Diwali Surge For Premium Appliances Points To A Familiar Stress

Sales of entry-level consumer durables and electronic goods were muted this festive season in another indicator that the stress in rural markets is far from over.

Demand for premium refrigerators to washing machines, however, was "encouraging" despite price hikes and last year's high base, according to companies BQ Prime spoke with.

"This Diwali, we saw a jump in sales of mid- and high-end products... about 25-30% in terms of volumes and close to 50% in terms of values," said Eric Braganza, president of the CEAMA, which is the apex body for the Rs 75,000-crore consumer electronics and home appliances industry in India.

Sales of entry-level products, however, fell 10-15%, resulting in inventory piling up, said Braganza.

Manufacturers of consumer durable and electronic goods have navigated pandemic-led closures and the consequent supply chain snarls in the last two years. But dealing with the fallout from persistent inflation seems to be an even tougher test. That's reflected in the uneven demand recovery, like in the case of consumer goods.

Although premium products typically perform better during the festive season as consumers look to upgrade, Braganza said this year is the first in many years when sales of mass-market products have declined—an unwelcome development for companies that depend on the festive-season splurge to meet their annual financial target.

According to Neeraj Bahl, managing director and chief executive officer, BSH Home Appliances (India and SAARC), the festive season witnessed a 20% plus growth in comparison to the same time last year. "Top load washing machines and refrigerators were key growth drivers this year."

Dishwashers also performed well, said Bahl, but "there is definitely room for more growth in that category."

He attributes the growth in the premium segment to the lucrative offers and easy financing that were rolled out this year.

According to estimates by market intelligence firm GfK, the festival period contributes about 17–19% to annual sales of white goods. In the past 18 months, consumer durables manufacturers have raised prices by 25–30% to pass on the burden of higher commodity prices, rising freight charges, and rupee depreciation, among other factors, to the end consumer.

Yet, strong growth in the midrange and premium categories signals that more expensive options aren't turning all consumers away. A section of shoppers is still spending, confidently defying levels of inflation.

Brands like Haier, Godrej, Whirlpool, and Panasonic have also seen stronger demand for large capacity washing machines, fridges, and large screen TVs while the mass segments remained under inflationary pressure.

AC sales were tepid during Diwali, but that, CEAMA's Braganza said, is because it is an off-season. "Typically, AC sales pick up in the summers."

Electronics retail chains like Reliance Digital and Vijay Sales also witnessed strong growth driven by higher bill values and conversions as more and more customers visited their stores on the back of promotional events, attractive offers, and festive buying.

Mobile phones, TVs, and washing machines did particularly well with 30% year-on-year growth in the July-September period, said Gaurav Jain, head of strategy and business development at Reliance Retail, in a recent post-earnings call.

JioMart Digital, he said, clocked 25% growth in the September quarter over the June quarter, driven by large appliances.

Vijay Sales reported a sales growth of nearly 15% this festive season, driven by large television sets, microwaves, mobile phones, and laptops.

"Volumes also grew 11% after several months of tepid growth," said Nilesh Gupta, director, Vijay Sales.

Early data from the Retailers’ Association of India indicates that consumers also shopped for appliances weeks prior to the main festivities of Diwali. In September, which saw festivals like Navratri and Onam, sales of consumer durables and electronics rose 30% over the corresponding period of 2019.

The flagship online festive sales by Walmart-owned Flipkart and Amazon also pushed sales of appliances and electronics companies.

According to Redseer Strategy Consultants, around 1,100 mobile phones were sold each minute, with Rs 11,000 crore worth of these gadgets sold on large e-commerce platforms alone during the first four days—Sept. 22 to Sept. 25—of festive sales. Premium phones, including the iPhone 12, 13, and OnePlus, drove mobile sales, it said.

Similarly, a report by Strategy Analytics pointed out that Samsung led the festive season sales—Sept. 23 to Sept. 30—with a 26% market share, followed by Xiaomi with 20% and Realme with 17% market share.

"We estimate Samsung sold out 3.3 million units of smartphones this year," said Linda Sui, senior director at Strategy Analytics. "The premium models like the S22 Ultra, S21 FE, S22 Plus, and Z Flip 3 were handsomely discounted and sold quite well."

Online-only television brand Thomson saw 100% growth this festive season compared to 2021. "The premium segment saw more than a 120% jump in volumes, aided by hefty deals," said Avneet Singh Marwah, CEO of Super Plastronics Ltd., the exclusive brand licensee of Thomson in India.

"This year, we saw good sales as consumers were attracted to the deals on online platforms," he said. "An entry-level 32-inch TV, for instance, was available at its lowest price ever. Ditto for the premium category, where one could buy a 55-inch 4K TV for the price of a 43-inch 4K TV."

However, the bigger worry, he said, is that the high sales may not be sustainable as input cost concerns linger on and the rupee remains volatile. "We expect prices to go up by around 15% next month, and the moment the prices are revised upward, demand is bound to take a hit," said Marwah.