Festive Demand: Uncertainties, Inventory Concerns and Deep Discounts

The upcoming festive season typically draws attention to consumer demand, with companies eagerly anticipating a surge in purchases. This period, which includes Onam, Ganesh Chaturthi, Diwali, Navratri, Durga Puja, and Dussehra, is usually marked by a significant increase in consumption. However, this year, companies appear to be skeptical about a strong demand surge, particularly among low-and mid-income consumers.

So, what does this mean for companies this festive season?

Inventory buildup and a cautious recovery in demand, especially for entry-level products, could be affecting companies during this festive season, which typically accounts for 20-30% of their annual sales. Carmakers, smartphone manufacturers, and others are grappling with inventory challenges. Industry estimates indicate that the unsold stock of cars rose to approximately 421,000 units by the end of August, up from 410,000 units at the end of July and around 300,000 units at the start of the fiscal year. Similarly, mobile phone tracker Counterpoint Research reported that smartphone channel inventory reached about ten weeks by the end of August, compared to the usual 4-5 weeks. Consequently, this year is expected to be highly competitive, with brands likely to offer aggressive promotions and deep discounts to stimulate sales during this critical period. It seems companies are already in discussions with e-commerce platforms to negotiate significant discounts aimed at clearing out inventory. According to industry executives, electronics and apparel companies will maintain their production plans for the festive season but may reconsider their strategies post-Diwali, depending on the extent of unsold inventory.

In conclusion

Predicting demand for this festive season has been challenging. On one hand, demand could improve with a healthy monsoon, as good rainfall typically has a positive effect on consumer spending. However, recent demand has been sluggish, and the significant inventory buildup remains a primary concern for many industries. Whether the festive season, bolstered by discounts and promotions, can successfully stimulate demand remains to be seen.

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