A Festive Boost Isn't Certain For Appliance Makers To Retailers This Time
As the second wave of the Covid-19 pandemic stalled a rebound, makers of home appliances are betting on the festive season for a boost. But that's far from certain.
Everything from refrigerators to washing machines has turned costlier as companies increased prices to offset rising commodity and freight costs. According to the electronics retailer Vijay Sales, prices are up 3-15% across products.
And now, a global chip shortage is threatening to impact production.
“Raw material prices have increased by 22% and we have only taken a price increase to the tune of 12-15% across categories since January,” Kamal Nandi, vice president at Godrej & Boyce Mfg Ltd., told BloombergQuint.
While refrigerators saw a bigger jump in prices, Nandi said washing machines have seen a hike of 9-10%.
If commodity costs continue to rise, the company will increase prices further in the third quarter, Nandi said. But for air conditioners, he said, prices will only rise in the next summer season if raw materials don’t become cheaper.
Freight costs have also surged four to fivefold over the pre-pandemic levels, according to Nandi and Avneet Singh Marwah, chief executive officer at Super Plastronics Pvt., a maker of Thomson-branded televisions in India.
The company has increased prices by 30% to offset a rise in costs, and doesn’t intend another round of hikes to stay competitive to Chinese brands.
Marwah, however, cautioned that there could be a supply issue in the second half of the festive season, which is starting from the second week of October.
Parts from China are coming with a delay of 45 days, making it difficult to supply products on time.
High global demand after pandemic-induced restrictions were eased has caused shortage of chips for everything from televisions to cars.
Freight prices, too, are at an all-time high as China shut the port at Ningbo-Zhoushan, one of its busiest, for 14 days, Marwah said.
And then there are concerns around demand itself.
Godrej & Boyce and Super Plastronics said while demand has recovered after the second wave of the pandemic, the rebound wasn’t as good as the one seen last year.
“Pent-up demand isn't equal to last year’s level and business-2-business demand is recovering with a gradual opening up,” Nirmal Bang said in its recent report. There are expectations of demand revival in the festive season.
“Our channel checks across major Indian cities indicate that business sentiment has still not improved meaningfully across product categories,” the brokerage said. Despite the vaccination picking up pace, there are fears of a possible third wave among the channel partners, leading to low stocking, it said.
Vijay Sales, however, has seen a recovery. It’s close to pre-pandemic levels and 5-7% higher compared to January, said Nilesh Gupta, managing director at the retailer, said. Though it was a tad higher in June-July last year because of the pent-up demand after the first nationwide lockdown.
Gupta sees demand improving during the festive demand if the Covid situation is under control.
Nandi also expects the festive season to be smooth and doesn’t foresee issues in inventory. The company will, however, wait to see how the situation with components pans out.
Nandi expects discounts in consumer durables to be lower this festive season.
Super Plastronics will offer discounts during the festive season to boost volumes but some stock keeping units won’t be discounted due to supply crunch, Marwah said.