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Sales of consumer durable goods have halved in the wake of the demonetisation of high-denomination currency notes, forcing retailers and manufacturers to offer finance schemes to boost sagging consumption.
As air-conditioners, mixer-grinders, refrigerators and televisions pile up at outlets, consumer durable giants are willing to let people walk away with the goods and pay later in instalments.
About three-fourths of the transactions in the consumer durable space are done through cash. “In the short term, demand growth for appliances will slow down as cash transactions account for 70-75 per cent of sales,” said Dipen Shah, Senior Vice-President at Kotak Securities.
Godrej Appliances saw a 40 per cent plunge in sales after the demonetisation announcement. The decline was about 15 per cent for Videocon and 30 per cent for Haier India. Dealers in consumer durables estimate that overall sales in the category have dropped by almost 50 per cent.
In small towns, brown goods are typically bought with cash. To bail out dealers and retailers, companies are offering cusomers easy EMI and no-cash options. “We are trying to take away the cash component from our finance schemes. There will be no down-payment and processing fees. Our cash sales will likely fall by 60 per cent,” Kamal Nandi, Business Head & Executive Vice-President, Godrej Appliances, told BusinessLine .
Videocon Industries COO CM Singh said the demonetisation move “has shaken up consumers. We are spending ₹15 crore on a new campaign with the message ‘buy in 2016 and pay EMI in 2017’. Finance schemes now contribute 65 per cent to our sales,” he added.
Panasonic is taking similar steps to push sales. “Consumers are postponing purchases of consumer durables. We are offering easy finance schemes with pushed-back EMI schemes,” Gaurav Minocha, Head, Home Appliances, Panasonic, said.
With 87 per cent of currency values having been sucked out of the system, it will be a while before cash levels return to pre-demonetisation times. Till then, consumer durable firms will be compelled to offer freebies and EMIs to lure customers.
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