The auspicious occasion of Dhanteras is seen by believers as the right time to acquire assets like homes and cars.
Those monitoring the economic slowdown were thus closely watching spending trends during Diwali celebrations to check if there is going to be a loosening of purse strings. It was a mixed bag.
The good news was the auto sector, reeling with declining sales for over a year, showed a definite spike in passenger car sales.
Online shopping too notched robust double-digit growth with apparels and smartphones leading the charge. On the other hand, small businesses and entry-level commodities continued to slip; so did home buying.
The underlying trend was: sales picked up where there were deep discount offers. That’s a matter of concern. Sales driven purely by discounts do not have depth.
HIGHS AND LOWS
The clear winners were the e-tailers – Amazon and Flipkart. According to a consumer survey by RedSeer, online sales saw 30 per cent growth above last year, and business was worth Rs 21,000 crore in the first six days of the Diwali season. Interestingly, compared to last year, which saw 60 per cent spike, this was a slower year.
Sales in malls and highstreets also looked up with apparels, smartphones and consumer electronics driving Diwali sales on the single-digit 7-8 per cent track. Smartphone sellers like OnePlus hit pay dirt with sales of Rs 1,500 crore in the Navratri-Diwali period.
The auto sector too was a major gainer with 50 per cent spike. Tata Motors said sales grew 49 per cent on Dhanteras compared to last year, while Hyundai Motor sold 12,500 cars on that single day, equivalent to 31 per cent of the company’s monthly sales in September.
However, small businesses and entry-level consumer goods reported muted sales, the worst Diwali in a decade. Online e-tailers did well on the back of predatory pricing, even cutting into the sales of mom-and-pop shops in Tier II and III cities. It will thus have to be determined whether the robust figures of Flipkart and Amazon reflect a genuine buying spree and higher volumes, or was it ‘cannibalism’ of shifting purchasers from the small business outlets to online buying?
This is truly worrying as there are 7 crore small enterprises that employ over 50 crore hands, which are now threatened with going under in the current slowdown.
PRICE RESISTANCE
When measuring consumer resistance, there are important takeaways. The Indian consumer is more price-sensitive than normally perceived. As long as Amazon and Flipkart are doling out the Diwali goodies, he will make a grab for it; if the price goes up even marginally, he withdraws and prefers to wait.
The municipalised bus transport system in Mumbai, which runs 3,200 buses in the city, slashed ticket prices by over 50 per cent about four months ago, in a bid to improve ridership. Rides in AC buses came as low as Rs 6 a trip. The results were beyond the company’s dreams. The average daily ridership grew from 19 lakh to 30 lakh a day, hitting auto and taxi ridershipby 15-17 per cent. A 5-10 per cent cut in ticket price wouldn’t have worked.
In-home buying, things have worked the other way, where the ticket size is big and it is perceived as a ‘luxury’ that can be postponed. Ultimately, there are very few people who are homeless, and need a roof here and now! A juggi-jhopdi dweller is trying to get himself a one-room authorised tenement, the couple-on-rent are trying to graduate to an ownership hole-in-the-wall, and so on.
So, builders’ attempts at Diwali dhamakas by throwing in a ‘free’ modular kitchen, and even bearing the hit of registration and stamp duty charges, have failed to move the market. The smart consumer sees these as what they actually are – sops. On the price front, he realises that the final payout does not go down too much.
No wonder, Anarock Property Consultants says that at the end of the July-September 2019 quarter, there were 6.56 lakh unsold homes in the seven big metros in India, of which 12 per cent or 81,300 units were ready-to-move-in homes. It is stressful times indeed, where businesses are not finding consumers; and consumers are shy because they are not sure about their jobs tomorrow.
An academic paper from the Centre of Sustainable Employment, Azim Premji University, says “total employment between 2011-12 and 2017-18 declined by 9 million…for the first time in India’s history”. While in the short-term, it will be price cuts or deep discounts that will move the market; in the long-term, the only way to crank up sales is to ensure consumes have more money in their pockets.
The way forward
In the short-term, it will be price cuts or deep discounts that will move the Indian markets. In the long-term, the only way to crank up sales is to ensure consumes have more money in their pockets.