Description
Increased level of awareness among consumers exposure to international brands wand with the rising income, favorable demographics, increasing urbanization, increased urbanization easy financing financing schemes, the demanding assertive of Indian consumer is slowing the seeds for an exciting retail transformation that has already started bringing in larger interest from International brands.
IJAMBU Volume 2 Issue 1Jan-Mar 2014
ISSN 2348-1382 (Online)
94
Consumer Durables Retailing in India
K. Anand
Doctoral Research Scholar
Dr. G. Prabakaran
Assistant Professor, Department of Business Administration, Government Arts College,
Dharmapuri
Abstract
Increased level of awareness among consumers exposure to international brands wand with the rising
income, favorable demographics, increasing urbanization, increased urbanization easy financing financing
schemes, the demanding assertive of Indian consumer is slowing the seeds for an exciting retail transformation
that has already started bringing in larger interest from International brands. India is amongst the least
saturated of all major global market in terms of penetration of modern retailing formats. The growth of the
retail sector has made retailers powerful and will bridge the gap between manufactures and consumers. The
Indian government allows 51 per cent Foreign Direct Investment (FDI) in single brand retailing owing to which
foreign multinationals are now operating directly in the Indian markets instead of going through franchise route
as earlier. Undoubtedly, such healthy trends substantiates that the retail sector boom is here to stay in India
sustained basis. India has increasingly affluent middle class population that, on the back of rapid economic
growth, has made the country‘s consumer industry highly dynamic.
1. Introduction
India‘s consumer market is riding the crest of the country‘s economic boom. Driven by a young
population with access to disposable incomes and easy finance options, the consumer market has been throwing
up staggering figures. The consumer durable industry in India to post 15% CAGR growth over next five years
and the market share of MNCs in consumer durables sector is 65 percent MNC‘s major target is the growing
middle class of India. MNCs offer superior technology to the consumers whereas the Indian companies compete
on the basis of firm grasp of the local market, their well acknowledged brands, and hold over wide distribution
network.
India officially classifies its population in five groups, based on annual household income. These
groups are Lower Income; three subgroups of Middle Income; and Higher Income. Household income in the top
20 boom cities in India is projected to grow at 10 percent annually over the next eight years, which is likely to
increase consumer spending on durables, with the emergence of concepts such as quick and easy loan, zero
equated monthly installment (EMI) charges, loan through credit card, loan over phone, it has become easy for
Indian consumers. (Source: Company Data, Bloomberg, GEPL Capital Research)
The Consumer Durables industry consists of durable-goods and appliances for domestic use such as
televisions, refrigerators, air-conditioners and washing machines. Instruments such as cell phones and kitchen
appliances like microwave ovens are also included in this category. The sector has been witnessing significant
growth in recent years, helped by several drivers such as the emerging retail boom, real estate and housing
demand, greater disposable income and an overall increase in the level of affluence of a significant section of
the population. The industry is represented by major international and local players such as BPL, Videocon,
Voltas, Blue Star, MIRC Electronics, Titan, Whirlpool, Hitachi home and Life appliances, symphony IFB etc.
The consumer durables industry can be broadly classified into two segments: Consumer Electronics and
Consumer Appliances. Consumer Appliances can be further categorised into Brown Goods and White Goods.
Consumer Durables
White Goods Kitchen Appliances/Brown Goods Consumer Electronics
? Refrigerators
? Washing Machines
? Air-conditioners
? Speakers and Audio
Equipments
? Mixes
? Grinders
? Microwave Ovens
? Iron box
? Electric Fans
? Cooking Range
? Chimneys
? Mobile phones
? Television
? MP3 Players
? DVD Players
? VCD Players
IJAMBU Volume 2 Issue 1Jan-Mar 2014
ISSN 2348-1382 (Online)
95
2. Trends Favoring The Growth of the Consumer Durables Industry
The key trends that impact the Indian Consumer Durables Industry today are reflected in the diagram
and discussed separately in the following sections.
3. Increasing Share of Organised Retail
The urban and rural markets in India are growing at an annual rate of 7 to 10 per cent and 25 per cent
respectively. One of the key enablers of this growth has been the increasing penetration of organised retail.
