ICOQM-10

June 28-30, 2011

Effect of Consumer Behavior on Retail Marketing of Consumer Durables

Tasneem Khidir khidirtasneem@gmail.com Saraswati College of Engineering, Kharghar
Increased level of awareness among consumers exposure to international brands and with the rising incomes, the demanding assertive of Indian consumer is sowing 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 markets 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 on sustained basis. India has an increasingly affluent middle class population that, on the back of rapid economic growth, has made the countrys consumer electronics industry highly dynamic. Keywords: Awareness, Consumer, Brand, Foreign Direct Investment

1. Introduction
Consumption and consumerism is at the core of modern culture and society. It defines who we are since shoppers and consumers today buy a lifestyle based on whats fashionable amongst our peers. The shopper Information is everywhere; technology has made it easier than ever to gather opinion, share thoughts and monitor global trends. The open network framework and consumer insights that are gathered from the consumers and that will determine the success of marketing strategy. Retailing is defined as all activities involved in selling goods or services directly to final consumers for their personal, non-business use via shops, markets, door-to-door selling, mail order or over the internet, where the buyer intends to consume the product through personal, family or household dues. Retailing is the final step in the distribution of merchandise - the last link in the Supply Chain - connecting the bulk producers of commodities to the final consumers. Retailing covers diverse products such as consumer durables, food, apparels, financial services and leisure etc. India's vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets. The growth story of Indian retail sector is based primarily on its huge middle class. There was a time when there was not a single mall in India, but today 400-500 malls are either operating or are under construction. India is ranked the 5th largest retail destination across the globe, retailing constitutes 35% of GDP it is the second largest employer after agriculture.

2. Importance of Study
India has an increasingly affluent middle class population that, on the back of rapid economic growth, has made the countrys consumer electronics industry highly dynamic. The industry has been witnessing significant growth in recent years due to several factors, such as retail boom, growing disposable income and availability of easy finance schemes. But still, the consumer electronics goods, like refrigerators, microwave and washing machines have low penetration in the country, representing vast room for future growth. The retail sector in India is witnessing a huge revamping exercise as traditional markets make way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. Western-style malls have begun appearing in metros and second-rung cities alike introducing the Indian consumer to a shopping experience like never before. Rated the fifth most attractive emerging retail market, India is being seen as a potential goldmine. It has been ranked 2nd in a Global Retail Development Index of 30 developing countries. Retail is currently the biggest industry in the world with sales of $7.2 trillion. Every 10th billionaire in the world is a retailer. 25 of the top 50 Fortune 500 companies are in retail The Indian retail sector is worth roughly $292 billion, and roughly 2% of this is classified as organized retail. Of the 12 million stores in India almost 95% are less than 500 sq. ft in area. The retailing sector in India is expected to grow at roughly 8.3% during the next 5 years, with organized retailing growing at rates anywhere between 24 to 49%. The consumer electronics industry has witnessed a phenomenal growth over the past few years. This growth can be attributed to the increasing effect of state of the art electronic devices on the market. The consumer electronics industry is ushering in the dawn of Convergence. It is the confluence and merging of hitherto separated markets of digital-based audio, video and information technology, removing entry barriers across the market and industry boundaries. This convergence of technologies has resulted in a greater demand for 701

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consumer devices, be they portable, in-home (mobile phones, digital camera) or in-car (CD/DVD players), offering multiple functions. The revolution brought about by Digital technology has enabled the consumer electronics sector to profit from the growing interaction of digital applications such as: camcorders, DVD player/recorder, still camera, computer monitor, LCD TV etc. It has also witnessed the emergence of mobile telecommunications technology, incorporating both digital visual and digital MP3 capabilities. The computer industry has also benefited by being able to make its way into consumer's living rooms. HDTV's with VGA connections and SD/MMC card personal media players, and Microsoft-based Media Center PCs have pushed the two industries even closer together than before. The overall revenue earned through the sale of audio, video and gaming consoles constitutes the international consumer electronics market. The global sale of consumer electronics is estimated to exceed all expectations to touch an all time high of $135.4 billion in 2006, which indicates 8% increase from 2005. Changing dynamics of consumer behavior luxury goods are now being perceived as necessities with higher disposable incomes being spent on lifestyle products. There is a discernible shift in the consumers preference in favor of higher-end, technologically superior branded products, the demand being spurred by increasing consumer awareness and preference for new models. This shift is also explained by the growing trend of products being manufactured in the organized sector of the economy and the narrowing down of the price differential between branded and non-branded goods. Competition has forced companies to offer efficient after sales service and support and this, in turn has swayed customer preference for branded products. Quality products with superior technology and up gradation have helped the industry to achieve higher growth in terms of volume and also in higher realization in value terms. There has been qualitative change in consumers preference going for higher end products. Rate of growth in production has been more in terms of quantity or in volume growth rather than the growth in value terms for a number of products. Because of growth in production in the organized segment and domestic availability of branded products due to lowering of import duties and other liberal measures, The price difference between branded and unbranded goods has narrowed down and with branded players providing good after sales services and support consumer prefers to buy branded products. There are approximately 40 million people and 11 million outlets in Indias retail sector. The government decision on January 24 2006 allows up to 51 percent foreign direct investment (FDI) in single brand retail stores.

3. Classification of Consumer Durables

The Indian Consumer Durables Industry can be segmented into three key groups: Consumer Durables/White Goods Refrigerators Washing Machines Air Conditioners Speakers and Audio Equipments Consumer Electronics Mobile Phones Televisions MP3 Players DVD Players VCD Players Kitchen Appliances/Brown Goods Mixers Grinders Microwave Ovens Iron Electric Fans Cooking Range Chimneys

4. Reasons for Growth in the Retail Sector

Easy availability of low-credit has encouraged a kind of purchase boom Consumers shifting evaluation from MRP to EMI. Revolution in Indian Consumer behavior. Rising disposable incomes (higher buying power). Lifestyle, power seeking variety quality and price. 702

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Increased indulgence in entertainment and products. Seeking value for money (Brand consciousness). Technology Savvy. Male no longer the sole income generator & decider. Convenience seekers. Entry of heavyweight retail players is increasing competition. The penetration of consumer durables is very low in India, as compared to other countries. This translates into vast untapped potential. For example, in case of color televisions (CTVs), the penetration level of various countries is:
India Brazil China US France Japan 24% 11% 98% 333% 235% 250%

Demand and Penetration Level of White Goods in India 1995-1996 Demand Penetration Level 3.43 million 149 per 1,000 households 2005-2006 8.72 million 319 per 1,000 households 2009-2010 13.14 million 451 per 1,000 households

In a study conducted by Frost & Sullivan and commissioned by India Semiconductor Association (ISA), the demand for Electronic Appliances is projected to grow exponentially at a compounded annual growth rate (CAGR) of 30%. In Billions

5. 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 services 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 counterparts in terms of technology combined with a steady flow of capital. The domestic companies compete on the basis of their well-acknowledged brands, an extensive distribution network and an insight into local market conditions. Demand is Cyclical and seasonal. Demand is high during festive season and is generally dependent on good monsoons. Purchase necessarily is done only during the harvest, festive and wedding seasons. 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. The 703

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consumer goods companies are themselves can provide attractive financing schemes to consumers through their extensive dealer network. The phenomenal growth of media in India and the flurry of television channels and the rising penetration of cinemas have spread awareness of products in the remote markets. Bargaining power of customers is high due to availability of many brands. Increasing consumer 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 socioeconomic environment with changed life styles.

6. Conclusion
The past 4-5 years has seen increasing activity in retailing of consumer durables. Though 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.

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7. References

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