Consumer durables sales might dip this festive season

India’s major festive season starts from August and stretches till New Year’s Day in January. It starts with Independence Day & Onam followed by Ganesh Chaturthi, Eid, Dussehra, Diwali, Christmas and New Year.

Normally, these four-five months are regarded as the peak shopping season, majorly for home appliances & other electronics. But this year news is out that consumer durables sales are expected to drop.

Drop in consumer durables sales predicted

Over the past few years, consumer durable businesses generally witness 20-25% growth during this festive season. With the rise in online shopping, this percentage has gone up even further. In fact, consumer electronics and home appliances are two of the top grossing product categories on online shopping sites. This is the result of aggressive selling tactics adopted by etailers such as Flipkart to push electronics sales.

But according to the sources, this season it can come down to 10%. It is a bad news since electronics companies earn about 35% of their revenue around this period.

Reasons

The reason for this expected slump is said to be bad monsoon. Less rainfall has affected the earnings and buying capacity of rural consumers. And rural market filled with aspirational buyers is the biggest market segment.

Business Head of Godrej Appliance, Kamal Nandi expressed his views, “Onam is an indicator for the whole festive season. Going by that, around 10-15% value growth is what we expect. The rural and semi-urban markets are yet to pick up. A bad monsoon leads to poor agricultural income and that hits consumer durable firms hard. Whatever growth we expect will come from urban markets. Thus, marketing and promotions will be urban centric.”

Another reason is weakening rupee. Manish Sharma, MD of Panasonic – India & South Asia stated correctly, “Sales during festivals are usually very high, but vary from year to year depending on the macroeconomic solidity and general flexibility in consumer sentiment. This season, rupee depreciation might lead to an increase in product prices passed on to the consumers, thereby impacting the sentiment.”

All eyes on urban market

So hopes are pinned on urban market this festive season. Just like Nandi, Whirlpool’s VP – Shantanu Dasgupta also feels urban market is performing better than rural market. He said, “Last year, Diwali was better than Onam in terms of growth. We expect the same this year. However, rural markets are a concern for the industry. Urban markets are behaving relatively better as replacements are taking place.”

With old electronics brands staging a comeback and turning to ecommerce, the competition is going to get even fiercer, especially when retailers will be vying for the same set of urban consumers.

However, this is just the beginning of the festive season. Who knows things might turn around for better, given the unpredictable nature of economy. What do you think? Please share your views.