While there are established distribution networks in both rural and urban India, the presence of well-known
brands and organized sector is increasing. At present around 96 per cent of the more than 5 million retail
premises of all types in India are smaller than 50 sq mtrs. This situation is, however, transforming. Shopping
malls are becoming increasingly common in Indian cities, and based on plans announced by key developers, a
proliferation of new malls is expected over the next three years. Although many of the new malls would be
much smaller than their western counterparts, Indian consumers will have a far larger number of attractive,
comfortable, brand-conscious outlets in which to shop. As a result, the organised retail industry is expected to
cover a market share of 15 to 18 per cent , from just 3 per cent at present. This will have a positive impact on the
consumer durables industry, as organised retailing would not only streamline the supply chain, but also facilitate
increased demand, especially for high-end and branded products
? Consumer Durables Industry in India to post ~15% Compounded Annual Growth Rate over next five
years.
? We believe that the consumer durables industry‘s growth has been two pronged: (a) driven by lower
penetration in rural markets and (b) new innovations and replacement demand in urban markets.
Key growth drivers include
1
Continued economic growth demonstrated through 8.4% Compounded Annual Growth Rate growth in
GDP over last 5 years
2 Favorable demographics; 64% of the population in working age category
3 Increasing Urbanization, nuclear families
4 Increase in disposable incomes; which drives consumption
5 Increasing affordability coupled with declining prices of products
6 Lower consumer product penetration
7 Availability of new products and technologies
8 Easy financing schemes and Increase in organized retail (15% in FY15)
9 New Technology and lifestyle trends creating replacement demand
10 Low penetration in most of consumer durables products offers a huge market opportunity
11 Increasing rural income to drive rural demand
12 Changing perceptions, aspirational demand.
(Source: Company Data, Bloomberg, GEPL Capital Research)
IJAMBU Volume 2 Issue 1Jan-Mar 2014
ISSN 2348-1382 (Online)
96
4. Reasons for Growth of Consumer Durables
? The price difference between branded and unbranded goods has narrowed down and with branded
players providing good after sales service and support consumer prefers to buy branded products.
? Competitive strategies revolve around strong brand differentiation and prices.
? The consumer durables industry has two clearly differentiated segments. The MNCs have an edge
over their Indian counter parts in terms of technology combined with a steady flow of capital.
? Attractive consumer loan schemes with reduced interest rates over the years by the financial
institutions and commercial banks and the hire-purchase schemes have added to the surge in
demand. In consumer goods companies are themselves can provide attractive financing schemes to
consumers through their extensive dealer network.
? Increasing awareness and preference for new models have added to the demand. Consumer
Durables are no longer perceived as luxury products but are treated as necessities in the changed
socio-economic environment with changed life styles.
5. Rural Markets Offer a Big Opportunity
? Rural Consumer durables markets is growing by 30% currently, expected to grow by 45% in Fiscal
Year 2014.
? Approximately 69% population resides in rural India yet only 35% sales is contributed by rural
? markets. However, this sales contribution is expected to increase to ~45% in near future.
? Rural markets are expected to post much faster growth than urban markets in medium term led by
1) Increasing rural Income with higher contribution from non farm income.
2) Miniscule penetration (5-7%) in many product categories generating demand from first time
buyers.
3) Customized products for rural consumers.
4) Product awareness through advertising
? Growth is mainly contributed by first time buyers of products unlike replacement demand in
urban markets.
? Improved rural infrastructure, agricultural reforms, power availability will boost growth going
forward.
? Entry of private labels in rural market may fuel competition.
6. Key Challenges
? Intense competition among players - leading to higher ad spends and lesser pricing power, thereby
lowering margins.
? Increase in raw material prices – major raw materials (metals) are exhibiting increasing trend
posing margin pressures; however, shift in product mix to partially offset increase in input costs over
the medium term.
? Changes in technology - making product lifecycles short.
? Rural distribution - availability of products to masses is difficult as 68% of India‘s population still
lives in rural areas.
? Entry of cheap products - as private labels in organized retail.
IJAMBU Volume 2 Issue 1Jan-Mar 2014
ISSN 2348-1382 (Online)
97
6. Major Players
? Videocon
? Sony
? LG
? Samsung
? Whirlpool
? Hitachi
? Panasonic
? Symphony
? Blue star
? BPL
? VOLTAS
7. Conclusion
The past 4-5 years has seen increasing activity in retailing of consumer durables. Through the retailers
will have to face increasingly demanding customers and intensely competitive rivals, more investments will
keep flowing in and the share of organized sector will grow rapidly. Consumer durables industrial sector is
poised for a quantum leap due to technological improvements, falling prices due to competition, aggressive
marketing and declining import tariffs.
