V-Mart to Flipkart prep for bumper festive demand after a tepid summer

Haier India pre-ordered components required to make washing machines and refrigerators much in advance unlike the previous years. Its factories are already running at full capacity.

“Summer taught us that demand outstripped supply as we saw some supply-chain disruptions due to the red sea issues," said NS Satish, president, Haier India. “We are now taking that learning and have pre-ordered components much ahead of the peak festive shopping period. Currently our factories are running at full capacity. Half the production has already happened."

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This year, the festive season will run from mid-September to Diwali on 1 November, followed by the wedding season. Demand for household goods to cars and jewellery spikes during this period, contributing roughly 20-30% of yearly demand. Indian businesses are hoping for bumper sales during the auspicious phase to make up for tepid consumption earlier this year on account of harsh summers and general election.

For Haier India, demand for LED televisions surged 35% on year during the recently concluded Onam festivities, while sales of washing machines too surpassed internal targets. Refrigerators and air conditioners reported a 25% growth, below its estimates, as sales had surged earlier in the year because of a hotter-than-expected summer.

While online sales of electronics, household goods and apparel are expected to during pre-festive sales, customers may prefer to visit stores closer to the festive days.

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“Online spending mix might shift as we progress into the festivals with shopping for apparel, confectionery and groceries becoming more popular," said a report released last month by Mastercard Economics Institute. “Not only could the online spending basket change, but shoppers are likely to prefer physical stores to online retail shopping for grocery & confectionery, jewellery and cosmetics in traditional bazaars as we move closer to the big festivals."

Festive demand from tier 2 cities could outstrip sales in tier 1 cities, it said.

Apparel and fast-moving consumer goods retailers, and fast-food chains have flagged tepid demand on account of high inflation earlier this year. Harsh summers, coupled with the general election, also restricted mobility in some parts of the country. Demand for clothing has remained subdued since the previous year’s festive season as consumers diverted spending to other categories.

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But a strong monsoon may come as a relief for several households. Inflation has been cooling too—wholesale inflation fell to a four-month low of 1.31% in August on account of softening of food, fuel and power prices. Retail inflation, too, has stayed with the central bank’s tolerance band for two straight months.

The company, which operates 448 general merchandise (V-Mart) and value apparel (Unlimited) stores across India, saw some disruptions in the June quarter on account of general elections. It expects this festive season to be better than the last three-to-four years.

'Demand trends to get better'

“Demand trends will be better than the first half of the year—definitely. Festive is also early this year and then there are enough wedding days once the festive season ends," said Lalit Agarwal, founder & managing director, V-Mart Retail Ltd. “Monsoon has been building up well and we should expect more money in the hands of consumers (in rural markets). Winters may also arrive early. We are expecting to grow anywhere between 10-15% compared to the last festive season."

Online retailers that typically launch aggressive sales in the run-up to the festive season have also expanded their capacity to match demand.

On Tuesday, online marketplace Amazon announced the launch of three new fulfillment centers in Delhi-NCR, Guwahati and Patna, along with the expansion of existing fulfillment network, to boost delivery speeds for customers in North and East India. All these buildings are ready and operational ahead of the upcoming festive season and will collectively support more than 2.5 lakh sellers across Delhi-NCR, Bihar and Assam, it said.

Rival Flipkart launched 11 fulfilment centres across the country, spanning over 1.3 million sq ft. “Flipkart is poised to meet the festive demand for same-day delivery with over 2 lakh stock keeping units, across 20 cities ahead of The Big Billion Days 2024," the company said in a statement Monday.

Others are hopeful of more consumers coming to stores too.

“When the first half of the year is weak, demand in the second half is stronger. We have launched new collections already," said Akhil Jain, Executive Director of lifestyle brand Madame. “Online is growing organically and keeps growing at a certain pace; we are opening more stores and increasing square footage, so we are seeing jump in offline sales."