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Corporate gifts may dry up this festive season

October 08, 2008 08:31 IST

The global financial meltdown may take a toll on gifting companies, with corporates likely to tighten their belts around their gifting spend on employees this ensuing festive season.

"Corporates, especially in the IT space, are now facing a twin-edged situation - even tier-I employees leaving the organisations and plummeting revenues - a reality which we should accept. Festive gifting per se, the entire activity will not be waived, but per employee spend is likely to be reduced," says Phani N Raj, managing director of corporate gifts and brand merchandising company eYantra Industries Limited.

Festive gifting has been a centuries-old tradition - a goodwill gesture towards clients and a feel-good factor for employees. However, due to lower margins, corporates may reduce their gifting spend partially, may be to an extent of 10 per cent, he adds.

The Hyderabad-based over Rs 25-crore (RS 250 million) company, which caters to the brand needs of 1,000 corporates across 42 countries including biggies like Microsoft, Infosys, Wipro, Google, Satyam, Dr Reddy's, Aurobindo and Genpact, witnessed expensive orders for electronic goods like iPods, digicams, camcorders, mobiles and portable DVD players during the last festive season.

However, this season, it expects orders for gift sets (comprising a mix of pens, watches, valets, keychains and Swiss knives), fragrances, and liquor chocolates packaged in brushed steel containers.

"Last Diwali, Indian corporates spent around Rs 500 crore (Rs 5 billion) on gifts. But the situation may change this year, thanks to the recent developments such as Lehman Brothers filing for bankruptcy, with tier-I employees expected to get expensive gifts and the 'not-so-important' cadre ending up with getting less expensive ones," Raj adds.

The global corporate gifting market, mostly fragmented by the unorganised sector, is currently pegged at $50 billion ($20 billion in US alone), while it is projected to touch Rs 6,000 crore (Rs 60 billion) this year in India, as compared with Rs 4,500 crore (Rs 45 billion) last year.

However, consumer electronics manufacturer LG Electronics, remains unfazed with the current market dynamics. "With festive season around the corner, consumers would splurge and we are hopeful to meet their demands. We will be coming out with innovative products in key categories like washing machines, microwave ovens, refrigerators, flat panel display, mobile phones and IT," says V Ramachandran, director (marketing), LG Electronics India Limited.

LGEIL is targeting a growth of 30 per cent this festive season over last year.

The 500-odd employees of Aliens Group, a Hyderabad-based infrastructure development company, are treated with sweets and chocolates on Diwali besides a trip to foreign destination as performance-based incentives.

This year, it is looking at quality spending on gifts like watches. "We are looking at cost-effectiveness and trimming overseas trips. Gifting, after all, is a relationship-building tradition and we cannot cut down the spending straight away," says Hari Challa, MD of Aliens Group.

K Rajani Kanth in Chennai