The saying ?the only thing that is constant is change‘ is very relevant in the retail industry. Consumer
and consumer preferences used to change slowly, providing retailers an opportunity to spend time analyzing
the implications to their business, allowing them to make well-informed decisions. However, today, as in
life, change in consumer preference happens rapidly. This has forced retailers to become more observant
and better prepared to make strategic decisions.
References
1. Arora Renu. Consumerism in India & abroad: a perspective. Indian Journal of marketing, 1995,
vol24, 22-25.
2. Del.I.Hawking, Roger J Best. (9
th
Edition) Consumer Bahavior Building Marketing Strategy Tata
Mc.Graw Hill Companies 2007.
3. Arora Renu. Consumerism in India & abroad: a perspective. Indian journal of marketing, 1995, vol.
24, 22-25.
4. Bayus, Barry L. The consumer durable replacement buyer. Journal of Marketing, 1990, Vol. 55 (1), 42-
51.
5. Chuunawalla, S.A. Commentary on Consumer Behaviour (M/e). New Delhi: Himalaya Publishing
House, 2000, 1&6.
6. Kotler, Philip, Keller, Kevin Lane, Koshy, Abraham and Jha, Mithileshwar. Marketing Management –
A south asian perspective (12/e). New Delhi: 2007 .
7. Saxena Ranjan (3
rd
Edition) Marketing Management Tata Mc Graw-Hill Companies 2007.
8. Berry Berman, Joel R.Evans (9
th
Edition) Retailing Management A Strategic Approach Prentice Hall
2007.
9. VS Ramaswamy, S Namakumari (3
rd
Edition) Marketing Managemetn Planning, Implementation &
Control 2002.
10. Polanski.Michael. Waller. David.-2004,2005. Designing & Managing a Research Project Magazines.
11. Hitesh D.Vyas. Consumer purchase of consumer durables: A Factorial study,2010,Vol 1.
12. Tasneem Khidir. Effect of Consumer behavior on maketing of consumer durables.
13. 2011 Report GEPL Capital private limited.
14.http://www.researchandmarkets.com/research/bd4b3f/consumer-behavior. Accessed on 4.12.2013.
15. IBEF Market and opportunities report 2010.
doc_433825731.pdf
Increased level of awareness among consumers exposure to international brands wand with the rising income, favorable demographics, increasing urbanization, increased urbanization easy financing financing schemes, the demanding assertive of Indian consumer is slowing the seeds for an exciting retail transformation that has already started bringing in larger interest from International brands.
IJAMBU Volume 2 Issue 1Jan-Mar 2014
ISSN 2348-1382 (Online)
94
Consumer Durables Retailing in India
K. Anand
Doctoral Research Scholar
Dr. G. Prabakaran
Assistant Professor, Department of Business Administration, Government Arts College,
Dharmapuri
Abstract
Increased level of awareness among consumers exposure to international brands wand with the rising
income, favorable demographics, increasing urbanization, increased urbanization easy financing financing
schemes, the demanding assertive of Indian consumer is slowing the seeds for an exciting retail transformation
that has already started bringing in larger interest from International brands. India is amongst the least
saturated of all major global market in terms of penetration of modern retailing formats. The growth of the
retail sector has made retailers powerful and will bridge the gap between manufactures and consumers. The
Indian government allows 51 per cent Foreign Direct Investment (FDI) in single brand retailing owing to which
foreign multinationals are now operating directly in the Indian markets instead of going through franchise route
as earlier. Undoubtedly, such healthy trends substantiates that the retail sector boom is here to stay in India
sustained basis. India has increasingly affluent middle class population that, on the back of rapid economic
growth, has made the country‘s consumer industry highly dynamic.
1. Introduction
India‘s consumer market is riding the crest of the country‘s economic boom. Driven by a young
population with access to disposable incomes and easy finance options, the consumer market has been throwing
up staggering figures. The consumer durable industry in India to post 15% CAGR growth over next five years
and the market share of MNCs in consumer durables sector is 65 percent MNC‘s major target is the growing
middle class of India. MNCs offer superior technology to the consumers whereas the Indian companies compete
on the basis of firm grasp of the local market, their well acknowledged brands, and hold over wide distribution
network.
