A dull Diwali for consumers, companies

Modest queues, lack of buzz and very few sales made for a gloomy environment

The Festival of Lights turned out to be a gloomy one for Indian consumer products makers, real estate developers and auto companies. Market visits by Citibank analysts during the festival season suggest it was a dull Diwali and there were very few big/bright sales. The queues were modest and there was a lack of buzz across all sectors. Unlike earlier, this Diwali turned our to be a dull sales season for jewellery/real estate and autos and mixed for electronics. The consumer mood was generally low mainly due to inflation, job losses and lack of new job creation in the economy.

On the ground report

– Very few sales, it’s largely full price in retail: There were no sales, which reflects that India’s sale season (particularly apparel and lifestyle) has established itself in the July/August season. This also suggests discounts will not drive sales hence retailers may as well hold prices. Discounting was however seen in autos and e-commerce.

– It’s the small stuff that’s selling, not the large discretionary stuff: There was Diwali momentum in apparel, e-commerce and in two-wheelers -- all small ticket items. But in the real estate, jewellery, cars segment, it was a dull season. Absolute spends appear to be going down.

– Little promotion, advertising, product launches or illumination: It’s just dull – there was little illumination, nothing to pull in the crowds. It’s as if businesses are counting their pennies.

– Movie Launches: The Diwali weekend is the most sought after movie launch phase. But this year there was just one big movie that was launched as compared to 11 in 2011.

Festive Fervour: Dimmer Lights, Lower Decibels

Auto Sector: Over September and October this year, auto sector had very few new models mainly due to low demand. What analysts noticed was that showrooms were little less decked up and the usual buzz was missing. In the showrooms, while earlier there had been even makeshift tents to cater to the additional customer rush, this year even the showrooms wore a non-festive look.

Retail: Consumption trends were mixed – there was no growth and modest decline for relatively high-ticket items (home improvement, premium electronics, etc). Apparel/footwear seemed to be holding ground and retailers talked of double-digit growth this festive season.

Real estate: Realty consumers seem to have retreated with little enthusiasm to engage in high ticket festive shopping. Most developers have refrained from launching new projects centered specifically around Diwali or giving sizeable discounts. Besides discounts also hurt margins of developers already struggling with increasing costs and subdued return on equities. Maximizing price and not the volume seems to be the dominant strategy.