Consumer durables firms take a hit, pin hopes on digital payments, summer rush

Meenakshi Verma Ambwani New Delhi | Updated on January 12, 2018


After grappling with sluggish growth for the past two to three years, the year 2016 had finally brought the much-needed cheer for the consumer durables industry. However, demonetisation has hit the growth charts badly leading to a fall in sales by 30-40 per cent in November.

Post-demonetisation, durable makers are now gearing up for the summer season, which contributes a big chunk to the sales of cooling products, such as refrigerators and air-conditioners. At the same time, various factors such as commodity prices could lead durable players to hike prices in January.

Kamal Nandi, Business Head & EVP, Godrej Appliances, said: “ From January till October, the industry was growing at 25 per cent as we saw benefits of various factors that helped drive consumption, such as good summer, the Seventh Pay Commission, among others. However, in November, the industry saw a drop in sales by about 40 per cent due to demonetisation.”

Strong demand

He said in December, “we are seeing things bouncing back, especially in cities where consumers have switched to digital payments in a big way. But due to demonetisation, upcountry markets could take longer to recover.”

Durable makers said while they did go for production cuts in November, they had now increased production to cater to the demand for the upcoming summer season.

CM Singh, COO of Videocon, said durable companies tend to increase production of refrigerators and air-conditioners in a bid to prepare for the summers.

Energy labelling norms

“The penetration for refrigerators and ACs is still low. These products are a necessity, so as we gear up for the summer season, we expect to see good demand for these products,” he said.

After demonetisation, the industry expects to see the durable business getting more organised especially at the retail end, he added.

Meanwhile, the Bureau of Energy Efficiency (BEE) has tightened energy labelling norms by two notches, which would mean prices for the new 5-star and 4-star rated direct cool refrigerators could be hiked by ₹3,000-4,000. Display panel prices have also gone up globally, which is expected to impact LED TV prices. Players said depending on a company’s ability to absorb costs due to currency fluctuations and increase in commodity prices besides other factors, they may hike prices in January by 7-8 per cent. Some other players believe given the demonetisation impact, durable players may hang on to the existing prices.

E-commerce sales

Companies also expect the contribution of e-commerce sales channel to grow in 2017.

Gunjan Srivastava, MD & CEO, BSH Household Appliances Manufacturing Pvt. Ltd said: “The e-commerce channel’s contribution to overall sales may be small, but it has seen very high growth this year. We believe its significance is only growing. Even if consumers are not buying online, they are forming critical purchase decisions online.”

Meanwhile, competition has further intensified, as some home-grown electronics brands, such as Intex and Micromax, are expanding to new categories in the home appliance segment. While Micromax this year entered the AC segment, Intex has recently forayed into refrigerators and is also strengthening its presence in washing machines and air-conditioners.

Nidhi Markanday, Director, and Business Head-Consumer Durable & IT, Intex Technologies, said: “We are confident that by end of 2017, at least half of our annual revenues will be generated from the consumer durables segment.”

Published on January 01, 2017

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