Online sales surge, no to Chinese goods: How note ban, GST impacted Diwali 2017

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Online sales surge, no to Chinese goods: How note ban, GST impacted Diwali 2017

The experts in trade and commerce have blamed demonetisation, GST, strict vigil by tax department and a significant thumbs up to online sales and avoidance of Chinese goods for this year's low sales.

The streets are beautifully lit up with fancy festive decoration but this year the crowds and sales in markets and malls are nowhere close to last year.

Well, the experts in trade and commerce blame demonetisation and GST, even strict vigil by tax department and a significant thumbs up to online sales and avoidance of Chinese goods. So, this festive season's sales may not be higher than last year.

The festive season's biggest money spenders were the corporates in form of gift purchases. According to a series of surveys by industry and trade body ASSOCHAM, festivities this year are low key and due to stressed balance sheets, corporate India has tightened its purse strings in Diwali gifts this year.

The survey says that corporates have slashed the budget for corporate gifts by a minimum of 35-40 per cent. The reduction in gifts is across the spectrum.

The other cuts by the corporates which will impact the sales this year is the reduction in bonus payments. Companies which were known for hefty bonus this year hit by debt, note ban, GST and lack of demand have cancelled or reduced bonus payments.

"The bonus was used by employees to buy white goods or invest in gold jewellery", said a senior corporate official.

The worst hit are fast-moving consumer goods (FMCG) and white goods manufacturing companies. While this period is considered auspicious, but the sales of white goods items like refrigerator, TV, washing machines etc has gone down. There is a reduction in sales of even cookies and sweets.

"This is considered perhaps the best period of the year for sales for these goods. At a time when new products have hit the market and there are offers available even the sale of smartphones have taken a hit," a trade expert said.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) came to the conclusion about huge trimming of Diwali budgets after a telephonic survey of about 758 companies across tier I, II and III cities - Ahmedabad, Bengaluru, Chennai, Delhi-NCR, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai.

Modi government's drive against black too is having an impact. One of Delhi's top whole seller of electronic items said, "Till last year Diwali was a time to blow up black money. Gifts and purchases worth crores were made to use part of the dishonest money. But post note ban and GST, the elbow room for pushing untaxed wealth or making unaccounted sales has lessened. People know more than Rs 50000 sales need KYC elements. There is relatively cleaner money flowing this time".

But the crowds at the market are not missing only because the mood is cautious. Trade bodies say online sales have made a huge dent in the monopoly of over the counter sales.

The assessment after a quick survey conducted in 10 cities- Delhi-NCR, Mumbai, Ahmedabad, Chennai, Kolkata, Hyderabad, Chennai, Bangalore, Chandigarh and Dehradun, is that online sales may touch Rs 30,000 crore as against Rs 22,000 crore spent last year.

Experts say consumers are increasingly opting for online shopping especially of mobile phones, electronic gadgets, consumer durables, apparel, home appliances and gift articles on the occasion of Diwali. This year the sale of mobile phones was 78%, electronic gadgets (72%), consumer durables (69%), gift articles (58%), accessories (56%), apparel (49%), and home appliances (45%).

The government's digital push is also being cited as a key reason for the boost in online sales. A ministry of information technology official speaking off the record said, "The rise of online sales is hugely due to the spreading footprint of high-speed internet. Especially in smaller towns, it is encouraging people to buy online".

Top online sales come naturally from top metros such as Delhi, Mumbai and Bengaluru. But the upward trend is also visible in tier II and III cities like Pune, Gurgaon, Noida, Chandigarh, Nagpur, Indore, Coimbatore, Jaipur, Vishakhapatnam. The increase in sale from such towns is almost 60-65 percent every year.

If India is a young nation, then the young are driving the digital market. As 35 percent of frequent online shoppers are in the age group of 18-25, 55 percent in 26-35, 8% in 36-45 and 2% in the age group of 45-60.

Reasons for this switch are lifestyle, lack of time, nuclear families, simpler return and refund processes, free home delivery and huge bargains. Credit cards are the most favourite mode of payment in e-commerce sales.

More men buy online than women as 65% of online shoppers are male as against 35% female. The most active online festive shopping category is men and women between the age group of 25 and 34 years.

The other interesting element of trends in purchasing this festive season is a tilt towards made in India. During the Diwali season, idols of Hindu gods like Ganesha-Lakshmi, decorative items, lights, gift items, lamps and wall hangings from China used to rule the market. But by precipitating a visible and long drawn Doklam crisis, China has hurt its own manufacturers and exporters.

An ASSOCHAM survey says that the sale of Chinese products is likely to decline at least by 40-45 percent this Diwali. The demand for Chinese made electronics goods including mobiles and LCDs is also down at least by 20 percent.

The Supreme Court order on crackers in the NCR has led to a steep decline in sales of Chinese crackers across the country.

Shopkeepers say many customers at the time of purchase make a specific demand, "we want made in India products not made in China ". A wholeseller in Delhi said, "it's in sync with the wave of nationalism. But customers now want Indian products as they also have concerns about the quality of goods manufactured in China".

Estimate say that in 2016 the value of Chinese goods sold during Diwali alone was around Rs 6600 crore and two-third of this were Diwali related items.