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Consumer Durables Industry 1

Consumer Durables Industry 1

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Published by: sweeten69 on Sep 15, 2009
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Indian Consumer Durables Industry-Outlook
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The industrial sector grew in moderation during FY08 at 8.5% on the back of acomparatively higher growth of 11.5% during the previous fiscal. The country’sreal GDP grew by 9% during FY08; lower than 9.6% in the previous FY.
Thursday, March 05, 2009 3:27:31 PM0 Comments
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The key growth drivers for the Indian consumer durables industry:
Rise in disposable income
: The demand for consumer electronics has been risingwith the increase in disposable income coupled with more and more consumersfalling under the double income families. The growing Indian middle class is anattraction for companies who are out there to woo them.
Availability of newer variants of a product
: Consumers are spoilt for choice whenit comes to choosing products. Newer variants of a product will help a company ingetting the attention of consumers who look for innovation in products.
Product pricing
: The consumer durables industry is highly price sensitive, makingprice the determining factor in increasing volumes, at least for lower rangeconsumers. For middle and upper range consumers, it is the brand name,technology and product features that are important.
Availability of financing schemes
: Availability of credit and the structure of the loandetermine the affordability of the product. Sale of a particular product is determinedby the cost of credit as much as the flexibility of the scheme.
Rise in the share of organised retail
: Rise in organised retail will set the growthpace of the Indian consumer durables industry. According to a working paper released by the Indian Council for Research on International Economic Relations(ICRIER), organised retail which constituted a mere four percent of the retail sector in FY07 is likely to grow at 45-50% per annum and quadruple its share in the totalretail pie 16% by 2011-2012. The share will grow with bigger players entering themarket.
Innovative advertising and brand promotion
: Sales promotion measures such asdiscounts, free gifts and exchange offers help a company in distinguishing itself fromothers.
 
Festive season sales
: Demand for colour TVs usually pick up during the festiveseasons. As a result most companies come out with offers during this period to cashin on the festive mood. This period will continue to be the growth driver for consumer durable companies. 
Major hurdles and challenges plaguing the Indian consumer durables sector:
Threat from new entrants, especially global companies
: The domestic consumer durables sector faces threat from newer companies, especially from global ones whohave technologically advanced products to offer.
Rivalry and competition
: Presence of a large number of players in the domesticconsumer durables industry leads to competition and rivalry among companies.Threat from rivalry and competition poses a threat to domestic companies.
Potential markets remaining yet untapped
: A large segment of the domesticmarket, mostly the rural market is yet to be tapped. Tapping this yet untapped andunorganised market is a major challenge for the Indian consumer durables sector.
Threat from substitute products/services
: The domestic consumer durablesindustry is plagued by threats from substitute products. Easy accessibility totheatres/multiplexes, especially in urban areas has turned off the viewership from TVto a large extent. With the advent of a horde of FM radio stations, radio sets havenow substituted TVs.
Customer power with respect to availability of choice
: The availability of a wideproduct line on account of most products being homogeneous, poses a threat for companies operating in the consumer durables sector. Customers have the choice of both domestically produced and imported goods, with similar features.
Marketing and StrategyLast Updated: June 2009
 With market liberalisation, increasing consumerism and the entry of more foreignplayers, Indian markets are seeing revolutionary changes. The Indian consumer israpidly evolving and is spoiled for choice by a host of international brands sellingtheir products at competitive prices.According to a study by the McKinsey Global Institute (MGI), India's middle class willswell by more than ten times—from its current size of 50 million, to 583 millionpeople—by 2025. And over 23 million Indians—more than the present population of Australia today—will be counted as billionaires. By 2025, India will also become the5th largest consumer market, surpassing Germany, moving up from the 12th positionit occupied in 2007.In the seventh annual Global Retail Development Index (GRDI) conducted in 2008,India stood second as the most attractive destination for retail investment. It isestimated that the Indian retail market will increase from US$ 330 billion in 2007 toUS$ 427 billion by 2010 and US$ 637 billion by 2015. Organised retailing comprises just 4.6 per cent of the currently estimated Indian retail market. However, thissegment grew nearly 40 per cent in 2007 and is estimated to increase to 22 per cent
 
by 2010.
Rural Market: The Next Big Opportunity
The rural market offers great untapped potential. In 2008, the rural market grew at animpressive rate of 25 per cent compared to the 7-10 per cent growth rate of theurban consumer retail market. Further, according to international consultancy firmCelent, the rural market will grow to a potential of US$ 1.9 billion by 2015 from thecurrent US$ 487 million.Today, the rural market accounts for a hefty share in most market segments—55 per cent of LIC policies, 70 per cent of toilet soaps, 50 per cent of television, fans,bicycles, tea and wrist watches.Also rural India is less affected by the global slowdown. Consequently, an increasingnumber of marketers are targeting it across fast moving consumer goods (FMCGs),cars, two-wheelers and consumer durables.FMCG is clocking over 20 per cent demand in rural markets, ahead of the 17-18 per cent growth coming from urban India.Nokia plans to tap the growing rural market with 93 million subscribers. It is tying upwith various micro finance institutions. Moreover, it is trying to reach into rural areaswith ‘showrooms on wheels’ and ‘Rural care on the go’— marketing and servicingvehicles, respectively.
Brand Extensions
In a bid to garner higher market share and sustain long-term growth, FMCGcompanies such as Coca-Cola, Nestle, PepsiCo, Dabur, Marico and Godrej haveadopted a brand extension strategy amid negative factors such as high inflation andthe global financial crisis.According to marketing research company IMRB, the FMCG companies launched251 products (223 variants and 28 brands) in calendar year 2007 as against 191(173 variants and 18 brands) in 2006. The industry pegs the number of variants andextensions launched in 2008 to be in line with 2007.Nestle launched a record number of variants in 2008—from its Maggi Cuppa Mania,Maggi Pichkoo to Maggi Bhuna Masala. Dabur too unveiled a pudina variant of itspopular Hajmola brand apart from extending its Gulabari skin-care range.In terms of categories, brand extensions in personal-care, household-care andprocessed foods drove growth in the FMCG sector.Marketing and StrategyLast Updated: June 2009

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