Diwali offers boost consumer confidence

The usual pre-Diwali excitement for consumers appears to be back.

People are slowly beginning to loosen their purse strings, as the festival of lights nears and the din of offers and discounts gets louder by the day.

Most consumer durable companies admit that sales in the last 10-12 days have been good as consumers rush to take advantage of the offers and discounts.

Says Y V Verma, chief operating officer, LG Electronics, the largest consumer durables manufacturer in the country, "There has been a good pick-up in sales in the last 10 days. We are happy."

A spokesperson for the second-largest consumer durables maker, Samsung, also echoes a similar sentiment.

"From Navratri onwards, which began on September 28, the momentum has been good. This should sustain right through to Diwali."

On an average, most consumer durable firms are expecting sales growth this festive to be in the region of 25-30 per cent -- a tad lower than the 40 per cent growth they saw last year.

Despite this what is making them happy is that consumers are back.

"We are on track to achieving our sales targets," says Shantanu Dasgupta, vice-president (corporate affairs and strategy) at home appliances major, Whirlpool.

Pradeep Dhoot, president, Videocon Industries, says the sentiment is good. "As Diwali nears, we expect to see more consumers stepping out to shop. This should help," he says.

Typically, firms spend double the amount on advertising and sales promotions during the festive period to cash in on the spirit.

This is easily eight to nine per cent of monthly sales in comparison to 4.5

per cent during regular months.

This year, companies haven't bucked the trend in doling out freebies, cashback offers and bumper prizes despite a visible slowdown in sales.

Samsung and Whirlpool, for instance, have lined up gifts worth Rs 150 crore (Rs 1.5 billion) each, which will be given out during the festive period.

Sony India, on the other hand, is giving out gifts worth Rs 100 crore on products such as its Bravia TVs, Vaio laptops etc.

Godrej Appliances, in contrast, is running a consumer promotion around Shah Rukh Khan-starrer Ra.One as part of its brand association with the film.

According to the company's vice-president (sales and marketing), Kamal Nandi, associations such as these create further excitement.

"Consumers postpone their purchases to Diwali in anticipation of good offers. A tie-up with a film such as Ra.One helps in drawing the attention of consumers."

What also drives consumers to stores is the numerous financing options on hand. Manufacturers typically look at finance schemes to help upgrade consumers to high-end products by absorbing the interest and processing charges on them.

"What consumers land up paying is simply the principal amount, which is spread over six to eight months," says Sunil Nayyer, senior general manager, sales, Sony India.

"This is good for them."

In the last two years, sales backed by finance schemes have grown from two to three per cent to seven to eight per cent for most consumer durable players.

For some firms such as Sony, it is even higher at about 10-15 per cent of overall sales.