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Writankar \n Mukherjee, Atmadip Ray & Pramugdha Mamgain<\/i><\/p>\n Writankar \n Mukherjee, Atmadip Ray & Pramugdha Mamgain<\/i><\/p>\n
Kolkata\/New \n Delhi, 24 October 2011<\/i>
\n <\/i><\/p>\n
Retailers are countering the economic slowdown by offering interest-free \n equated monthly instalment (EMI) schemes, which they say are not \n only helping them pull customers into stores but also encouraging \n shoppers to buy higher value products. <\/p>\n
Such EMI-based sales promotions have staged a big comeback at \n a time near double-digit inflation has put a heavy strain on household \n budgets, making people defer non-urgent and big-ticket purchases \n even on credit because of hardening interest rates. <\/p>\n
But transactions carrying zero percent financing have grown more \n than 50% over the past year, say retailers and bankers. <\/p>\n
From apparel sellers such as Arvind Brand’s MegaMart and Fabindia \n to multi-product retailers such as Future Group, Lifestyle and \n Godrej, firms reckon that zero-interest EMI options are the most \n effective discounts they can offer. <\/p>\n
While retailers end up bearing the interest for the duration \n of the credit extended, they see it as an acceptable cost of keeping \n the sales register ticking during the downturn. <\/p>\n
"EMI schemes are removing inhibitions and inducing consumers \n to splurge on big-ticket items," says Himanshu Chakrawarti, \n chief executive of Essar Group’s Mobile Store, the country’s largest \n mobile phone retailer. He says consumers going for six-month EMIs \n are buying handsets priced twice than they had initially planned \n and those going for nine-month to 12-month schemes are tripling \n their size of transaction. <\/p>\n
Almost a third of the high-end mobile phones, such as the iPhone \n and the latest models of Blackberry and Android-based phones, \n sold at the Mobile Store are paid for through instalments. The \n company, which rolled out EMI schemes at its 1,200 stores across \n the country over the past couple of months, recently became India’s \n largest seller of BlackBerry smartphones. <\/p>\n
Instant approval of loans and minimal documentation help speed \n up EMI-based transactions, says Parag Rao, senior executive VP, \n HDFC Bank. He says the bank has seen a more than 100% spurt in \n this loan category over the past year with an average transaction \n of 30,000. "Since the amounts are much smaller compared to \n home or car loan, the EMIs don’t pinch much," he says.<\/p>\n
Consumer durables and jewellery sellers were the first to offer \n such sales schemes, but now retailers across product categories \n are betting on interest-free instalment schemes. For consumers, \n this spells the return of consumer financing schemes, which had \n dried up during the global meltdown in 2008 and 2009 when banks \n turned away from most unsecured lending schemes. <\/p>\n
But the return of such schemes is becoming a major motivator \n at a time when studies are showing consumers are searching for \n the best deals and discounts like never before. A latest study \n by NM Incite, a Nielsen-McKinsey Company, shows that conversations \n about deals and discounts account for 50% of all conversations \n in social media forums this Diwali. <\/p>\n
"Deals are becoming the primary motivators to consider purchases. \n This more than anything will decide which brands will win a greater \n share of wallet this season," says Adrian Terron, Head, NM \n Incite India. <\/p>\n
From apparel and mobile phone sellers to furniture and computer \n stores, retailers across the board are reporting a jump of 10% \n in sales on average driven by deals like EMI schemes. They say \n the average bill size has also grown simultaneously by 10% to \n 15%. <\/p>\n
EMI-based sales have doubled for consumer electronics during \n this festive season, retailers say. In the case of products such \n as LCD and LED televisions, nearly 15%-17% of all purchases are \n being made through such schemes, says Devang Mody, business head \n (sales finance) at Bajaj Finserv Lending. <\/p>\n
The lender has tied up with manufacturers such as LG, Samsung, \n Sony and Panasonic and durable retailers including Croma, Vijay \n Sales and Reliance. It expects the festive season to generate \n EMI-based sales worth 750 crore. <\/p>\n
For jewellery retailers, hit by the double whammy of inflation \n and appreciating gold prices, interest-free instalment schemes \n have become a veritable lifeline. <\/p>\n
Furniture retailers, staring at halving of growth to 10%, are \n finding a much-needed growth driver in zero-interest EMI schemes. \n "With inflation kicking in and discretionary spending capability \n of households going down, EMI schemes will become more relevant \n as these facilitate consumer instant gratification while paying \n in easy instalments later," says Lifestyle International \n managing director Kabir Lumba. <\/p>\n
Future Group’s Home Town is similarly offering products on interest-free \n EMIs, as is Style Spa, which joined the bandwagon a fortnight \n ago. Fabindia launched an EMI scheme this month on purchases of \n 50,000 and above, which covers apparel and other products. "We \n intend to tap the burgeoning professional class through this scheme," \n the company spokeswoman said. <\/p>\n
Analysts say retailers stand to gain even as they absorb the \n interest component when they offer zero-percent EMI schemes. "While \n such schemes may impact their margins, the interest gets accounted \n as a cost they need to bear to generate sales," says Devangshu \n Dutta, CEO of retail consultancy Third Eyesight.<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"
Writankar Mukherjee, Atmadip Ray & Pramugdha Mamgain Kolkata\/New Delhi, 24 October 2011 Retailers are countering the economic slowdown by offering interest-free equated monthly instalment (EMI) schemes, which they say are not only helping them pull customers into stores but also encouraging shoppers to buy higher value products. Such EMI-based sales promotions have staged a big […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-2822","post","type-post","status-publish","format-standard","hentry","category-press-quotes"],"yoast_head":"\n