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Cautious festive sales mood

business Updated: Aug 10, 2008 21:06 IST
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With interest rates up and inflation a dampener, how will the coming festival season be for consumer electronics sellers – for whom Diwali is usually the big chance?

This year, the mood is cautiously optimistic because the market is still good, but with niggling worries, say manufacturers.

A good farm output, the ever-bountiful marriage season and salary bonuses may keep the steam high, but an overhang of inflation is a problem, industry insiders say.

“Although inflation is a factor, it does not have a big bearing as only 10 per cent of business comes from consumer finance,” said Sandeep Tiwari, marketing head at the Videocon group, which plans to spend close Rs. 80 crore to light up its market.

Kamal Nandi, vice-president, sales and marketing, at Godrej Appliances said his company will spend Rs. 44 crore in September and October, looking at a 25 per cent growth over last year’s sales in refrigerators and ovens.

“We expect this year’s festive season to be much better than last year. Since this summer saw a postponement of purchase of air conditioners and refrigerators, the demand will culminate in this festive season,” Nandi said.

But not all white goods makers share the optimism. “The festival season may be affected because of subdued consumer sentiment arising out of rising inflation and credit squeeze,” said Vivek Sharma, chief marketing officer at Philips India.

“Despite price corrections, the rapidly rising input prices have put margins under pressure. Though the demand is strong, manufacturers will see margins getting affected despite a good festive season,” said LG’s marketing director V.Ramachandran, whose company will spend upwards of Rs. 75 crore in promotions.

However, cost-conscious LG will this year do away with its contests that give away assured gifts.

With consistent rains in the last few days, the farm-driven rural market will yield good demand, said Suresh Khanna, secretary-general of the Consumer Electronics and Applicance Manufacturers’ Association.

Pinakiranjan Mishra, who leads the retail practice at auditing firm Ernst & Young said early discounts offered in this month’s Raksha Bandhan festival sales may hit sales during Diwali time.

“With a lot of brands offering discounts and schemes now to attract buyers, consumers might pre-purchase, affecting festival sales,” said Mishra.

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