After two turbulent years, expensive products push festive sales

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Urban consumers continued to make high-value purchases this festive season, helping cellphone and consumer electronics brands achieve more than 15% growth in overall sales, even as smaller cities and the Rural India have largely postponed these purchases due to inflation. However, apparel and fashion businesses, fine dining and quick service restaurants enjoyed a strong season after two years of Covid lull with business exceeding pre-pandemic levels.

Fast Moving Consumer Goods (FMCG) sales in categories such as packaged food and discretionary personal care products received a festive boost with sales growing 8-11% over a similar period last year over the past two weeks due to in-home and away-from-home consumption and donations. However, industry executives said the real test will be in sustaining this momentum in demand beyond Diwali.

“With Covid waning and a normal holiday season after two years, the industry was expecting even activity across the market,” said Kamal Nandi, head of Godrej Appliances business. “But spending was largely limited to consumers with higher discretionary incomes, and people in inland markets didn’t spend as we had originally expected due to high inflation.”

Sales volume or the number of units sold of refrigerators and washing machines fell 10-15% from the 2019 holiday season due to a slowdown in demand for consumer products, even though High-end sales rose more than 35%, driving overall sales value, according to industry estimates. Part of the sales growth was also due to a price increase of 22-25% over the past two years. Over the past year, sales volumes have remained stable. Also for smartphones, sales value increased by around 17-20% due to increased purchases of 5G and premium handsets, even as overall volumes grew in the single digits, industry executives estimated. .

The managing director of the Lifestyle International chain of stores, Devarajan Iyer, said Diwali had been a record high.

“Categories such as ethnic and mass-priced fashion products, which were under pressure before, performed well,” he said. “While this is led by celebratory sentiment, we will now have to see how the market performs given inflation and pressure on consumer savings.”

Marketers are cautious about the post-Diwali period.

A real indication of the drawdown will not just be Diwali sales, but those that follow, said Sanjiv Mehta, chief executive of Hindustan Unilever, the country’s largest consumer goods maker. “If trade bought optimism before Diwali and its production does not happen after Diwali, then there is a backflow,” he said.

Demand in small towns and rural markets has picked up, but only in the past seven days and was largely limited to clothing, footwear and household products. Managing director of small town-focused V-Mart Retail chain, Lalit Agarwal, said there had been an increase in sales over the past few days, including an increase in average billing values ​​per compared to last year.

The month-long festive season – from Navratri to Diwali, Durga Puja, Dussehra, Karva Chauth and Dhanteras – is India’s biggest consumer period, accounting for 20-30% of most companies’ annual business in contact with consumers.

FMCG sales increased in packaged foods and some discretionary products, with the high-end line again remaining resilient, several companies said. ITC Ltd said the early start to the festive season last month helped offset some of the negative impact of inflation on consumption.

Mayank Shah, senior category manager for Parle Products, said there had been an 8-9% increase in retail packaged food sales over the past two weeks compared to similar periods last year. , while it was 10 to 11% over a consecutive month. on a monthly basis driven by large packaging, modern commerce and out-of-home consumption.

The holiday season has also been a relief for restaurants and eateries.

“Overall, the holiday season was marked by euphoria with an increase in industry business of 15-18% over last year and strong deliveries in the last few days, which led to a recovery after two years,” said Anjan Chatterjee, managing director of Specialty Restaurants, which operates more than 100 restaurants. electrical outlets. “However, energy is lacking in small towns.”

Abhayraj Singh Kohli, founder of restaurants like Tori, Grandmamas cafe and Pritam Da Dhaba, said the sentiment could continue after Diwali, leading to growth of at least 20%.

More than 65-70% of high-ticket purchases were made on EMIs, either by card or credit from non-bank financial companies, retailers and online marketplaces said. It also led to average transaction values ​​for categories such as smartphones, electronics and furniture, with those who bought on credit improving their purchases, Flipkart said.

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