In the run-up to the goods and services tax (GST) roll-out on July 1, de-stocking saw manufacturers dish out products almost at half rate.
In the run-up to the goods and services tax (GST) roll-out on July 1, de-stocking saw manufacturers dish out products almost at half rate. Though shop shelves are filling up, the pace of restocking is slow enough to upset the white goods offtake this festive season. Reason enough for industry watchers to predict a paltry 4% category growth in sales compared with last year’s festive season. Owing to drying up of discounts, manufacturers are hard-pressed to slash prices this season. Besides, high metal prices are another dampener. “Input costs have increased with metal prices going up by around 10%… Most consumer durable manufacturers, including us, will refrain from giving any deep discount. In fact, soon after the festive season, we are contemplating increasing prices by 3% to 4% due to increase in costs,” explained Kamal Nandi, business head and executive vice-president at Godrej Appliances.
Prior to the GST implementation deadline, air conditioner-maker Voltas undertook a massive stock clearance bid with hefty discounts, resulting in a 17% year-on-year sale on the shop floor. But as the festive season kicked off with Ganesh Chaturthi and Onam, the AC-maker was in the throes of subdued sales. With re-stocking not gathering steam either, Voltas is facing the prospect of selling its ACs in winter. Unlike last year, when consumer goods firms offered discounts in the range of 25-35% in the case of old stock, and as high as 50% on new stocks, this festive season, industry experts point out that discounts will range from 15% to 25%.
A Whirlpool spokesperson too said the company will not offer any discount this season. Multi-brand retailers too agree brands have kept off deep discounts. “We are getting a sense that brands are likely to provide lower discount this festive season as they have managed to clear stocks in June,” said Ritesh Ghoshal, chief marketing officer, Infiniti Retail, which runs consumer durables chain Croma. However, industry observers point out that with e-commerce companies such as Flipkart, Amazon and Paytm Mall offering steep discounts, offline retailers too may be forced to increase their discounts. After the implementation of GST, consumer durables players witnessed their sales drop by around 10% to 15% in July while it was flat in August. “A lot depends on the kind of discounts which are being offered by online players. Even as manufacturers may go slow on discounts, retailers may take a step ahead, especially to counter the offers given by online players,” said Rajat Wahi, partner and head, consumer, Deloitte Touche Tohmatsu India.