Business - Party poopers likely to spoil the mood of festive season

Around this time every year, companies in India roll out the red carpet, occasionally gilded with gold, to lure consumers. But this festive season the sheen is expected to be missing at many consumption points.There are too many party poopers. First comes the global economic meltdown, in a proportion that can force even the spendthrift among spendthrifts to keep purse strings tight. To make things worse, the recent spate of terror strikes is adding to the jitters among consumers. That’s a key factor that could affect footfalls at shopping zones. With circumstances being different, it would be natural for companies to deviate from the usual scheme of things this festive season — that covers Eid, Dussera, Diwali going all the way upto Christmas. Most companies do not disappoint. While some like LG Electronics and Mahindra & Mahindra will use the current festive season to unfurl new product introductions in a bid to stir up excitement, others like retailer Trent’s Star Bazaar are planning to take a consumer segmentation effort while rolling out promotions, rather than be everything to everybody, at one go. Importantly, promotions no longer mean only freebies. Before getting into the details of what each company will do, let’s understand why there’s much ado about festive season sales, year after year. Obviously festive seasons are money spinners, with industries like consumer durables notching up nearly 25% of their annual sales in just a month-and-a-half. Some retailers see that period getting squeezed even further. “Generally the festive season is spread across October and November but this year it’s more concentrated in October as both Dussera and Diwali come in October,” says B A Kodandaraman, chairman and managing director, Viveks, a leading South Indiabased retail chain. And factors like the lack of time to shop — particularly a metro phenomenon — is further crunching the number of peak shopping days. “Three-four years back Diwali sales were spread over 25-30 days. Now, it’s just 10 days,” Kodandaraman adds. The flip side to this trend is that companies have too little time to make or break it. One blink and companies could lose much more than they bargained for. For instance, according to some estimates, the consumer durables industry notched up a turnover of Rs 30,000 crore in 2007, of which about Rs 7,000-crore worth of sales came in the month of October itself. Naturally, a single-hiccup in performance can cost the companies dear. By the looks of it, there’s enough scope for hiccups. “Compared to last year, consumer spends are expected to go down by 5% to 6%,” says an executive from market research services major, AC Nielsen. Harmindar Sahni, managing director at consulting services company Technopak adds, “Consumer spending will be definitely subdued this year as compared to the last few years. But there will be slower growth rather than a complete slowdown.” Others put forth an all’s-well point of view. “There are no visible contractions in shopping seen in India. Marketers will continue to woo and consumers will continue to spend. In India, shopping for big-ticket items peaks around the festival season, and this year too the spirits will not be dampened,” says Paru Minocha executive director, Synovate India.Companies agree. “We have almost had eight quarters of continuous growth and haven’t seen any changes in the trend. We are not bearish,” says Venka tesh Kini, vice president - marketing, India & South Asia, Coca-Cola India. That sentiment is not restricted to cola manufacturers. Even apparel makers think so. “The financial or macro economic bearish conditions have yet to trickle down to the consumer level and slow down consumption. The economy is still growing at 7% plus,” says R Sathyajit, COO, Allen Solly, an apparel brand that’s part of the Aditya Birla Group. This doesn’t mean companies are willing to throw caution to the winds. “We are cautiously optimistic,” agrees V Ramachandran, director - marketing, LG Electronics, one of the largest consumer durable companies in the country. Caution in turn is leading to rational behaviour. First, companies are slowly, but clearly, beginning to shy away from promotions. “There will not be a very high skew towards promotional spends, says Rajesh Jejurikar, chief of operations - automotive sector, Mahindra & Mahindra. Retailers second that. “We don’t do one-day sales during the festive season but have regular offers,” says Ajit Joshi, CEO, Infiniti Retail, the company that owns the Croma chain of durables retail outlets. “We are planning to launch various promotions in the stores which will not be discount-led, but activityled,” says Zeena Freeman, CEO of apparel retailer, Peter England People. Season’s Ratings Even when promotions happen, it will not be all about giving away freebies. “Our store-specific promotions will not be in the traditional sense of giving away products or gifts on purchase, but instead focus on giving consumers a reason to walk into and experience the store,” says Sathyajit of Allen Solly. The company plans promotions like a “make-over” weekend, “fashion weekend” and themes revolving around its latest communication plank “fridays forever”. Similarly, at the Tata group’s hypermarket chain, Star Bazaar’s “Diwali Carnival”, the promotions are built keeping consumer segmentation and consumer buying patterns in mind. The hypermarket will focus on a lead category every week based on the market needs to anchor its promotional offers. For example, in Mumbai’s Star Bazaar, the thrust will be on food and groceries during the first week of October, which will then be followed by concentrating on children the following week. Others are looking at putting ‘product’ ahead of ‘promotion’ by offering new products or variants to coincide with the festive season. LG is among them. “Manufacturers have not done a great job to persuade people to upgrade ahead of time,” says Ramachandran. With a new product range that’s derived from unique consumer insights, LG plans to back the new offerings with significant spends in the festive season. These products, according to Ramachandran, are developed to fill existing gaps in the market. For example, based on the insight that less than 3% of the features in washing machines are actually utilised by end consumers, LG has introduced a washing machine that would recognise speech. Then, recognising the fact that charging cellphones is a cumbersome task, the company has introduced a cellphone with an USP of having “the largest battery life”.Sahni of Technopak seconds that increasingly product battles should be fought less on pricing and more on product attributes. Mahindra also bets on new product introductions to get a longer look during festive time. Apart from the recent introduction of the Bolero CRDE version, the company has also unveiled a new series of the Logan. On its part, Coca-Cola’s looking to leverage the festive spirit through traditional communication. On the product front the company has launched a 350 ml Sprite Xpress for Rs 15 and has rolled out a home-focused 1.25 lt fridge pack for Rs 35. While companies are concentrating on beefing up their portfolios, retailers are reading the leaves to get early insights. Onam in Kerala and Ganesh Chaturthi in Maharashtra have provided the early seasonal leads. “Current indications from the Onam season of Kerala are that there is not much to worry,” says R Subramanian, managing director of retail chain, Subhiksha. Kishore Biyani, chairman, Future Group, says: “Already, for Onam the response has been good. With Dussera beginning in Karnataka and Durga Puja in Kolkata we are seeing positive trends.” According to Subramanian, a conventionally held view is that in a downturn people loosen up during festive times. “Our view is that Indian consumers may not really cut back on festive spending. High ticket items may be impacted but normal spending on gift packs and crackers will go on.” Some companies are also paying heed to the assurance from these retailers. Says Sandeep Tiwari, head-marketing, Videocon Electronics, “We are coming up with a unique advertising campaign that projects the eco-friendly side of the company for this festive season.” On freebies, advertising and BTL put together, the company plans to spend about Rs 70 crore this festive season. That, when the consumer durables business is reeling under the double impact of rising input costs and weak economic outlook. Someone out there is seeing the upside of a downturn.