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Consumer finance firms make hay in a sluggish market

Partha Ghosh

Amidst the pall of gloom in the consumer durables industry, consumer finance companies are a happy lot. Not only have they been re-discovered by consumer durable producers as the last resort to push sales in a sluggish market, they are raking in more moolah as the average tenure of financing is on the rise.

During the last six months, while the television, refrigerator and washing machines market has shrunk 20 per cent, sales via the finance route have increased from around 10 per cent of total sales to as high as 40 per cent.

Average cost of finance, which was 5.5 per cent in the 12-month scheme, has doubled to around 10 per cent in the 24-month schemes.

The manufacturers, vying for a larger piece of an increasing shrinking market, are willing to take the additional burden.

Says a senior Countrywide Consumer Finance functionary: "Six months ago, around 95 per cent of the finance route sales were coming from the 12-month schemes (with an eight-month payment period). Now, this has gone down to 30 per cent, the remaining being equally divided in the 18-month and 24-month schemes. We (consumer finance firms) are just moving in the right direction."

"Finance schemes have now become 'marketing tools'. It is one of the features of our product," says Rohit Sathe, regional sales manager (North), Sony India Ltd. Sony started offering finance schemes only four-five months ago, and "this has helped promote sales in a sluggish market", Sathe adds.

Agrees a Samsung spokesperson. "In a slow market, we can neither burden the consumer, nor the trade. Cutting prices also impacts consumer sentiments."

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