India officially classifies its population in five groups, based on annual household income. These
groups are Lower Income; three subgroups of Middle Income; and Higher Income. Household income in the top
20 boom cities in India is projected to grow at 10 percent annually over the next eight years, which is likely to
increase consumer spending on durables, with the emergence of concepts such as quick and easy loan, zero
equated monthly installment (EMI) charges, loan through credit card, loan over phone, it has become easy for
Indian consumers. (Source: Company Data, Bloomberg, GEPL Capital Research)
The Consumer Durables industry consists of durable-goods and appliances for domestic use such as
televisions, refrigerators, air-conditioners and washing machines. Instruments such as cell phones and kitchen
appliances like microwave ovens are also included in this category. The sector has been witnessing significant
growth in recent years, helped by several drivers such as the emerging retail boom, real estate and housing
demand, greater disposable income and an overall increase in the level of affluence of a significant section of
the population. The industry is represented by major international and local players such as BPL, Videocon,
Voltas, Blue Star, MIRC Electronics, Titan, Whirlpool, Hitachi home and Life appliances, symphony IFB etc.
The consumer durables industry can be broadly classified into two segments: Consumer Electronics and
Consumer Appliances. Consumer Appliances can be further categorised into Brown Goods and White Goods.
Consumer Durables
White Goods Kitchen Appliances/Brown Goods Consumer Electronics
? Refrigerators
? Washing Machines
? Air-conditioners
? Speakers and Audio
Equipments
? Mixes
? Grinders
? Microwave Ovens
? Iron box
? Electric Fans
? Cooking Range
? Chimneys
? Mobile phones
? Television
? MP3 Players
? DVD Players
? VCD Players
IJAMBU Volume 2 Issue 1Jan-Mar 2014
ISSN 2348-1382 (Online)
95
2. Trends Favoring The Growth of the Consumer Durables Industry
The key trends that impact the Indian Consumer Durables Industry today are reflected in the diagram
and discussed separately in the following sections.
3. Increasing Share of Organised Retail
The urban and rural markets in India are growing at an annual rate of 7 to 10 per cent and 25 per cent
respectively. One of the key enablers of this growth has been the increasing penetration of organised retail.
While there are established distribution networks in both rural and urban India, the presence of well-known
brands and organized sector is increasing. At present around 96 per cent of the more than 5 million retail
premises of all types in India are smaller than 50 sq mtrs. This situation is, however, transforming. Shopping
malls are becoming increasingly common in Indian cities, and based on plans announced by key developers, a
proliferation of new malls is expected over the next three years. Although many of the new malls would be
much smaller than their western counterparts, Indian consumers will have a far larger number of attractive,
comfortable, brand-conscious outlets in which to shop. As a result, the organised retail industry is expected to
cover a market share of 15 to 18 per cent , from just 3 per cent at present. This will have a positive impact on the
consumer durables industry, as organised retailing would not only streamline the supply chain, but also facilitate
increased demand, especially for high-end and branded products
? Consumer Durables Industry in India to post ~15% Compounded Annual Growth Rate over next five
years.
? We believe that the consumer durables industry‘s growth has been two pronged: (a) driven by lower
penetration in rural markets and (b) new innovations and replacement demand in urban markets.
Key growth drivers include
1
Continued economic growth demonstrated through 8.4% Compounded Annual Growth Rate growth in
GDP over last 5 years
2 Favorable demographics; 64% of the population in working age category
3 Increasing Urbanization, nuclear families
4 Increase in disposable incomes; which drives consumption
5 Increasing affordability coupled with declining prices of products
6 Lower consumer product penetration
7 Availability of new products and technologies
8 Easy financing schemes and Increase in organized retail (15% in FY15)
9 New Technology and lifestyle trends creating replacement demand
10 Low penetration in most of consumer durables products offers a huge market opportunity
11 Increasing rural income to drive rural demand
12 Changing perceptions, aspirational demand.
(Source: Company Data, Bloomberg, GEPL Capital Research)
IJAMBU Volume 2 Issue 1Jan-Mar 2014
ISSN 2348-1382 (Online)
96
4. Reasons for Growth of Consumer Durables
? The price difference between branded and unbranded goods has narrowed down and with branded
players providing good after sales service and support consumer prefers to buy branded products.
? Competitive strategies revolve around strong brand differentiation and prices.
? The consumer durables industry has two clearly differentiated segments. The MNCs have an edge
over their Indian counter parts in terms of technology combined with a steady flow of capital.
? Attractive consumer loan schemes with reduced interest rates over the years by the financial
institutions and commercial banks and the hire-purchase schemes have added to the surge in
demand. In consumer goods companies are themselves can provide attractive financing schemes to
consumers through their extensive dealer network.
