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Rediff.com  » Business » Easy finance, credit cards push white goods sales up

Easy finance, credit cards push white goods sales up

January 02, 2008 11:32 IST

Consumer durable manufacturers and retailers have observed that as more consumers buy premium products such as LCDs, high-end refrigerators, washing machines and IT products, the curve is shifting towards credit purchases.

Increased liquidity and unaffordable real estate costs have fuelled demand for premium white goods as the Rs 25,000-crore consumer durables industry beat its own expectations during the festive season.

However, the industry is slowly observing the popularity of consumer finance schemes among buyers.

Sukhpreet Singh, general manager, brand marketing, Whirlpool India, said, "The durables industry is seeing a gradual trend towards financing purchases, particularly at the entry-level and high-end products. Almost 20 per cent of home appliances sales come through financing options, but the number could be larger if we take into account unorganised financing too."

The company has observed that consumers are ready to buy appliances for Rs 12,000-13,000 and are even willing to stretch their budgets, opt for a lower EMI payment option and purchase an upgraded model in the category.

Korean durables company Samsung, which registered a 30 per cent jump in home appliances sales during the festival period, reported an average 10 per cent increase in sales from consumer finance schemes.

"Finance schemes contributed about 30 per cent of the sale of premium products with an average purchase price of Rs 35,000. The contribution of consumer finance among mass products was 20 per cent, up 5 per cent from the previous year," said a company executive.

Nilesh Gupta, managing partner of Mumbai-based retail chain, Vijay Sales, said, "Consumers are inclined towards purchasing premium products through credit cards as there are lucrative offers available. Credit card-based sales shot up to 40 per cent from the conventional 15 per cent figure."

Manoj Kumar, head, consumer durables, Home Solutions Retail, part of the Future Group, said, "Credit card purchases accounted for 30-35 per cent of the sales of e-zone and Electronics Bazaar. Though the market share is large in bigger cities such as Bangalore, small centres such as Indore and Agra, also contributed visibly."

Sachin Khandelwal, head-card products, ICICI Bank, attributed this trend to the emergence of organised retailing in consumer durables and the overall increase in acceptance of credit card payments amongst retailers.

"Credit card purchases are gaining popularity particularly in consumer durables and jewellery as retailing is getting more organised and also moving into bigger formats. The banks are also increasing their network and partnering with regional retail chains for promotions," Khandelwal said.

Whirlpool's Singh observed that durables financing needs to stabilise, as financial institutions tended to be inconsistent with their strategies.

Credit is cool

  • The consumer curve is changing as more consumers are buying high-end refrigerators, LCDs, washing machines and IT products on credit purchases and finance schemes
  • Samsung registered a 10 per cent rise in sales on consumer finance schemes, while e-zone and Electronics Bazaar posted 30-35 per cent rise in sales
  • Credit card-based sales shot up to 40 per cent from 15%
Tejal A Deshpande in Mumbai
Source: