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Slowdown dims festive season sales

Growth in sales has been positive in the first half of the year. We observed a healthy demand at all our major counters, especially in the west and south region as they contribute to approximately 40 percent of our revenue. On the online circuit, we launched an exclusive range of air conditioners with Amazon that has helped us gain a good digital presence.

The first two quarters have been positive, but not as per industry expectations. The same was not true for the much-anticipated festive season that followed. The home appliances industry overall did not perform as expected.

For the crucial period of Diwali, sales of many product categories were flat or declined slowly. The past three quarters witnessed a slow economy and poor consumer sentiment in both rural and urban areas. Categories, such as mobile phones and apparel, have seen exceptional growth in both online and offline markets.

The HVAC industry, especially the air conditioner sales, has been flat and is driven mostly by mid-premium and premium inverter air conditioners in the metro cities.

Smaller cities, especially Tier-II and Tier-III towns were unable to match the expected sales growth. Consumption slowdown in the market place also shrank the ticket size of the purchases. In the air conditioners segment solely, we saw muted growth in primary sales during the festive season.

At the retail level, modern retail chains have done better and are likely to pick up the pace by the end of the year but smaller, standalone retail stores have fared poorly. Our marketing initiatives like the lifetime free service, scratch-and-win assured gift, and easy EMI payment offers garnered a good amount of redemptions in the initial phase of the season. Such promotions helped the large-format retailers to post better sales.

Smaller counters struggled due to lesser walk-ins and a shift in consumption patterns that suggested consumers postponed their purchases hoping the economic climate would improve.
The online scenario until mid-Diwali has been very impressive for the large appliances with almost 50 percent of the sales coming from Tier-II towns. According to Amazon, the large appliances category experienced eight times growth in the first part of the Great Indian Festival sale this year.

Premium brands have made the most out of this period as every one in five customers has opted for an upgrade from their existing appliance with the help of easy finance and lucrative offers available online. The growth of AC sales on e-commerce space is in single digit and not so impactful compared to the previous year.

Amidst the festive season that starts with Onam in Kerala and covers festivals like Navratri, Durga Puja, Dussehra, and Dhanteras, unseasonal rains hit the major metro cities in the south and the west. Untimely rains impacted the pace at which the sale was expected to pick up during Diwali making goods makers and offline retail counters conscious about business during the make-or-break festive season that contributes almost 35–40 percent of their annual sales for companies.

In spite of the slowdown, the industry has abundant opportunities to grow with potential growth of 10–12 percent in the coming 5 years. We still remain optimistic about our growth by penetrating further into the market by doubling the number of our retail touchpoints, enhancing trade share in e-commerce, and rolling out a new feature-rich energy-efficient air conditioner at attractive price points.

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