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issue: May 2009 APPLIANCE Magazine

International Report - India
Upbeat in India


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Adite Banerjie, India correspondent

While most of the world is reeling from the economic slowdown, the mood is strangely upbeat in India.

 

A global consumer confidence study by Nielsen reveals that Indians are “the most optimistic lot globally who think that their country will be out of the economic recession in the next 12 months.”

The study, which polled 26,000 consumers across the world about their economic outlook, reports that 16% of Indians consider job prospects within the country as “excellent,” while 59% say that prospects are “good.”

The upbeat mood has rubbed off on the consumer durables market in India as well. Despite fears that the sector would suffer a setback in the wake of the global economic downturn, industry analysts report that consumer spending on durables in both urban and rural India since January 2009 has been picking up. Volumes of LCD TVs, laptop computers, air-conditioners, refrigerators, washing machines, and audio systems are reported to have increased by 20%. Rural markets are also reporting robust sales.

Appliance manufacturers are of the opinion that home appliances will see growth rates of 15–20% in 2009, while manufacturers of electronics goods are projecting sales growth of 12–15%. LCD TV sales continue to register high growth rates and the general consensus is that aspirational products such as LCD TVs are unlikely to be affected by the economic downturn. Increasingly, the rural market is becoming a more lucrative destination for appliance and electronics goods marketers. A number of government initiatives aimed at tackling rural employment has ensured that rural citizens have more disposable incomes than ever before.

As rural demand for white goods grows, some companies like LG are putting more focus on these markets. The company is reworking its model mix for the rural market so that it is able to offer a wider choice of models at the entry level. However, for top-end products, it will continue to focus on urban markets. The semi-urban and rural markets’ contribution to the company’s sales revenue is expected to reach almost half of its total sales revenue.

Another company that is looking at improving its sales share in the tier 2 and 3 towns of India is Dutch appliance OEM Philips. It is planning to roll out various appliances targeted at the low-income groups in urban and rural markets.

The smokeless Chulha (stove) is one product that Philips is planning to introduce for rural consumers. The Chulha was developed as a way to help the socially disadvantaged and was designed to be simple to use and maintain, locally manufactured, relatively inexpensive, easily produced, and able to significantly reduce indoor pollution. Philips plans to partner with nongovernment organizations, microfinance companies, and rural cooperatives to help market the stove. Entry-level products are the ones that are expected to generate big volumes for the company in the rural markets.

Industry analysts feel that while the impact of the downturn is likely to hit urban consumers in India, rural consumers will continue to remain insulated from recessionary trends in the near future. Recent studies have shown that rural demand for big-ticket items is growing steadily. It’s therefore not surprising that companies such as LG and Philips are gearing up to address the huge untapped potential of rural sales.


 

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