By Srabani Sen
With the advent of summer, newspapers, banners, hoardings and large signs in front of stores buzz with tempting offers, schemes and discounts of up to 50 per cent on different brands of UPS and inverters. Today, inverters and UPS are no more a luxury; they have become a necessity, as everyone wants power backup for their homes and offices. The summer months being the peak season for sale of inverters and UPS, competition is also at an all time high during these months. Therefore, despite people declining to compromise on these essential gadgets, heavy discounts are common even during the peak season months.
But how do inverters and UPS sell in the off-season? Trends in the market suggest almost 40 per cent of the sales of branded products come from discounting. However, market experts say that ideally the ratio between offseason sale and full price merchandise should be 20:80 or 30:70. However, the current trend in the market suggests that the ratio is 50:50. Manufacturers and dealers in the city report that the demand for UPS and inverters has been steadily rising over the past couple of years, as a whole new segment of clientèle for the manufacturers and dealers is emerging— the middle class—who is now armed with some good spendable income and can afford ‘luxury’ products like UPS and inverters. Hence, selling these products during off-season is not as difficult as it was five years back, when production was basically frozen during the off-season months.
Dip in sales during off-season
While January and February are the months considered as off-season for UPS, December through February are the months perceived as off-season for inverters. In spite of the growing demand for alternative power backups, sales of both UPS and inverters do get affected during the off-season months. These months are challenging times for business leaders. “The sale of our products—both UPS and inverters—dips by 15-20 per cent during these months,” says Atul Pant, business development manager, Tekmart India. But players successfully steer their ships through the rough seas, while keeping their sights on long-term growth and other ongoing challenges. Instead of just accepting reduced sale volumes during these times, special marketing techniques are applied by branded players. Su-Kam, one of the leading players, claims to sell UPS all round the year. “There is no offseason for this product,” says Su-Kam CEO, Kunwer Sachdev, “UPS sales are connected to the number of PCs sold every year. Bigger online UPS sales are only for the industrial segment, hence, there is no season for them. However, inverter is a need-based product and sells more when summers become unbearable, from March to July,” Sachdev adds.
Every product has to go through a lean period, which is usually termed as the ‘off-season’. With the fall in temperature, sale of UPS, particularly inverters, dips to an all time low. Every manufacturer records a sharp decline in his company’s net sales and profit growth. “Even during the rainy season, with the dip in mercury, business too sees a drop, and by September, sale of inverters becomes very nominal,” adds Sachdev.
“During the off-season, inverter sales need a real push. During this period, Su-Kam comes up with some good schemes and offers for its channel partners,” says Sachdev. Two years back, Su-Kam had started some schemes for its customers, which did not turn out to be successful. Since then, the company had focused on the dealers alone, “who give more mileage. Dealers can make or mar the business,” he feels. Tekmart India has a similar story to tell. The sale of its products sink and to top it all, customers expect huge discounts tagged along with the products. “It is customer psychology to expect something free when they buy a product,” says Pant. Microtek International offers schemes round-the-year and overhauls some of these schemes during the the off-season months. “We do face some challenges in maintaining sales during the off-season. Secondary sales—sales off the counter—have to be pushed a little hard. So we give more importance to dealer-motivated schemes,” says Sunil Jain, vice-president, public relations, Microtek International.
Numeric conducts promotional and advertisement campaigns, both for its channel partners and customers to bring about maximum awareness of its products. “After sales support is the core strength of Numeric. Numeric expands its service network every month in order to guarantee peace of mind to its ever-growing customers,” says a Numeric spokesperson. Numeric has 230 service centres across the country. To all manufacturers, dealers are an important part of the marketing network. “To increase business, it is necessary to encourage and motivate dealers with some attractive schemes,” says N K Mishra, CMD, Ekta Telecommunication & Systems. Arun Ghosh, MD and CEO, Hita Technology, feels the same. “It is very important to offer various schemes to dealers from time to time to push channel sales. Normally, dealers are not willing to stock, so good schemes are the only way to push products,” he affirms.
