The Hindu Business Line : Flat, and growing

The festive season may be over but for consumer durables companies assimilating their sales figures for the period, the party seems to have just begun.

Even as the season started off on a slow note in August-September, consumer durables companies say that with most of the buying coming in during the latter half of October (closer to Diwali), they are well on their way to crossing their sales targets.

Sample this. Mobile phone maker Nokia reportedly sold more than four lakh handsets on October 19, a number not achieved in a single day anywhere else in the world. And while the bigger consumer appliances/electronics makers may have achieved no such sales landmarks, most of them have recorded a growth of over 20 per cent in the season.

Samsung India, for instance, has seen a growth of 40 per cent between September 15 and October 25 over the corresponding period last year. "Our target for the period September 15 to October 31 is Rs 850 crore and we will comfortably achieve it. The growth drivers have been flat screen TVs (grew by over 50 per cent this year over the previous year during the festival period), flat panel TVs (600 per cent growth), frost-free refrigerators (over 40 per cent growth), fully automatic washing machines (57 per cent growth) and smaller categories like digital still cameras and digital camcorders," says R. Zutshi, Deputy Managing Director, Samsung India. The company spent Rs 55 crore during the promotion period — Rs 45 crore on the gifts for the promotion `Diwali Jackpot, Gifts Sureshot' and Rs 10 crore on the advertising.

Videocon Industries, meanwhile, said it is set to cross its targeted sales of Rs 700 crore during the festive season. In fact, according to the Consumer Electronics and Television Manufacturers Association (CETMA), sales in the current festive season are better than last year. "While the official figures are yet to come out, the success of the festive season can be gauged from the fact that there is no clogging in the pipelines for the industry. In other words, there is no excess inventory and production for November is proceeding as planned, showing that companies have managed to achieve their sales targets," a CETMA official said.

According to CETMA, the high-end segment has driven sales during this season. This includes frost-free refrigerators, LCD, plasma display panels and fully automatic washing machines. The growth has been particularly significant in the flat panel TVs segment, which witnessed a double-digit price erosion in the year. In fact, the price erosion in the flat screen TV segment is estimated at 10 per cent and for flat panel TVs at 30 per cent this year. Incidentally, as a result of higher raw material costs, prices of refrigerators, washing machines and air-conditioners have actually gone up this year. Market analysts point out that even smaller towns are increasingly contributing to purchases of high-end durable purchases with availability of finance improving in these areas combined with growing awareness about new technology.

According to Girish Rao, Vice-President (Sales), LG Electronics India, the high-end segment has driven value growth for the company this year, with growing disposable incomes and easy availability to finance helping sales of these products. About 30-35 per cent of sales came through the various finance schemes on offer by banks and dealers. "Our festive promotions period started in August (around Onam) and will last till end of October. We have set a target of Rs 2,500 crore for the festive period and are on course to achieve that. This would represent a growth of 20 per cent over the same period last year," he says. LG has earmarked marketing spends of Rs 100 crore for the festive season.

Market watchers say the easy availability of credit is also reducing the impact of the festive season on overall sales. "Unlike in the past when durables were bought only during Diwali, durable purchase is now happening all through the year and not during Diwali or other festivals.

Consumers are now spending on other high-value aspirational products, for instance, upgrading to a high-end mobile phone, buying digital cameras or spending on holidays," says Shravani Sen, Associate Director (Qualitative Research) for global market research company Synovate.

Companies claim that sales are made throughout the year, with the concept of consumers being flush with cash around the festive period (because of bonuses and such) no longer holding much weight. "With credit being easily available, consumers are now buying throughout the year as and when the requirement arises," says Rao. In addition, other sales drivers during the year too account for a chunk of sales, resulting in consumers not waiting till the festive period to make purchases.

The FIFA World Cup in June this year, for instance, helped to drive CTV purchases. And with the ongoing Champions Trophy and the approaching ICC World Cup, companies may just be saving up their best offers/marketing promotions for the last.

More Stories on : Market Shares | Consumerism | Television Sets | Consumer Electronics

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