Consumer spending expected to hit a record this festive season

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There was too much uncertainty in the economy, and immersing into one’s reserves to buy something that wasn’t a necessity didn’t seem the most sensible thing to do.
But the situation changed now.TheSensex is in the sub-28,000 zone like it was a year ago; economic signs are mixed- whilst industrial production hit a nearly three-year high in August, retail inflation rose in September.The Reserve Bank cutting the repo rate by a handsome and more-than-expected 50 basis points to a four-and-a-half-year low of 6.75 per cent.

Royal Enfield would attest to the new sense of confidence among consumers. The maker of the Bullet and Thunderbird motorcycles has observed an over 50 per cent growth in sales in the last six months over a year ago. Along with Royal Enfield, a raft of carmakers, consumer durable manufacturers, brick-and-mortar retailers and electronics brands are betting big on an uptick in consumer spending, which has remained fainted over the last few festive seasons.

Arvind Singhal, founder of consultancy firm Technopak, is not surprised to see consumer spending criticizing out better than the last few festive seasons. It is because of inflation has been low and economic growth is picking up every year. And what’s immediately leaving consumers with more money in their wallets are lower fuel prices than a year ago.Singhal points out that consumer sentiment has got further stoked by online retailers and their aggressive marketing strategies and attractive discounts. Ecommerce players are subsidising the shopping of people and fuelling consumerism.Online sales and discounts would have enabled consumers to save some Rs 15,000 crore this year, which will now be used to buy goods in the brick-and-mortar.

Flipkart, for occasion clocked $300 million in gross merchandise value during its ‘Big Billion Days’ sale. The company sold over one million mobile phones and 60,000 TVs, got orders worth over 10 lakh units of fashion merchandise during the first 10 hours and the sale helped over 100 sellers turn millionaires in just five days.The numbers were equally attractive for its competitor Amazon. Industry body Assocham said online sales would cross Rs 52,000 crore during the festive season, which goes on till end December. E-commerce sales would register a five-fold increase this festive season over 2014.Big Bazaar, the hypermarket retail chain of the Future Group, has seen strong double-digit sales and growth during Navratras.

Compared to the last festive season, LG has seen a 20-25% hit in business this time around. Religare Capital Markets, maintains that optimism is widespread as it’s not only urban India that is seeing a improvement in spending; demand in tier III and IV towns is also strong. The government sets up pay commissions every 10 years to review the pay scale of its workers.While the demand for Renault Duster had jumped, launch of the competitively priced Hyundai Creta led to a spur in demand.Rakesh Srivastava, senior vice-president, Hyundai Motor India, feels it was finally up to the automakers to attract people to buy. It’s a challenge for marketing people to excite them with good products.While the festival season usually contributes over 30% of the annual volume, it was floating at a low of 5% over the last few seasons.

Meanwhile, if there’s one sector that’s in the depression it is real estate. But then that can only be good news for consumers. As far as business for PropTiger is concerned, sales in October so far are 50% higher than the previous month, and marginally higher than during the Dussehra of last year.Prices have fallen in real terms, and hence customers have started buying homes, especially in the end-user segment.Tata Housing is for the first time offering gold, gift vouchers and foreign trips to buyers by sensing a revival in consumer sentiment.So consumers are opening the follow strings but it isn’t as if they are spending like there’s no tomorrow.

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