For marketers, no Diwali cheer this year6 min read . Updated: 26 Oct 2008, 10:57 PM IST
For marketers, no Diwali cheer this year
For marketers, no Diwali cheer this year
New Delhi / Mumbai: In an eastern suburb of New Delhi, Sanjay Krishnan knows what it’s like to be in the sales chain of a contrarian company.
Unmindful of slowing consumer demand and high interest rates, Hero Honda Motors Ltd, India’s largest motorbike maker, has set its dealers a stiff target this October: sell some 600,000 units, overtaking sales in the festival season last year.
This year, both Dussehra and Diwali are in October and Hero Honda decided to go for the jugular. But, Krishnan, a sales manager at Himgiri Automobiles, a Hero Honda dealer in east Delhi, is not so sure. “It’s difficult to meet the targets set by the company... Customers had postponed their buying decisions for the festive season hoping to get discounts, freebies during the period, but in the absence of any such schemes, they are foregoing their purchase decisions," he says.
Across India, salesmen face the same worry. Dussehra and Diwali (and Dhanteras and Bhai Dooj, two festivals around Diwali) and the harvest festivals in south India typically account for up to 20% of annual sales of automobile and consumer goods. Maybe not this time around.
This year, buffeted by a stock market meltdown, high inflation and expensive credit, a slowing economy and a spate of terrorist attacks, consumers are unlikely to deliver that target as anecdotal and survey-based evidence suggest.
Research firm Boston Analytics in a recent survey said its Consumer Sentiment Index (CSI), a monthly barometer of Indian consumer opinion, household financial conditions and consumption, registered a 6.6% year-on-year decrease for September.
The firm’s outlook for the coming months is not rosy either. For the first time since March, its Future Expectations Index fell below its CSI.
Thanks to the economic slowdown, “consumers are likely to spend a lot less on otherwise popular product categories for this season, such as consumer durables, jewellery, and retail," said Manish Aggarwal, business director, Mindshare Insights, a GroupM research arm. According to estimates by the agency, consumer spending on expensive items this year is likely to halve from 2007.
“While the sale of mass products have remain unaffected, lifestyle categories such as plasmas, LCDs, laptops and other high-end items have been growing at over 100% year-on-year but this year the growth is expected to be anywhere between 40-50%," said Purnendu Kumar, associate vice-president, retail and consumer goods, Technopak KSA.
Markets across the country that are normally crowded at this time of the year find themselves empty over what one expert calls the fear factor—coming from the serial bomb attacks in Indian cities. Says Jayant Kochar, managing director, Go Fish Retail Solutions Pvt. Ltd, “…Diwali sales are also getting affected by the blasts in public places which is creating apprehension in people’s mind in going out to shop."
Marketers are not ready to give up just yet. Companies are not only investing on festive campaigns, but also tweaking communication strategies to retain the festive fervour and woo consumers.
Samsung India Electronics Pvt. Ltd, which usually offers discounts and freebies with every purchase during this season, has changed its strategy this year to offer finance options with 0% interest and is waiving processing fees to make buying more affordable.
Sony India dealers were expected a doubling of sales from previous months. “But because of the current economic scenario, expectations will not be met," says Rajesh Dewani, director, AVIT Digital Pvt. Ltd, a distributor for Sony products in New Delhi.
Sony and Samsung rival LG Electronics India Pvt. Ltd, eyeing in part spending by government employees, is still ambitious. It has ramped up production by nearly 45-50% for October. “Instead of investing in the plummeting stock market and real estate, people are using the extra cash in electronics," says Amitabh Tiwari, business head for consumer electronics and appliances at the company.
Car makers, who are bearing the brunt of slower consumer spending, are offering freebies and discounts to woo customers. Mahantesh Sabarad, an analyst with Centrum Broking Pvt. Ltd, describes it as a function of demand and supply. “With the demand curve being up for the two-wheelers, manufacturers don’t need to offer any discounts. But, car makers need to offer discounts to boost sales, at least on models that have had flat sales," he says.
Maruti Suzuki India Ltd, the country’s biggest car maker, is offering discounts ranging from Rs5,000 to Rs28,000 on its Maruti 800, Alto, Wagon R and Estilo models, according to a Mumbai-based dealer. Hyundai Motor India Ltd, which offered gold coins to its buyers until 30 September, is offering free insurance worth Rs12,000 and discounts of between Rs5,000 and Rs10,000 on its Santro, Getz, Accent and Verna models, a Mumbai dealer for Hyundai said.
Similarly, Ford India Ltd is offering gift vouchers worth Rs20,000 for diamond purchase from Tanishq outlets. It’s also offering free registration and insurance for the Ikon and free accessories worth Rs10,000 with its Fusion and Endeavour models. Despite all these offers, an executive at Shaman Auto Ltd, a Ford dealer, said the car maker is “apprehensive of meeting our October targets".
A dealer for Tata Motors Ltd and Fiat India Automobiles Pvt. Ltd echoed the sentiment. “Our sales are lower by at least 15% to 20% over the last year," said an executive at a Mumbai dealership, despite a discount of Rs50,000 on Fiat’s Palio model and Rs30,000 on Tata’s Indica V2 Xeta.
Indian aviation, which has been bearing the brunt of rising fuel prices and fluctuating currency exchange rates, is also taking quick steps to facilitate consumer spends and make up for losses. “The last three months have been very bad for the travel industry with companies facing major losses. Even at Yatra, sales dropped by 10% in the last quarter but we are hoping that travel will increase by at least 15% during the festive season," said Bhawna Agarwal, founder and general manager, airlines business at online portal Yatra Online Pvt. Ltd. Online travel firm MakeMyTrip India Pvt. Ltd has also noticed a decline in air-travel booking in the first two weeks of October, peak travel time in India.
Jewellery, a popular gifting option during Diwali and the wedding season that follows, also seems to have lost its sheen. The soaring gold prices is forcing jewellers to tweak marketing strategies.
“The price of gold is on an all-time high, which has dampened the demand for gold this season. People are not buying gold for investment or on impulse," said Alpana Parida, head marketing and merchandising, Tanishq, the jewellery brand of Titan Industries Ltd. The company is offering 5-10% discount across it’s range but says sales are mainly being driven by purchases from non-resident Indians.
Retailers this season also expect slower growth of between 25% to 30% from the previous year, compared with growth of 50% in 2007—prompting two of the biggest names in organized retail to unveil a range of offers to grab a bigger share of incremental spending.
Trent Ltd’s Star Bazaar stores has increased discounts. At Reliance Retail Ltd, too, more offers have been added. “For the first time across all hypermarkets and supermarkets, we are offering gold coins depending on the slab of purchase," an executive said on condition of anonymity.
Companies are cutting down on corporate gifts due to the slowdown, says Kushagra Seth, head of marketing at Vishal Retail Ltd. The retailer then is “focusing on items which are more cost effective and are offering combo-packs for the high value items and bundling products together to give good deals", he adds.
Jharna Mazumdar contributed to this story.