Diwali is that time of the year when festive fever takes the entire country in its grip. Besides spreading cheer, this period also gives people a chance to refurbish their houses with new electronic equipments, buy new clothes for the celebrations, invest in jewellery in keeping with the traditions and also make purchases that give a customer more value for money than at any other time of the year.
According to the Associated Chambers of Commerce and Industry of India (ASSOCHAM), this year, fast moving consumer goods (FMCG) companies hiked their advertising and promotional budget by 60 per cent as compared to last year in an effort to perk up demands and shore up revenues. Companies dealing in home and electronic appliances, real estate, textiles, gems and jewellery and luxury products followed close. The chamber has also revealed that companies selling home and electronic appliances, automobiles, textiles, gems and jewellery, luxury products and homes had expected sales to go up by 30 to 40 per cent during the festive season. “The September-December season has traditionally been the most productive time for retailers, with consumers looking at buying clothes, consumer electronics and home products during the festivals. However, sales remained lower this year as compared to last year. Also, we saw people spending on a number of brands and products rather than buying just a few. Moreover, since both Dussehra and Diwali fell in October this year, there was a higher contribution in October for retailers but lower sales in November as compared to the last year,” said Purnendu Kumar, Vice President, Retail, Technopak Advisors. During the festive season, it is industries like CDIT, FMCG, automobile and jewellery that offer the highest returns as customers go berserk with their shopping plans. We take a look into these industries to ascertain how they fared across the country during the festive period.
Smart gadgets stole the show
Unperturbed by the weakening consumer response that impacted growth figures for most of the consumer durable companies, this festival season, the leading brands in the sector were optimistic about the industry growth for the festive period this year. However, India Inc. registered only a 25-30% sales growth for this period, which is significantly lower than the last year’s figures. Most consumer durable companies admit that sales have been as good as the previous years despite numerous offers and discounts.
This year, the sales had gathered momentum Navratri onwards, and were expected to grow further till Diwali. Despite slow overall sales, electonics products across all categories did reasonably well, with consumers showing a positive outlook towards products like LED and LCD televisions, refrigerators, air conditioners, computers, mobile phones and microwaves. Croma stores across different regions registered strong sales growth during the festive season, growing at 40 per cent as compared to last year. Washing machines and refrigerators, too, witnessed good demand.
Normally, brands spend double the amount on advertising and sales promotions during the festive period to cash in on the spirit, which comes about near eight to nine per cent of monthly sales in comparison to 4.5 per cent during regular months. Sony had expected BRAVIA to sell four lakh units of LED/LCDs during the Sep-Oct period. The company had expected to garner sales of Rs 2,000 crore this festive season (Sept-Oct, 11), which meant 35% growth over the corresponding period last year. “The company invested Rs 100 crore towards ATL and BTL promotion during this time, which included television and print commercials as well as ads on OOH, cinema and shop front,” said Sunil Nayyar, Senior General Manager, Sales, Sony India.
This festive season, Panasonic India aimed to achieve a 15 per cent market share in the eastern, northern and central regions and 18 per cent in the southern region. The brand expected to achieve sales revenue of Rs 1,000 crore during the festive season as per Manish Sharma, Director Sales & Marketing, Panasonic India. Samsung India saw a 25 per cent growth in sales during Diwali, as compared to 28 per cent last year. “The overall sales were not good and I think the same applies to the organised segment. I think inflation has taken a lot of discretionary income from consumers, which is why there is a drop in growth,” says Arvind Singhal, Chairman, Technopak Advisors. Smartphones have been the biggest winners this festive season. Nokia sold more than 1.5 million units within four days in the run-up to Diwali, clocking sales of about Rs 400 crore. Their sales volume has been up by 33 per cent as compared to last year’s Diwali shopping season. Sales volumes increased by as much as 50 per cent for Samsung over this period. LG has clocked a growth of over 30 per cent during the festive season as compared to that of last year. Even sales of local mobile phone brands such as Micromax rose by 25 per cent.
Jewellery sales slide down
According to industry experts, the demand for gold in India, which is the world’s largest bullion market, has always been strong during the October-December period, which is a traditional time for festivals and weddings, despite the high inflation that has hindered the growth of economy. Demand for gold bars, coins and other pure investments in India around this time last year had soared to 83 per cent from the year before. According to an industry estimate, festival gold sales were to the tune of 70 tonne last year and the industry expected more or less the same figure for this year as well. MMTC, the country’s largest gold importer and a key seller of jewellery, coins and bars, expected the figures to go up by 25 per cent during the festive season. However, there was a 10-15 per cent decline in the overall Diwali jewellery sales. While there has been a rise in the value, the volume has registered a drop. Most of the retailers reported that the sales of gold jewellery were higher than the sales of diamond jewellery during the festive season.
Tanishq had announced a special ‘dhamaka’ offer and assured gifts on purchases for the Diwali season, including flat discounts of 20 per cent on the purchase of diamond jewellery worth Rs two lakh and above, 24 karat gold plated lamp on jewellery purchase of Rs 10,000 and above. Titan offered free gold coins of three gm and six gm on purchase of Nebula collection of watches till October 27 as a festival offer. Timex offered a flat 20 per cent discount on their watches. The watch business reported a growth of 16 per cent during the season, significantly lower than the estimated percentage, which was led by decline in realisation. However, the volume growth has been robust at 19 per cent with higher sales of low-value brands. Major brands have yet to come out with their figures but the signs of the sector performing admirably with the soaring gold prices and inflation pinching the consumers is gloomy.
