Good time for white goods

Poonam Agarwal bought a laptop for herself in this festival season. Poonam is a marketing executive and lives in her own flat in Bangalore.  Her reason behind the buy was, “Getting a micro oven with a laptop is a mouthwatering offer for the festive season.”

It is surprising to see that in the festive and wedding season, the electronics and consumer goods are overflowing with various discount and promotional offers while the food prices of the country are skyrocketing.

Status symbol to common items

It was a time when a Godrej refrigerator was a status symbol to the middle class households of India. The consumer market was then dominated by a few domestic players like Godrej, Allwyn, Kelvinator and Voltas. It was the pre-liberalised era. But the monopoly-like market changed drastically with the influx of global players in the domestic market enhancing the competition and the quality of the product. According to a study by Ernst & Young for the commerce and industry body, ASSOCHAM, released in September, estimated the current market size to be USD 27.38 billion for 2008-09. Today, a middleclass working lady like Poonam wants an LCD television, frost-free refrigerator, split air conditioner, laptop, micro oven and grinder machine in her flat.

Though, there was devaluation in the rupee by nearly 25% in 2008-09, that showed negative growth in dollar terms, the industry has grown 7.1% over the previous year in rupees terms. It is estimated that the electronics and appliances industry can reach USD 40 billion by 2012 with a CAGR of 11%. The industry wants a separate department for electronics and appliances, created by the government to promote growth in the domestic market and attracting investments from global players.

Who are the buyers?

The key factors that drive domestic electronics and appliances market are growth in per capita income, shift in cultural patterns and life-styles and access to credit.

A recent study by Assocham reveals that, nearly 10 million households in the country are enjoying income levels above USD 10,000 per annum. “They choose the festive season to purchase” informed a retailer. The world’s second largest workforce is also experiencing a growth of 20% in their per capita income. After the implementation of 6th Pay Commission recommendations last year, the salaries of nearly 5 million central government employees have been raised by an average 21%. An employee in Kolkata-based Great Eastern Trading Company said, “Our regular customers are mostly government employees. As their income is not influenced by the business cycle or market condition, they keep on purchasing products very easily in the festive season.”

The National Rural Employment Guarantee Act has increased wage income in rural India. As a result, the rural market is growing faster than the urban markets, though penetration is much lower. Technological upgradation due to enhanced research and development activity add more features to a particular consumer product segment. With evolving life-style, the replacement cycle of consumer durables is reduced. For example, the replacement cycle which was nearly 9 years for television and 12 years for domestic appliances has come down to approximately 4-5 years for television and 7-8 years for other domestic appliances.

One of the major reasons for growth this year is that prices of durables have not been revised upwards since October 2008. This has resulted in better-than-expected consumer demand. The excise sops rolled out by the government too have helped the industry and the end consumer. A dealer from the Eastern region stated, “There is a huge demand for low cost electronics items like playstation or microwave that comes at a more affordable level of INR 3000.” There is also an expectation that the sales of high-end LED TVs would do well.

This trend of a growing market at an affordable rate is good but would be better if it is compatible with the overall sectoral progress in the country.