The Great Indian Garage Sale

CAN you remember when you last bought clothes without a discount? Or for that matter, shoes, TVs, home appliances, even cars and jewellery? In most consumer goods, 1996 is like a never-ending Diwali sale. Right now, Reebok and Levi’s are offering their products at 50 per cent discount. For a 21" Akai colour TV, another 14" set of the same brand comes free. Exchange your old refrigerator for Samsung Multiflow and save up to Rs 5,555. A Whirlpool appliance is available at Rs 2,100 discount plus a pager worth Rs 2,995. A citrus press is yours with a Philips mixer-grinder and a CD player with a Brother fax machine. A Titan watch is free and Rs 5,000 service charge waived with a Maruti Esteem. For 10 Cielos, the eleventh one comes free. And 10 per cent off on purchases worth Rs 50,000 and above of, hold your breath, gold jewellery. That’s at Tribhovandas Bhimji Zhaveri, while some other jewellers are running contests with prizes ranging up to a kilogram of gold.

With competition stiff and the choice of prestigious consumer durables brands widening everyday, the Indian customer may be finally king. Says Sundar Hemrajani, senior vice-president, Whirlpool: "Banking on brand equity is no longer enough. You have to provide value-addition to customers. Promotions have to be seen in that light." Adds S. Ramesh, research director, Pathfinders: "The consumer is reaping the first harvest of a competitive and open economy. But that’s only half the story." 

So what’s the other half? "When economic indicators are flagging, inflation is in double digits (never mind the official figure), GDP projections are being downscaled, salaries are being squeezed and fear of recession is lurking, TVs and washing machines are the last thing on the minds of people," says V. Kumar Chopra, managing director, Thomson. Thanks to an economic slowdown, market projections of many companies have gone haywire, leading to a high inventory buildup. Says marketing consultant Devan-gshu Dutta: "Apparel companies that entered the market six months to two years ago had their seconds and surplus stocks piling up. Now, the dead stocks are moving at discounted rates." But Reebok General Manager Siddharth Verma differs: "Our sale is part of the international practice of phasing out old models. Consumers don’t want to see the same things every year." 

The truth probably lies somewhere in between. "The market is consolidating. Marginal players see lower sales but bigger players are gaining. It’s a redistribution of market shares," says Ramesh. The promotions are "more a sign of correction than recession," says Arvind Singhal, managing director, Technopak, a marketing consultancy. In absolute terms, he explains, the washing machines market has expanded with companies like Whirlpool and BPL doubling their sales. Maruti sold 164,207 vehicles in April-October, 1996 as opposed to 127,347 vehicles in the same period last year. That’s a 30 per cent growth of the overall car industry growth of 21 per cent. "When so many people spend over two-and-a-half lakh of rupees on a car, talk of a recession is premature," says Singhal.

As the euphoria over foreign goods settles down, premium brands are shifting volumes to the value-for-money segment.

The other correction taking place is in pricing strategy. Most consumers have gone back to basics after the initial euphoria of must-own high-priced foreign-brands settled down. Explains Neeraj Swaroop, vice-president, Bank of America: "The TNCs miscalculated the demand and market sizes for products. The Indian middle class is not a homogenous 200 million. Nor is the consumer psyche such that he wants to buy, say, three pairs of Rs 1,000 shoes each for walking, playing cricket and aerobics. This happened even one-and-a-half years ago with brands like Pierre Cardin, Lacoste and others. There might have been trial purchases but consumers have not returned." Now that many of the premium brands have realised their mistake, they are shifting volumes to the value-for-money segment. The discounts and freebies may be the price to pay for that shift.