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The Season of Spending

November 2004
The Season of Spending

This year, a convergence of major festive holidays such as Diwali, Id, and Durga Puja, as well as of many other factors such as a robust rural economy thanks to a good monsoon, has resulted in a consumer market that seems fully charged on steroids.


It is the time of the year again when Indians like to splurge, leading up to the biggest Hindu festival of lights, Diwali in the month of November when the goddess of wealth Laxmi is worshipped. The goddess, it is believed, is quite mercurial and enters only that house which is the most readied to welcome her. Thus, Indians decorate their homes with candles and make new purchases in the form of cars, air-conditioners, washing machines,

clothes, mobile phones and every other such comfort goods, to impress the

Goddess so that she arrives to never leave again.

It is the time of the year when corporations, the government as well as employers of every hue dole out the annual Diwali bonus to their employees, in keeping with holy

requirements. Diwali is also the occasion when business ties, friendships, political networks are buttressed through exchange of expensive gifts, which at most times are not refused for obvious reasons, packaged in tradition and religion.

This year the hopes of the merchants are particularly high as there is a confluence

of three important festivals around the same time --- Id, observed by the

150 million Muslims in the country, Durga puja which is the most important

festival of Bengalis and Diwali.

Predictably, with so much cash circulating and willing buyers, the Indian consumer durable market, valued at $ 4 billion (Rs 20,000) crore and the fast moving consumer goods (FMCG) market --- the clothes, soaps, cosmetics, chocolates et al --- valued at $ 10 billion (Rs 50,000 crore), are preparing to cash in the huge annual Indian urge to spend that take place in the quarter October-December when the sales are always the highest.

The festival marketing schemes take the form of exchange offers, discounts, freebies, lucky draws, advertising campaigns involving film stars and cricketers, the two biggest brand ambassadors in this country. The second and third week of November

before Diwali are the hottest selling days of the year, with sales figures often rising to 100-150 times the average take in off times.

The planned ad spends are already in place much in advance with every attempt to ensure the right information about what competition has in store. According to industry estimates, all the brands put together in the consumer goods category, where the maximum purchase happen, have earmarked over $100 million (Rs 500 crore) on promotions which is double the budget for last year. Korean durable major LG electronics has slotted $20 million (Rs 100 crore) as against last year's $12 million (Rs 62 crore.) LG's competitor and Korean counterpart Samsung has also nearly doubled its festive budget from $10 million (Rs 50 crore) last year to $20 million (Rs 100 crore)

this year. "The concept of gifting will never lose its charm. The consumer will always look at extra benefit whenever he makes a purchase,"' says R Zutshi, of Samsung India. Philips has earmarked $4 million (Rs 20 crores) while on offer are lucky winners of 10 Mercedez Benz cars on the purchase of every Onida product. Other consumer goods companies, such as Electrolux, Videocon and Whirlpool, have also set aside huge hikes in their promotion spends this quarter.

"It is a do-or-die situation for every marketing manager who has to ensure that every attempt is made to cash in on the festival season," says Ritwik Das, is a dealer for LG products in Delhi.

Expectations are high as well, with most companies hoping their year-end sales to make up a sluggish first three quarters, to meet annual targets. LG, Samsung, Videocon expect their sales to be 30-40 % higher than last year. They may well be right as a survey by Synovate India, a consumer research firm, says that consumers from Delhi and Mumbai, the two main metropolitan cities, are in the mood to splurge. Branded clothing, personal

grooming items, mobile phones, digital cameras are pretty much in the purchase agenda. Most consumer durable companies listed in the stock exchange have clocked high returns over the last couple of months, in expectation of the good period ahead. Even firms that are struggling to keep afloat, such as BPL have risen in the stock exchange.

The demand is expected not only from the high-income category of consumer but also from the lower end of the income spectrum, who stretch themselves during this time to purchase the much planned for car, two-wheeler, television or washing machine. Not surprisingly, several banks, including HDFC, ICICI, GE Countrywide, Bank of Baroda, Dena Bank have launched easy festive credit offers to entice the consumer even more. HDFC credit card is offering diamond pendants, holiday packages for spends over certain amounts, while others have relaxed norms to allow for loans at very low income categories.

The FMCG firms too are upbeat about their sales going up, though it is the consumer durable category that usually shows the maximum activity during this period. Chocolate and cola makers are leaving no stone unturned to ride the boom. Cadbury, Nestle and Amul are sprucing up their act by investing in packaging for gift packs exchanged during the Diwali period. Most companies have announced "happy occasion discounts" and reduced their price as well.

The Indian consumer market is expanding due to the high growth of the service sector that employs hundred of thousands of youth, keen to find an excuse to spend. The rural economy is doing well in the face of a good monsoon, with the harvest season for rice having begun. Several players have been making concerted efforts to penetrate the rural market, to tap into the big pockets of non-taxable agricultural income earners. All of these only augur well for the Indian economy, as it is only more income that allows for

more expenditure.

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