No fireworks for consumer durables-makers

Rashmi Pratap Purvita Chatterjee Mumbai | Updated on January 08, 2018

Dim outlook The retailer Croma is likely to witness a decline in sales compared to last year

Diwali sales to be hit due to liquidity crunch; high base effect of pre-GST buying to kick in

Consumer durable players are heading for a lacklustre Diwali as festival sales have been impacted by liquidity crunch and pre-buying in June ahead of the implementation of GST. Subdued market sentiments are leading to the piling up of inventory with retailers, despite a price cut of up to 50 per cent for certain categories.

Croma, India’s first large-format retail chain for consumer electronics and durables, is anticipating a decline in sales growth compared to last year, going by the numbers it has clocked so far. “Festival sales will be softer and definitely lower this year. There is going to be 9-10 growth compared to 20 per cent added sales last year,” Ritesh Ghoshal, Chief of Marketing, Infiniti Retail, which owns Croma stores, told BusinessLine.

The primary reason behind this is the purchases made by customers when companies were giving massive discounts to clear stocks ahead of the GST rollout on July 1. “Consumers bought products feverishly during the pre-GST period this year, and we, too, enjoyed our extensive sales that time,” he added.

High inventory

Higher-ticket products – premium LED TVs of 43 inch and above and refrigerators – have been more affected. “Inventory with retailers was back to pre-GST levels across most categories in August. However, weak secondary sales in August-September, have led to high inventory and resultant cut in new purchases from manufacturers,” Gautam Duggad, Head of Research, Motilal Oswal Securities, said. He also cited liquidity crunch due to GST as another reason for the slow off take of consumer durables. So the companies are rolling out freebies, discounts and price-cuts to expand their customer base. Both Daikin and Voltas have cut inverter AC prices, with their 1.5-tonne three-star inverter ACs being priced in line with LG at ₹38,000. Voltas is also running an exchange offer on inverter ACs where customers get a whopping ₹15,000 discount in exchange for their old units.

Nilesh Gupta, Managing Partner, Vijay Sales, said: “MNCs are already dropping prices by 7-10 per cent for their expensive LED TV sets and Indian companies may also follow suit to compete with them. Besides there are more zero down payment schemes being floated this year compared to last year,” he said. Vijay Sales, too, is expecting at least 10 per cent growth in sales compared to last year.

MNCs under pressure

MNCs are also feeling the heat because of the target set by their headquarters. “There is pressure to sell this Diwali and we have increased our promotions significantly compared to the last year. Now we are willing to give away smaller refrigerators with our side-by-side refrigerators, and even additional six-month warranties in the room air-conditioners segment since our dealers have similar expectations in sales like the pre-GST period,” said Vijay Babu, Business Head, Air Conditioners, LG India.

Manufacturers, as well as retailers, are now pinning hopes on Dhanteras next week to clock sales. K J Jawa, Daikin India MD and CEO, said that with the Dusshera weekend being a long one, customers avoided markets and purchases. “But the sales are back on track and the forthcoming weekend before the Dhanteras celebrations will be a big one for us,” he said.

Published on October 10, 2017

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