Consumer cos line up offers to offset RBI’s festive dampener

Vaishnavi Bala Posted online: Sunday, Sep 29, 2013 at 0000 hrs
Mumbai : With the latest move by the RBI to clamp down on the 0% interest scheme, consumer durable companies like

Samsung, LG and Panasonic are lining up freebies and exchange offers and launching new promotional activities, as they look to offset any drop in sales.

Companies are beginning on-ground and in-house activities to increase footfalls in stores, at a time when the notification by the RBI is bound to lower sales of electronics items, especially mobile phones. Industry estimates point out that 40-50% of the total mobile phone purchases in the country are made through various channels, including the 0% interest scheme.

Rajan Malhotra, head of eZone, Future Group’s electronics chain of stores, said, “I would not yet write off the festival season. We are working on special offers, discounts and exchange benefits for the period, especially after the recent ban on some schemes.”

RBI had said that banks must refrain from offering popular financing schemes for consumer durables that is disguised as 0% interest through equated monthly installment (EMI) schemes. It had said that in such cases, the customers are charged interest covertly through processing fees.

The period from October to December accounts for 35% of the total sales of consumer durables. While Samsung is planning to launch a new range of microwave ovens and frost-free refrigerators during the season, Whirpool will offer freebies like its recently-launched scratch-card offer during Onam.

“At present, we are offering six phones through the 0% EMI scheme. It will continue over the festival season till the banks come up with a newer scheme. These schemes will drive in significant business for us,” said a spokesperson for Samsung India.

Whirlpool of India began its festival offer from September 26, under which consumers get an assured gift. Shantanu Das Gupta, vice-president (corporate affairs and strategy), Whirlpool of India, said, “We are bringing the ‘Whirlpool Makes You Look Good’ consumer offer this Diwali. We are aiming for a growth of 15% and a sales turnover of R850 crore during the period, and are confident of getting there.”

Retailers like Vijay Sales, which has 48 stores across the country, are gearing up for exchange offers, combo packs and other EMI schemes (not on credit cards). “The festival season is big for us. We hope consumers would find the offers compelling,” said Nilesh Gupta, CEO of Vijay Sales. The company is looking to offset the 15-20% drop in sales in the immediate two weeks after the ban on the 0% interest scheme.

However, some retailers feel consumers’ appetite is way too large. Retail baron Kishore Biyani noted that while the clampdown on the 0% interest scheme is “anti-consumption”, it will not have much impact on consumer spending during the festivals. Shoppers Stop’s managing director Govind Shrikhande said that banning the 0% interest on EMI will lead to consumers getting apprehensive, but only initially. “With the festival season coming up, we do not see consumption being affected over the next few months,” he said.

“The ban will have a short-term effect, but in the long-term, it won’t affect sales,” Vijay Sales’ Gupta said.

eZone’s Malhotra believes that RBI’s move will bring more transparency into the system, but foresees a drop in sales over the next four weeks as consumers get accustomed to the absence of the 0% interest scheme. However, he believes that the festival season may still be able to offset the lull in the beginning. “There will be some fall in the number of transactions, but that would be less than 15%,” he said.

Some retailers are adopting a wait-and-watch policy, hoping that the ban would not impact consumers’ propensity to purchase. Ajit Joshi, CEO of Infiniti Retail that runs the Croma chain of electronics stores, said, “We will have to wait and watch the impact of this decision on the consumers and the retailers.”

“While only 25% of consumer durable secondary sale is through consumer finance; in auto secondary sale, it is 75-80%. Hence, the impact is more on automobiles,” said Deba Ghoshal, head-marketing, Unitary Product Business Group, Voltas.

The Samsung spokesperson said such EMI schemes contribute a double-digit sales proportion, adding it is difficult to maintain the sanctity of RBI’s order as newer schemes will try to make purchases more affordable.

(Inputs from Rachit Vats)