is pumping in R100 crore for marketing and branding, during the festive run, targeting sales of R1,200 crore. Samsung’s consumer promotion for the season “smart home celebrations” entails attractive gifts on purchase of products, ranging from tablets to mobiles to movie titles. Whirlpool India is aiming to cross R900 crore in sales this festive season.
The Diwali season contributes about 30% of the total yearly mobile phone sales in the country, making it an important phase for handset manufacturers. Apple launched iPhone 5 just a week ahead of Diwali. HTC has also launched its Windows 8-powered smartphones, while Lenovo has just entered the crowded smartphone segment in the country with its Android-based devices.
Samsung, the market leader in the smartphones category, is expecting to increase its lead over other players with its hugely successful Galaxy series of smartphones. “We expect to increase its market share in the smartphone segment by another 10% by the end of this festive season,” says Asim Wari, vice-president, Samsung Mobile India.
For companies like Nokia and Sony, this festive season is a make or break season due to change of market strategy in the fast evolving smartphone market. Nokia is pinning all its hopes on the Windows 8-powered Lumia range of phones, while Sony mobiles globally is focusing on Android-based Xperia range of smartphones and has exited the feature phone segment.
Nokia says the response to Nokia Lumia phones has been “extremely encouraging”. The company is offering free accessories worth R1,500-5,500 along with the Lumia models. “The current offer, combined with the festive season, gives consumers just the right excuse to indulge themselves,” says Viral Oza, director of marketing, Nokia India.
Blackberry, which has seen an increase in sales in October, hopes to continue the performance and is offering unlimited data services for R399 per month, says Amit Mathur, director of sales, Research In Motion, India. “There is no scope of a slowdown, we are rather bullish about growth in the adoption of these devices in the Indian market,” sums up Sachin Thapar, business head, mobile division, Sony India.
Gold & jewellery
With Dhanteras today and Diwali approaching, jewellery buying has picked up across the country. ?We are seeing positive signs . There is a definite surge in demand as people who were deferring buying for the past six-eight months are buying now,? says Gitanjali’s Gems’ president Abhishek Gupta. The company has introduced new brands and is targeting 250-280 sales point this year, from the 300 sales points it opened last year. Sales points refer to franchises, own stores, distribution and e-commerce platforms. In the four days leading to Dhanteras last year, the Gitanjali Group clocked around R400 crore worth of sales compared to R250 crore in 2010. This year also, the company is expecting double-digit growth.
Tanishq is seeing a gold demand growth in double digits, compared to the negative growth in the last quarter. ?In the past six-seven months, we saw a decline in gold volumes and we were not expecting volume growth, but the festive season has surprised us,? says Sandeep Kulhalli, vice-president, retail and marketing, Tanishq. Tanishq has seen a 35% increase in diamond jewellery volumes post Navratras till November 6. The company’s gold volumes have been decreasing for the past few quarters after record prices of gold hurt demand across the country.
India is the world’s largest buyer of gold and the demand is likely to gain pace in the second half of 2012 spurred by festivals and weddings, says the World Gold Council.
Since last year, retailers like Gitanjali and Tanishq have been focusing on smaller towns where disposable incomes are on the rise. Rural demand contributes to about 70% of the Indian gold demand. Also, typically, October-January is a good time for jewellers as the festive season spurs spending on gold and diamond. Experts say of the total sales of gold expected this year between Dhanteras and Diwali, roughly 15% would come from the sale of gold coins, half from gold jewellery and the balance from diamond jewellery. Overall, R2,000-2,500 crore worth of jewellery sales happens during the festive season.
Gifting
On the gifting front, estimates suggest that the pharmaceuticals, real estate, FMCG and civil aviation sector all put together may distribute gifts worth R2,000 crore. “Gifting helps to strengthen goodwill of the company and foster long-lasting cordial relations with both employees and associates. And that is why corporates spend big this season,” says DS Rawat, secretary general of Assocham. “Sweets, dry fruits, cakes, champagne, candles and diyas are pass?. IPods, digital cameras, MP3 players, DVDs, mobile phones, LCD TVs, spa packages, silverware, Swarovski, gold-plated items and fine stainless steel products are the in things now,” adds Rawat.
Inputs by Ashish Sinha in Delhi, Vaishnavi Bala in Mumbai, Anand J in Bangalore, Indronil Roychowdhury in Kolkata
