Consumer durable manufacturers, auto producers and retailers may soon start feeling the heat of inflation, which touched 7% for the week ending March 22.
While most manufacturers and retailers Fe spoke to said that there’s no immediate impact on their sales they conceded that if the trend is not checked their bottomlines would be impacted and they would be left with recourse but to hike prices. ?In the short-term spiraling prices of steel and copper, that have gone up by 27% and 18% respectively between January and March this year, will impact the revenues of most manufacturers by 3-5%. Also, with very little margins in the industry, most players will actually be left with no option but to hike the prices of air conditioners by 5% and refrigerators and washing machines by 3% to neutralize the increase in commodity prices that have gone up substantially and beyond a degree that can be absorbed by manufacturers,? says V Ramachandran, director (sales and marketing), LG Electronics India Pvt Ltd.
?However, if the high rate of inflation continues to persist, the demand for entry-level products will be impacted in a big way in the mid-term,? adds Ramachandran.
Agrees an industry expert, ?Despite inflation impacting the prices of all commodities, people will continue to buy the day-to-day stuff. However, they would in all probability postpone the purchase of not so important items like refrigerators and televisions for some time, thus impacting the overall sales.?
The inflationary pressure has so far had a mixed response on the retail industry, with basic commodities not witnessing any dip in the sales. On the contrary many retail stores, particularly the discount stores are witnessing a surge in sales as consumers are stocking anticipating higher prices in the days to come. ?There is an increase in the volume in the discount store formats due to anticipation of a further price rise?, said Kishore Biyani, managing director and group CEO, Pantaloon Retail (India) Ltd.However, the heat is being felt in the special category segments like consumer durables where the demand tends to dip since the consumer alters his consumption pattern and also due to decline in the available credit as is happening now.
While speciality retailers like apparels maintain that currently inflation hasn’t dented their top lines, they do foresee a likely hit in near future. ?I don’t think at this time our sales have been impacted, but we are expecting a slowdown of around 5% in the summer months of May and June on a year on year basis?, said Sanjiv Mohanty of Benetton.