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Consumer goods’ festive sales hit a four-year high

researchsnappy by researchsnappy
January 3, 2020
in Consumer Research
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Consumer goods’ festive sales hit a four-year high
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KOLKATA | BENGALURU: Retailers and consumer goods companies said sales in the October-December festive quarter had been the best in past four years on account of ‘pent-up demand’, a buoyant stock market, wider availability of consumer credit at 0% interest, and the harsh winter in the North that triggered sales of heating products and winter wear.

While industry executives said some ‘green shoots’ were visible, they added that they would observe sales over the next one-two quarters before announcing a revival in consumption.

“Some green shoots can be seen, but the upcoming summer will tell us whether the momentum is sustained,” said Panasonic India CEO Manish Sharma.

According to industry executives, sales of white goods grew 7-8% in October-December 2019 compared with a contraction of 2-4% during the same period in 2018 and 2017, and 3-4% growth in 2016. The only exception was TVs, which saw sales shrink 9-10% due to a shift in consumption habit to smartphones. Counterpoint Research, which tracks smartphone shipments, said last quarter of 2019 was the best for the category in four years.

The October-December quarter is crucial for consumer-oriented companies, and accounts for 35-40% of their annual sales.

The pace of sales growth during the last festive quarter is still less than the pre-demonetisation period, when companies used to widely report double-digit growth. Sales were severely impacted by demonetisation during the festive quarter of 2016, and by the implementation of GST in 2017, and industry executives believe the lingering effect of these two events dampened overall sentiment in 2018.

But the likes of Reliance Retail, Lifestyle, Puma, LG, One-Plus, Panasonic, Vijay Sales and Great Eastern Retail said sales in the last quarter of 2019 grew beyond expectation, with good demand during Dussehra-Diwali in October and a pickup in December wiping out the slow sales in November.

Puma India managing director Abhishek Ganguly said consumer spending had picked up in the festive quarter with buyers thronging malls and ecommerce marketplaces, and discounts coming down.

LG Electronics India vice president Vijay Babu said the company registered 18% growth in the last quarter. “Due to good festive sellout, current channel inventory is quite low and we expect 30% growth in the current quarter,” he said. LG is the largest white goods maker in India.

Counterpoint Research associate director Tarun Pathak said preliminary data shows smartphones sales grew in double digits in the festive quarter. “Due to a good last quarter, smartphone sales growth in calendar year 2019 would be 9-10%, and we expect double-digit pace of growth in 2020,” he said.

Smartphone maker OnePlus India general manager Vikas Agarwal said any product targeting the youth, like smartphones, will do well in an aspirational country like India.

India’s GDP growth rate fell to 4.5% in the September quarter from 5% in April-June. This has been attributed to poor consumer spending, weak private investments and the impact of a global slowdown. International Monetary Fund has forecast India’s economy will grow at 6.1% in 2019, but will pick up pace to expand at 7% in 2020.

Reliance Retail’s CEO of fashion and lifestyle business, Akhilesh Prasad, said there has been some recovery for the fashion retail industry in the October-December quarter. “If everything is so bad, why is the stock market rocketing? I don’t think there is any real slowdown,” he said, adding the retailer is targeting 70% growth in 2020.

Electronics retailer Great Eastern Retail director Pulkit Baid said sales were sluggish in the July-September quarter but had bounced back in October-December due to pent-up demand and wider availability of consumer credit at 0% interest.

Vijay Sales director Nilesh Gupta said the sales growth could be partially attributed to the harsh winter in the North, and said air purifiers and heating products were out of stock. “It has been an extraordinary quarter with sales growing at 12-13% compared with a decline during the same period in the previous three years,” he said.

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