? Increasing awareness and preference for new models have added to the demand. Consumer
Durables are no longer perceived as luxury products but are treated as necessities in the changed
socio-economic environment with changed life styles.
5. Rural Markets Offer a Big Opportunity
? Rural Consumer durables markets is growing by 30% currently, expected to grow by 45% in Fiscal
Year 2014.
? Approximately 69% population resides in rural India yet only 35% sales is contributed by rural
? markets. However, this sales contribution is expected to increase to ~45% in near future.
? Rural markets are expected to post much faster growth than urban markets in medium term led by
1) Increasing rural Income with higher contribution from non farm income.
2) Miniscule penetration (5-7%) in many product categories generating demand from first time
buyers.
3) Customized products for rural consumers.
4) Product awareness through advertising
? Growth is mainly contributed by first time buyers of products unlike replacement demand in
urban markets.
? Improved rural infrastructure, agricultural reforms, power availability will boost growth going
forward.
? Entry of private labels in rural market may fuel competition.
6. Key Challenges
? Intense competition among players - leading to higher ad spends and lesser pricing power, thereby
lowering margins.
? Increase in raw material prices – major raw materials (metals) are exhibiting increasing trend
posing margin pressures; however, shift in product mix to partially offset increase in input costs over
the medium term.
? Changes in technology - making product lifecycles short.
? Rural distribution - availability of products to masses is difficult as 68% of India‘s population still
lives in rural areas.
? Entry of cheap products - as private labels in organized retail.
IJAMBU Volume 2 Issue 1Jan-Mar 2014
ISSN 2348-1382 (Online)
97
6. Major Players
? Videocon
? Sony
? LG
? Samsung
? Whirlpool
? Hitachi
? Panasonic
? Symphony
? Blue star
? BPL
? VOLTAS
7. Conclusion
The past 4-5 years has seen increasing activity in retailing of consumer durables. Through the retailers
will have to face increasingly demanding customers and intensely competitive rivals, more investments will
keep flowing in and the share of organized sector will grow rapidly. Consumer durables industrial sector is
poised for a quantum leap due to technological improvements, falling prices due to competition, aggressive
marketing and declining import tariffs.
The saying ?the only thing that is constant is change‘ is very relevant in the retail industry. Consumer
and consumer preferences used to change slowly, providing retailers an opportunity to spend time analyzing
the implications to their business, allowing them to make well-informed decisions. However, today, as in
life, change in consumer preference happens rapidly. This has forced retailers to become more observant
and better prepared to make strategic decisions.
References
1. Arora Renu. Consumerism in India & abroad: a perspective. Indian Journal of marketing, 1995,
vol24, 22-25.
2. Del.I.Hawking, Roger J Best. (9
th
Edition) Consumer Bahavior Building Marketing Strategy Tata
Mc.Graw Hill Companies 2007.
3. Arora Renu. Consumerism in India & abroad: a perspective. Indian journal of marketing, 1995, vol.
24, 22-25.
4. Bayus, Barry L. The consumer durable replacement buyer. Journal of Marketing, 1990, Vol. 55 (1), 42-
51.
5. Chuunawalla, S.A. Commentary on Consumer Behaviour (M/e). New Delhi: Himalaya Publishing
House, 2000, 1&6.
6. Kotler, Philip, Keller, Kevin Lane, Koshy, Abraham and Jha, Mithileshwar. Marketing Management –
A south asian perspective (12/e). New Delhi: 2007 .
7. Saxena Ranjan (3
rd
Edition) Marketing Management Tata Mc Graw-Hill Companies 2007.
8. Berry Berman, Joel R.Evans (9
th
Edition) Retailing Management A Strategic Approach Prentice Hall
2007.
9. VS Ramaswamy, S Namakumari (3
rd
Edition) Marketing Managemetn Planning, Implementation &
Control 2002.
10. Polanski.Michael. Waller. David.-2004,2005. Designing & Managing a Research Project Magazines.
11. Hitesh D.Vyas. Consumer purchase of consumer durables: A Factorial study,2010,Vol 1.
12. Tasneem Khidir. Effect of Consumer behavior on maketing of consumer durables.
13. 2011 Report GEPL Capital private limited.
14.http://www.researchandmarkets.com/research/bd4b3f/consumer-behavior. Accessed on 4.12.2013.
15. IBEF Market and opportunities report 2010.
doc_433825731.pdf