Mixed Diwali for automobile, durables and fashion companies

Discretionary categories see some traction in past week though it was lower compared to last year

The curtains are down on the festival of lights. But, this season will probably go down as the toughest for fashion, durable and auto retailers/manufacturers, which log 30 per cent of annual sales this time of the year.

The crucial Diwali week, which concluded on Sunday, saw some discretionary spending by consumers. But, sales were lower compared to last year.

Conversations with multiple retailers and manufacturers in Mumbai, Delhi and Chennai revealed festive fervour was missing in most stores. Organised durable chains said they expected year-on-year sales growth of 12-13 per cent during the week. This was lower than the 15-20 per cent year-on-year sales growth they saw last year.

“I was worried there’d be no business at all during Diwali,” said Nilesh Shah, managing partner, Vijay Sales, a consumer durables chain operating in western and northern India. “Sales were seen in June when we offered heavy discounts to clear inventory. But we did get decent walk-ins during Diwali week. If Sunday's business is added, our overall sales growth for the week (over last year) should be 12-13 per cent.”

Executives from retail chains such as Sony Mony, Reliance Digital, Viveks and Kohinoor in cities such as Mumbai and Chennai endorsed this view. They said the mood has been sombre, though smaller centres were a little better in terms of sales. “People in larger centres were first to rush into stores when the pre-goods & services tax (GST) discount sales happened in June. Those in smaller towns opted for the Diwali period to make purchases,” said a Delhi-based consumer durables retailer.

A general slowdown in spending sentiment this year, triggered in part by demonetisation and introduction of  GST in July, has ensured discretionary categories did not get enough from consumers’ wallets, experts tracking the market said. 

A recent note from Nielsen observed the pullback in spends was also due to uncertainties over jobs and salaries. A TeamLease Employment Outlook Report for the first half of 2017-18 said the first six months of the current financial year were characterised by negative hiring sentiment, with a pick-up of only two percentage points expected for the second half of the year.

Nielsen also said the propensity to save was growing among consumers, along with anxiety on their financial front. This was best reflected, experts said, in the significant growth in business seen by e-commerce majors during their festive season sales. Consumers perceived the deep discounts these players offered, said experts, as significant savings.

In the offline category, apparel, too, felt the pinch this festive season. Vasant Kumar, executive director, Max Fashion, said his company was one to two per cent short of its sales target for the season. “This is because centres such as Bengaluru and Delhi have not taken off well. Discretionary purchases have not happened as anticipated and there has been an e-commerce impact as well.”

Future Retail Joint Managing Director Rakesh Biyani pointed to inclement weather playing spoilsport. Though the Diwali week, he added, would help the company post sales growth for the quarter in line with previous ones.

Arvind Lifestyle Brands Managing Director J Suresh also said the days leading to Diwali were good. “If this weekend does well, it would make up for the initial lag seen in the business.”

The ride wasn’t smooth for automobiles. An official from the Federation of Automobile Dealers Association (FADA), an apex body, said Diwali was mixed for them. “While parts of the east did well, the rest of the country, including the north, was not good at all, sales-wise.” 

Though sales numbers for the period have not been released, he said flat growth was expected in the auto market this year. “If there is any growth in festive sales, it is in two-wheelers and not four-wheelers. This is due to demand from rural areas.” His point was endorsed by top carmakers, which said Diwali hasn’t been the best, despite most of the companies putting their best sales foot forward. Discounts during the festive season constituted 10-15 per cent of the cost, steep by any standard.

Hyundai Motor India Director for Sales and Marketing Rakesh Srivastava said the sector expected growth of around 10 per cent in sales during the festive season. Maruti Suzuki was not available for comment.

Hero MotoCorp, however, said it had seen retail sales of about 300,000 units on Dhanteras, highest in a day. While Honda Motorcycle and Scooter India and TVS Motor were not immediately available for comment, industry sources said the two companies had seen steady growth this Diwali.

Slowdown in spending

• Diwali 2017 will go down among the tougher ones for auto, durables, fashion sectors 
   
• Contrary to perception, four-wheeler sales were not good during the week
   
• Two-wheeler sales, however, were good, led by rural demand
   
• In durables, smaller centres saw good  sales but larger cities did not
   
• Mainly due to pre-GST sales which saw demand coming from larger cities
   
• Fashion and apparel retailers also grappled with mixed performance during the Diwali week
   
• Many complained of inclement weather, beside a slowdown, in buying sentiment this festive period