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Consumer durables hit by weak demand

The festival season is crucial to Rs.52,000 crore consumer durables industry
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First Published: Mon, Nov 12 2012. 10 31 PM IST
Consumer durables output contracted 1.7% in September from a year earlier, according to the latest Index of Industrial Production numbers released on Monday. Photo: Indranil Bhoumik/ Mint
Consumer durables output contracted 1.7% in September from a year earlier, according to the latest Index of Industrial Production numbers released on Monday. Photo: Indranil Bhoumik/ Mint
Updated: Mon, Nov 12 2012. 11 59 PM IST
New Delhi: Sluggish demand for televisions, washing machines and other consumer durables is unlikely to wear off this festival season, trade numbers indicate, although some companies are optimistic.
Consumer durables output contracted 1.7% in September from a year earlier, according to the latest Index of Industrial Production numbers released on Monday.
As a precursor to the festive season, this doesn’t paint a promising picture for the coming months, said Soumya Kanti Ghosh, director, Federation of Indian Chambers of Commerce and Industry (Ficci).
“The overall sentiment and momentum looks weak, the interest rates haven’t declined, it needs to be seen how this translates into numbers. Last Diwali, the sector witnessed a decline of 0.4%. This year, I’m not sure it will either be at the same level or there could be a marginal improvement,” he said.
Ghosh leads the industry lobby group’s economics and research unit, which compiles monthly data for the consumer durables sector in collaboration with the Central Statistics Office of the ministry of statistics and programme implementation.
The festival season, which lasts from September to December, is crucial to India’s Rs.52,000 crore consumer durables industry, typically boosting sales by 20-30% over the previous months.
But dealers of consumer durable goods believe sales growth will be flat this festive season.
“It is going to be a flat period. The consumer sentiment is neutral” said Nilesh Gupta, managing director, Vijay Sales, the largest dealer of consumer goods in the country. “Last Diwali we saw sales increase by 8-10%, it should be the same this Diwali also.”
Large consumer durables companies like Samsung Electronics Co. Ltd and LG Electronics India say festive season demand this year started later than expected.
“Initially, the demand was mild but the last eight-odd days (have) been really good,” said L.K. Gupta, vice-president (marketing), LG India.
“The Dhanteras weekend (10 and 11 November; Dhanteras is the day considered auspicious to buy everything from gold to cars to TVs to washing machines) was really good,” he said.
Festive demand “definitely started late, however the demand is trying to come up fast”, said Ravinder Zutshi, managing director at South Korean consumer durables firm Samsung Electronics. “Dealers I spoke to said yesterday's (Dhanteras weekend) sales were very good.”
Zutshi expects the festive season to deliver revenue growth of 30-40% over last year’s Diwali sales, and Gupta sees a 30% increase.
Not everyone is as hopeful. Whirlpool of India Ltd believes revenue growth this Diwali will be muted.
“Essentially, it’s not been a buoyant Diwali. The consumer demand is far, far less than what we expected. It’s a continuation of the weakness in demand the industry is struggling with,” said Shantanu DasGupta, vice-president, corporate affairs and strategy, Whirlpool of India.
Home appliances seems to be worst-hit category this season while high-end products such as LCD and LED television sets and refrigerators are bringing in revenues.
“Home appliances have been hit this season,” said Gupta of Vijay Sales.
“This Diwali it’s been damp for home appliances.” added DasGupta.
“LCDs and LEDs have done well for us, followed by refrigerators,” said Zutshi.
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First Published: Mon, Nov 12 2012. 10 31 PM IST
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