 "Instant gratification in installments")
Rachita Shekhar, a first year college student from Delhi University, is a self-confessed gadget freak. The young girl can't hide her smile these days because she has acquired a brand new iPhone 4S, a status symbol that was till recently beyond her reach. Thanks to her elder sister, who works with the HR team in a five star hotel and who financed the gadget for her younger sister with the help of an equated monthly installment (EMI) scheme, Shekhar now has something most of her friends have already acquired.
Indeed Apple has made it really easy. For six months now it has been running full-page advertisements in various national newspapers for iPhones, iPads, even iMacs that are now available through EMIs. The company has also begun offering lucrative deals as part of the "exchange" scheme wherein customers get a certain price-off against their old handsets. If internet reports are anything to go by, iPhone sales have jumped nearly 400 per cent on the back of its zero-interest EMI schemes.
In an economy still struggling on many fronts, installment sales offer consumers a useful tool to buy things that would not be part of their consideration set in a "credit-sparse" environment. The strategy, also adopted by many other players in the category including Apple's biggest rival Samsung, is clearly an indicator that companies are really at their wit's end trying to get noticed, get firmer commitments from customers and ensure that stocks move off the shelves.
Little wonder then, sectors like apparel, technology, airlines, even online shopping sites - sectors that were not regarded as EMI-friendly earlier - are opening up to the idea of EMIs. Players like Levi's and Provogue, that are seen as premium and unaffordable by many, have been offering their range of apparel, including jeans, tops, dresses on EMI schemes for some years now. Of course, a customer has to make a minimum purchase commitment to avail of the EMI schemes. Ditto with airline brands like Jet Airways and IndiGo that are offering various versions of the fly-now-pay-later scheme, a boon given the slowdown in the sector as ticket prices soar.
Tanishq, for instance, has schemes like Golden Harvest and Swarnanidhi where you either put a fixed sum every month (or book grams of gold every month) and buy jewellery of an equivalent amount at the end of the committed period. It is a variation of an equated monthly scheme but one that allows the buyer to buy jewellery of higher value later. Similar schemes are offered by other players in the category, including Gitanjali and Asmi. Even luxury brands are fast learning that EMIs are a strategic weapon in a dull market. For instance, brandsvillage.com - a shopping club that has a vast selection from brands such as Jimmy Choo and Louis Vuitton - has a range of EMI options.
Singh cautions that such schemes have their own pitfalls and will bring fresh challenges for companies, albeit a few years down the line. The biggest challenge, he says, will be evaluating the credit worthiness of customers purchasing through EMIs. "This method of expanding the market is risky in general, more so in developing countries like India. People buying via EMIs generally do not have the ability to pay the needed amount in cash at the time of purchase. How can the company ensure that they would be able to pay for the purchase even through EMIs?" wonders Singh.
The problem becomes more severe as we go down the income ladder. Plus there is the issue of preponing purchases and leaving the field wide open in the future.
But as things stand, everyone looks happy.
Indeed Apple has made it really easy. For six months now it has been running full-page advertisements in various national newspapers for iPhones, iPads, even iMacs that are now available through EMIs. The company has also begun offering lucrative deals as part of the "exchange" scheme wherein customers get a certain price-off against their old handsets. If internet reports are anything to go by, iPhone sales have jumped nearly 400 per cent on the back of its zero-interest EMI schemes.
In an economy still struggling on many fronts, installment sales offer consumers a useful tool to buy things that would not be part of their consideration set in a "credit-sparse" environment. The strategy, also adopted by many other players in the category including Apple's biggest rival Samsung, is clearly an indicator that companies are really at their wit's end trying to get noticed, get firmer commitments from customers and ensure that stocks move off the shelves.
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According to Siddharth S Singh, director, Fellow Programme in Management, Associate Professor of Marketing, Indian School of Business, the concept of EMIs is common in developed markets. In developing markets such as India, however, many of the consumers targeted have low incomes when compared with their counterparts in the mature markets. So even as aspirations are high, the time taken to save and then make a purchase can be really long. "To grow in this market, companies have to address this issue, and hence the focus on EMIs. It also expands the market by reducing the 'sticker shock' by creating a perception of lower price," say Singh.
Little wonder then, sectors like apparel, technology, airlines, even online shopping sites - sectors that were not regarded as EMI-friendly earlier - are opening up to the idea of EMIs. Players like Levi's and Provogue, that are seen as premium and unaffordable by many, have been offering their range of apparel, including jeans, tops, dresses on EMI schemes for some years now. Of course, a customer has to make a minimum purchase commitment to avail of the EMI schemes. Ditto with airline brands like Jet Airways and IndiGo that are offering various versions of the fly-now-pay-later scheme, a boon given the slowdown in the sector as ticket prices soar.
Tanishq, for instance, has schemes like Golden Harvest and Swarnanidhi where you either put a fixed sum every month (or book grams of gold every month) and buy jewellery of an equivalent amount at the end of the committed period. It is a variation of an equated monthly scheme but one that allows the buyer to buy jewellery of higher value later. Similar schemes are offered by other players in the category, including Gitanjali and Asmi. Even luxury brands are fast learning that EMIs are a strategic weapon in a dull market. For instance, brandsvillage.com - a shopping club that has a vast selection from brands such as Jimmy Choo and Louis Vuitton - has a range of EMI options.
Singh cautions that such schemes have their own pitfalls and will bring fresh challenges for companies, albeit a few years down the line. The biggest challenge, he says, will be evaluating the credit worthiness of customers purchasing through EMIs. "This method of expanding the market is risky in general, more so in developing countries like India. People buying via EMIs generally do not have the ability to pay the needed amount in cash at the time of purchase. How can the company ensure that they would be able to pay for the purchase even through EMIs?" wonders Singh.
The problem becomes more severe as we go down the income ladder. Plus there is the issue of preponing purchases and leaving the field wide open in the future.
But as things stand, everyone looks happy.