Despite the lean period, companies need to maintain their sales even during off-season. Traditionally, many companies offer discounts and freebies and their promotional offers— price-offs, exchange schemes, combination deals—make up the bulk of advertising during these months. But surprisingly, most branded players have not resorted to slashing prices to beat the stiff competition during the recent grey period. While some companies offer off-season discounts, Su-Kam, Tekmart, Microtek and Numeric proffer different schemes and offers. “We don’t give discounts and we don’t expect industry sales to be very upbeat,” says Pant. Tekmart offers three months’ free support and extended warranty to its customers and a free inverter or UPS to each of its dealers for bundle sales. Explaining how it maintains its off-season sales, Sachdev says, “We do not believe in giving discounts. Nowadays, schemes are key drivers for sale. We usually start special schemes during winter. We give loyalty schemes and turn over schemes to channel partners only,” he adds. Microtek claims to put together a complete and powerful package for its dealers. “Obviously, the key benefits are the dealer-motivated schemes for each successful bulk sale.
We’ve worked really hard to create lots of other benefits for both dealers and customers,” says Jain. Microtek’s schemes and offers vary from region to region. One must know its region and local end-user psychology well. In Madhya Pradesh, Bihar, Jharkhand and Chattisgarh, Microtek offers free blankets to its customers. “Endusers do respond positively to these schemes. They are anyway out to buy, but schemes drive them to take the decision,” he adds. Microtek International plans in advance and advertises in time through proper media. “Through our schemes, we try to show value for money. We give some special offers on quantity purchases and also try to conduct focussed activities,” points out Jain.
Numeric floats monthly and quarterly schemes for dealers throughout the year and enhances them during the off-season. “Schemes to the customers are decided based on the market dynamics,” says a Numeric spokesperson. Hita Technology is not totally channel- driven. It mainly does business in the corporate segment, but also has a dealers’ network for its lower range of UPS systems. “We provide the dealers with special ORC for the range of products which are not normally sold through them. They can take advantage of our wide product ranges. Dealer product ranges are normally up to a maximun of 10 KVA. But we provide them with the opportunity of earning by ORC for our higher range of products,” states Ghosh.
Some vendors also take special initiatives to increase sales during the off-season. No vendor can afford to lose a single opportunity to encash on off-season schemes. “If they don’t, then the competition will take the share,” feels Pant.
A Luminous spokesperson perceives that for the inverter category, schemes for the dealers play a major role in thrusting the products further. “We keep offering newer and more innovative schemes for our channel partners, which excite them,” he expresses. Luminous has launched a ‘Cash Bhi Insurance Bhi’ scheme, clubbed with a consumer promo. Under this scheme, Luminous offers cash prizes to dealers who send entries for consumer promos. Apart from this, the dealer was eligible for personal accident insurance policy of Rs 1 lakh for up to three years. “This really motivated the channel partners as they were getting dual benefits,” he adds. Ekta Telecommunication & Systems comes up with many schemes for the dealers as it feels that schemes help in increasing sales. “We provide attractive turnover discounts, gifts like mobiles, handycam, etc, to motivate the dealers. Recently, we have a scheme for the dealers, in which we offer a Maruti 800 car for sale of Rs 50 lakh worth of our products,” says Mishra.
Periodic sales are beneficial
Industry insiders say that a certain amount of periodic sales are required to liquidate merchandise, as stagnant shelf spaces will not attract customers. But problems arise when brands go on year-round sales and customers do not take such sales as genuine. However, some companies sell only during the sale period.
Pant is of the opinion that companies have started taking into consideration the larger share of discount sales in the production cycle. “But,” feels Jain, “excessive discounting is of no specific advantage to any brand.” While SuKam’s sales do not come from discounting, 30 per cent of Tekmart’s products are sold through discounting. “Heavy discounts also affect long-term profitability,” opines Pant.
During the off-season, 25 per cent of Tekmart’s sales go to residences, 35 per cent to commercial and 40 per cent to the government sector. While Su-Kam sells the most in the commercial and government sectors, Numeric tries a balancing act between these sectors, but during the off-season it sells slightly more in the government sector. Last quarter, Numeric sold more in the government sector through direct marketing. Through its balancing act between different sectors, it manages to keep up the pace of the sales. Market analysts believe excessive short-term promotions can spoil long-term market behaviour. Su-Kam formulates its price list keeping the off-season in mind, hence the dip in off-season sales does not erode the margins of its labels. This off-season was particularly dull for Tekmart due to the slowdown in the economy, but Su-Kam and Microtek’s strategies saw them through.
With a sluggish season behind them, power electronics players are banking on the forthcoming summer season to revive their sales. While manufacturers are hoping to sail through this approaching peak season without discounts, analysts expect a hit on profits.