Millenials not so brand conscious & they are buying on EMIs: Vijay Sales MD

We see overall 70-80% sale is happening in EMIs. This has made buying consumer durables very easy for consumers. In our industry, sentiment plays an important role. If the sentiment is not so upbeat and this is the growth we are seeing, once the sentiments turnaround, then we can see a high double digit growth also. It is very important for sentiments to turn around, says Nilesh Gupta, MD, Vijay Sales, in an interview with Avanne Dubash of ETNOW.

Has the increase in demand for consumer durables come as a surprise for you?
For us it was a very big surprise because throughout, even before the season, there was talk about how the economy is going down, the market is bad and we did not know how consumers would respond.

In our industry, what matters most is the sentiment of the consumers and we were a little sceptical that the sentiment does not seem to be going positive. But it has surprised all of us. We have actually seen growth -- which was not there for quite some time -- in the last quarter, especially in the last two months.

December has been one of our most spectacular months this year, as far as growth is concerned. Another reason could also be because last year, November and December were washouts and so if we see growth over last year, it is a higher double digit growth which we have not seen in the last four years at all. The major reason I feel is because a lot of things have happened, brands have also been very aggressive on marketing as well as pricing.

Second, the cash backs which were offered by the credit card companies has worked in our favour and the zero per cent and zero down payment options available to the guests. We see overall 70-80% sale is happening on the EMIs. This has made buying consumer durables very easy for consumers and that is what they are coming in for.

I understand that despite the fact that we are talking about the best in four years, indications are still that the pre-demonetisation levels have not been achieved. How bad has the ripple effect been for the industry according to you, when it comes to buying sentiment, pricing power, etc, and when will we be out of the woods completely?
Looking at the last quarter, we are as good as out of the woods but the coming quarter will give us the flavour of what it is. Going forward, another reason we have seen a good demand is because the prices have come down, especially in televisions.

The large screen televisions have been very good demand because the prices have come down. They are the lowest ever, right from 32 inch TVs available for Rs 7,990-8990 and 55 inch TV for Rs 35,000-40,000. This has also coupled with growth and whether we are out of the woods or not, at least the consumer durable industry seems to be out of the woods.

When it comes to individual categories, it seems smartphone sales have been very good, but television has been lagging behind. Now all of us have phones which is like our eleventh finger and we tend to watch the latest serials, etc, on television screens. Are you sensing a shift in trend there?
There is no doubt that a lot of people are watching television on mobiles. But I feel, it has added to the sales. It has helped the sales of televisions for the simple reason that content is available. It was not available two years back. All have OTP channel programmes and all are web series.

What happens is the moment a consumer is travelling, he is watching on the mobile but the moment he reaches home, he wants to see the content on large screen. We have seen a huge growth in 43, 55 and 65 inch televisions. In fact, even 75 inches, which earlier rarely used to sell have started selling on a normal basis.

When it comes to rural sales, tier II, tier III growth, how has the sentiment been because now everyone is talking about green shoots of recovery?
In fact, although we are not much present in the rural areas, the feedback that I am getting from the market is quite positive. Secondly, mobile has led the way because even in the rural areas, I think nobody can live without mobiles. Everybody is moving on to smart phones.

Consumer stocks have been down trading over the past couple of quarters. Has this trend continued into this quarter?
In fact, this quarter we saw a little shift. People have upgraded themselves. Very few are upgrading on the brand side but are definitely upgrading on the capacity or the size side. In mobiles, we are seeing a different trend altogether. People want more capacity, more RAMs and so always within the brand, they are upgrading to the next level. That is one of the reasons why I feel consumer durable electronic seems to be out of the woods because people have once again started upgrading.

These past few months, you have seen single digit growth. Going forward, would will continue to see a pickup? The real test will be when we see the overall festive sales play out. Is a double digit growth on the anvil?
Going forward, this quarter is going to be very crucial. Secondly, another aspect which is very important for our industry is climatic conditions. This year, north India experienced a very severe cold and we saw total sale-out of all the room heaters, even the expensive ones. In case, we have a good summer, I think the air-conditioners and refrigerators will fuel double digit growth which we are expecting.

The competition is very stiff in your sector. Is there an issue when it comes to the pricing power?
In case of our industry, everybody wants to sell more. So normally, everybody is working on wafer thin margins. So yes, pricing is going to play an important role and already the air conditioning companies have started going aggressive.

One cannot deny that with portals like Amazon and Flipkart, everything is available at the click of a button. Are you not worried that that it is going to eat into the overall market share?
In fact, on a similar count, I had asked when I met PVR seniors that are they not afraid of OTT? They said on the contrary, it helps us to grow because people get more hooked to the content.

Similarly, I feel online portals are also helping the industry to grow because they are making people buy products at a faster pace, replace at a faster pace. Earlier, people used to replace TV sets once in 6-7 years. Now, they are okay with replacing it once in 3-4 years. They are here to stay and they will also be one part of this industry and some days they would do very well, some day the offline would do very well. Overall, consumers would want to buy both online as well as offline.

Although we are seeing the stock markets at all-time high, somehow one is feeling that at the ground level, that feel-good factor is just missing. People are not going out there and buying full throttle. Do you think the consumption story is starting to look a whole lot better?
That is what I had initially also said. In our industry, sentiment plays an important role. If the sentiment is not so upbeat and this is the growth we are seeing, once the sentiments turnaround, then we can see a high double digit growth also. It is very important for sentiments to turn around.

Apart from the stock market, it is the reports on how things are turning around, the economy is doing well that supports us more. So, it is a vicious circle. Positive report, positive sales automatically will lead to positive results.

Another favourable factor was the corporate tax cut. Any expectations from the Budget? Did tax cut change the sentiment on ground?
In fact, that did change slightly but this Budget if they cut income tax rate, that will make a lot of difference.

What are the trends that you are seeing? What is the older generation veering towards? Do millennials have a lot more power in their hands?
See I am seeing a major shift in consumer buying and especially among the millennials. Millennials are not so brand conscious, they understand the product, they study the product and if they find more value in something, they are okay to buy that, even if it is not a very big brand. That was not the case a decade back when people did not mind paying super premium for a brand. That is one major shift which is happening and that is why we have seen the rise of the new brands which have come in all of a sudden. So this is a major trend which we are seeing.

Secondly, nobody is shying away from buying on EMIs. A decade back, people even if they were buying on EMIs, would not tell their friends and family that they have bought on EMI. Today, if somebody is paying cash upfront and if his friend or family is accompanying him, they say are you mad? Why are you not going on EMI? Because of this shift, they are buying more.

But what are they buying now? Which are the categories that are doing well?
They are upgrading. When they are buying more, they are spending more on value, if they had come to buy a 43-inch television, they do not mind buying a 55 inch because on an EMI, it is only a Rs 2,000 difference. That is the major shift which we are seeing is happening. That is why over a period of time, consumer durable industry has been more or less stable.