Festive spirit: Premium, mid-segment items flew off shelves; mass market suffered

For most consumer goods players, traditionally the festive season signifies bumper sales and massive footfalls at the outlets. But this time, lack of enough demand at the mass market segments in big ticket categories like residential units, automobile and home appliances failed to lift their spirit.

While demand for consumer staples remained mostly stable, subdued sales in volume driven segments of dispensable categories has left them high and dry.

Take automobiles, for instance. In October, domestics sales of compact entry-level passenger cars plunged by 49 per cent to 71,308 units from 138,988 units last year. The segment that includes most popular passenger vehicle models like Swift, D’Sire and Alto from Maruti Suzuki (MSIL),  i10, i20 and Santro from Hyundai Motor, Tiago and Altroz from Tata Motors, Honda Amaze and Renault Kwid, witnessed a sharp fall compared to all other passenger vehicle categories.

Domestic sales of mid-size cars like Honda City, Hyundai Verna MSIL Ciaz and Volkswagen Vento fell 20 per cent. Sales of utility vehicles inched down by 2 per cent while for premium cars it grew by 46 per cent.

According to Vinkesh Gulati, president of the auto industry body Federation of Automobile Dealers Associations (FADA), during the festive month domestic demand for mid and premium-segment cars remained steady and the decline in utility vehicle sales is primarily attributed to lack of enough supply due to the ongoing semiconductor shortage. However, in spite of enough stocks of entry-level cars, subdued demand from consumers hit sales.

In the two-wheeler segment, the trend is similar. As per FADA’s assessment, as consumers preferred to conserve cash, demand for base-level two-wheelers (less than 125CC engine) suffered heavily.

Also read: FADA expects no festive cheer for automakers during Christmas, New Year

In the residential real estate market, while country-wide data is not yet available, early trends indicate demand remained skewed towards the mid-segment and premium properties. As per data from the real estate consultancy firm Knight Frank India, property registration at the country’s largest market - Mumbai - was highest in a decade for the months of October. At 8,576 units, sales registration grew 8 per cent over last year’s record 7,929 units.

However, with consumers looking for larger unit sizes, majority of these units were in the mid-segment housing (priced above Rs 45 lakh). Nearly 43 per cent of the units were priced between Rs 1 crore and Rs 5 crore, while over 30 per cent were priced above between Rs 50 lakh and Rs 1 crore. Overall, close to 80 per cent of the units sold and registered during the festive months were mid-segment or premium and luxury homes.

Also read: Diwali sales lit up urban markets as shoppers throng marketplaces

In the housing market in Kolkata, while last October registration of smaller units (size less than 500 square-feet), comprised of 61 per cent of the total units. This year, registration in smaller units plunged 23 per cent. Of the total 4,683 units that were registered in the market, mid-segment units (size between 500 sq.ft. and 1,000 sq.ft) formed 49 per cent, followed by units larger than 1,000 square-feet (26 per cent). While smallest units comprised 25 per cent of the total sales.

According to Dhruv Agarwala, Group CEO, Housing.com, with banks offering home loans at 15-year low interest rates, demand from the mid-segment buyer has improved. Agarwal now hopes that demand at the affordable housing space (priced lower than Rs 45 lakh) improves and will drive sales further during the rest of the festive quarter (October-December).

In the country’s Rs 1 lakh crore home electronics and appliances market, demand for premium and luxury segments has kept manufacturers busy in ramping up production. From LG and Panasonic to Sony and Godrej, all leading players have witnessed higher demand for frost free refrigerators, high-end split air conditioners and front and top-loading washing machines since the lockdowns were lifted in mid-2021.

Sales for mass market segments, however, continued to suffer during the festive season that traditionally contributes close to 45 percent of their yearly sales.

According to Kamal Nandi, Business Head and Executive Vice-President at Godrej Appliances, sales of entry-level segments like single door refrigerators and semi-automatic washing machines failed to take off. “Demand for mass market products have suffered as consumers in smaller towns and rural areas are skeptical about their financial future and are more inclined to conserve whatever cash they have for medical emergencies. Their harrowing experience during the second COVID-19 wave have kept them weary,” he said.

In the country’s robust smartphone market, iPhone shipments touched new peaks during the July-September quarter - a period that indicates the prospective demand for the festive weeks. During the quarter, Apple India’s shipments grew by a whopping 212 percent driven by superior demand for iPhone 11 and 12 models. Resultantly, the premium brand became one of the top five 5G handsets brands in India, Counterpoint Research noted.

Also read: India Inc may soon pass on the higher input cost burden to customers