Rise in sales value despite drop in volume sales
Clothing has always been an integral part of a consumer’s festive shopping. Even though there have been mixed responses to brands this year, expectations retained the same enthusiasm. End-sales have confirmed that inflation failed to have much impact on the festivities and with the seasonal change taking place, the industry is optimistic of their prospects being brighter. Allen Solly, a casual wear brand of Madura Fashion & Lifestyle, had expected a 15-30 per cent growth in the festive season for its different brands, which it exceeded. Arvind Brands, which posted over 50 per cent sales growth during Onam, expects high demand to sustain in the north even after festivities due to winter shopping, while other parts of the country may witness a slowdown.
Retailers say walk-ins increased at a rate of 10-15 per cent per day between Navratri and Diwali. Malls in Kolkata reported a 20 per cent growth in footfalls and businesses during Durga Puja and Diwali as compared to last year. Leading retail stores like Shoppers Stop, Fab India and Westside remained packed with shoppers during the season. The average bill size of India’s largest retailer Future Group went up 20 per cent. However, the sales were not as per expectaions despite some corrections by the retailers. Many retailers like Shoppers Stop and Pantaloons increased the ticket size to 8-18 per cent. However, to lure customers, some retailers cut down prices. The increase in prices is due to the increase in excise duty and cotton prices. The end-of-season sale, which continued till mid-August, is also one reason for low volume sales. However, the west and south regions have fared better than the north and east regions. Apparel retailers foresee that the northern market will pick up again during winter.
So who’s to blame for the low sales during Diwali this year? End-of-season sales till mid-August and hefty prices are some factors that dampened the retail mood .
Chocolate rules Diwali sale
This Diwali, the Rs 250 crore chocolate gifting market, which is primarily dominated by traditional players like Cadbury’s and Nestle, saw the emergence of imported brands like Ferrero Rocher, Galaxy and Sapphire. Sales growth for the new entrants has been driven by price cuts, retailing at top-end grocery stores and localised offerings. Leading organised retailers, Future Group’s Big Bazaar and RPG Group owned Spencer’s, said imported brands contributed 40-45 per cent to the overall chocolate sales nationally during the festive season, up from 30 per cent last year. Cadbury’s Dairy Milk and 5-Star lead with more than a 60 per cent share while Nestle held 28 per cent of India’s Rs 3,000 crore-a-year chocolate market, according to the global research firm Euromonitor. While Italy’s Ferrero Rocher increased its distribution beyond modern trade to bigger grocery stores, US confectioner Mars localised the packaging of its imported chocolates by including diyas and branding it with a festive flavour. Chocolate gift pack sales doubled year-on-year during this period and were the major contributors to the FMCG sector. Organised retailers say chocolate gift packs have been the fastest moving category this year, followed closely by dry fruits.
After undertaking these five sectors for the festive period, the usual suspects have formed the core for the industry this season. CDIT & Automobile, even with the rising input costs and long waiting-periods, have taken the mantle to ensure that the spirit of festive purchases among consumers is still intact.
Not so encouraging automobile sales
Auto sales do surge during the festive season, on the back of the belief that purchases in the period are favorable, which is largely restricted to passenger vehicles (cars and two-wheelers). However, this year, with high interest rates, high and rising fuel prices and high inflation, the sentiments were not the same.
With the festive season coming to a close, the spark, which passenger carmakers were looking forward to, has eluded them. On the other hand, the two-wheeler makers rejoiced with higher registered sales. According to industry observers, the festive season, which begins with Navratri and ends with Diwali, usually draws more number of people to the showrooms and the sales see a jump of 15-20 per cent than the average monthly sales. However, this time, most of the passenger carmakers posted a meager 5-10 per cent growth, that too driven by big discounts, offers and new launches. Ten of the country’s leading passenger vehicle manufacturers reported a decline of 23 per cent in sales last month at 1,70,668 units, as compared to the 2,21,062 units sold during the corresponding period last year. Maruti Suzuki’s sales have taken a downturn of 52 per cent as compared to last year. The company sold 51,458 units, as against 1,07,555 cars sold in October last year. Hyundai posted a five per cent decline in its domestic sales by selling 33,001 units. Tata Motors have reported a marginal growth of three per cent in passenger vehicle sales, due to the rise in demand for its small cars, Nano and Indica. Also, Japanese carmaker, Toyota Kirloskar Motor, posted a 63 per cent growth by selling 10,762 units on the back of sales of Etios and Etios Liva models.
Talking about the prospects of the industry, Abdul Majeed, PricewaterhouseCoopers, Automotive Leader, India, helped us analyse the sector deeply. According to him, the new launches in the small car segment excited consumers. The mid segment saw good demand for diesel sedan vehicles. Also, in the luxury segment, BMW, Mercedes and VW remained the top three in terms of sales. This segment saw sales of around 3,000 to 3,500 units in October.
Overall, Hero MotoCorp dispatched 5,12,238 units of two-wheelers in the month of October 2011, compared to 5,05,553 units dispatched in the corresponding period last year. Honda Motorcycle and Scooter India (HMSI), India’s fourth biggest two-wheeler manufacturer, posted an overall growth of 20 per cent with sales at 1,78,181 during this period. Yamaha sold 38,229 units in October 2011 as against 31,791 units sold in the same month last year with a growth of 20.3 per cent. Mahindra Group sales stood at 39,352 units during October 2011, as against 32,491 units last year with a difference of 21 per cent.
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