Festive sales signal strong consumer confidence and rural revival

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India’s retail sector saw one of its strongest festive seasons in recent years, with shopping bags dominated by gold and jewellery items, grocery, FMCG and consumer durables amid renewed affordability and a rise in participation by rural buyers along with a visible shift towards Indian-made products, experts have said.

Estimates from Confederation of All India Traders (CAIT) - which represents traders and small businesses - peg this year’s Diwali season sales at over Rs 5.4 lakh crore, higher by 25 percent over previous year, making it the highest festive turnover on record. Traders expect this buoyancy to extend through winter as well as the wedding season this year, followed by another festive season from mid-January.

Festive sales ended with a bang for electronics and automobile manufacturers too, as pent-up demand and renewed affordability with revised GST rates pushed the sales higher by at least 40 percent on year for some of the companies.

Read More: E-commerce, two-wheelers and credit cards get festive boost after GST cuts

"The festive season has begun on a strong note for us with sales momentum seen across both premium and mass segments across all product categories. Growth is being seen across categories with washing machines leading the pack; the growth in ACs can be attributed partially to GST reduction given that festive is not a peak AC selling season and we have seen growing traction for refrigerators in the premium frost free as well as mass segments," said Kamal Nandi, Business Head & EVP at Appliances Business of Godrej Enterprises Group.

Dealers and distributors of consumer durables and electrical products saw the demand for room air conditioners (RAC) rise by 25 percent after September 22, once the rationalized GST rates kicked in.

For apparels, companies saw demand in premium and wedding categories. Department store chain Shoppers Stop said it is anticipating the double-digit growth momentum to continue in the coming quarter.

"What we are seeing is that October is showing some incredible numbers of growth. And to be honest, I have not seen these kinds of growth numbers in retail for a very, very long time," said Kavindra Mishra – Customer Care Associate, Managing Director and Chief Executive Officer, Shoppers Stop.

Read More: Cracker of a Diwali - Quick commerce drives record festive season sales for D2C brands

Footwear maker Bata too has registered a revival in demand with robust growth for premium brands like Hush Puppies and Power.

FMCG sales accounted for 12 percent of total festive spending, the highest across categories, followed by gold and jewellery at 10 percent, and electronics and electrical appliances at 8 percent, according to data by CAIT. Purchases for made-in-India products saw higher demand amid geopolitical tensions, the association added.

While the swadeshi movement supported the sales momentum, companies too noted rising sales from rural India.

"There is higher income this year in rural economy owing to higher growth in agricultural output. Consequently, overall growth in demand from smaller towns and rural markets is expected to be higher. The higher demand growth in premium products from rural is only a natural outcome of the growth in demand, as across all markets premiumisation is a clear trend. Relative to rural, the disposable income growth in urban is relatively low, and hence growth in premium products from rural seems higher. Also worth considering is the fact that the access to premium products has increased in rural markets now owing to higher coverage by e-commerce players," said Santosh Sreedhar, Partner with Avalon Consulting, a strategy consulting firm.