2010

A Research on Purchase Pattern of consumers for

Consumer Durables along with Preference towards Organized & Unorganized Retail Formats
In Partial fulfillment of MBA Program of Gujarat University (Batch: 2008-2010)

Submited By Priyam Mehta (08059) Umesh Lukhi (08052)

Submitted To Prof. Praneti Shah

N R institute Of Business Management

A GRAND PROJECT REPORT ON

Purchase Pattern of consumers for Consumer Durables along with Preference towards Organized & Unorganized Retail Formats
IN PARTIAL FULFILLMENT OF TWO YEARS MASTER OF BUSINESS ADMINISTRATION PROGRAMME

PROJECT GUIDE
Prof. Praneti Shah

PREPARED BY
Mehta Priyam (08059) Umesh Lukhi (08052)

BATCH: 2008-10

N.R. Institute of Business Management

Preface
Before the liberalization of the Indian economy, only a few companies like Kelvinator, Godrej, Alwyn, and Voltas were the major players in the consumer durables market, accounting for no less than 90% of the market. Then, after the liberalization, foreign players like LG, Sony, Samsung, Whirlpool, Daewoo, and Aiwa came into the picture. Today, these players control the major share of the consumer durables market. Consumer durables market is expected to grow at 10-15% in 2007-2008. It is growing very fast because of rise in living standards, easy access to consumer finance, and wide range of choice, as many foreign players were entering in the market with the increase in income levels, easy availability of finance, increase in consumer awareness, and introduction of new models, the demand for consumer durables has increased significantly. Products like washing machines, air conditioners, microwave ovens, color televisions (C-TV) were no longer considered luxury items. However, there were still very few players in categories like vacuum cleaners, and dishwashers Consumer durables sector is characterized by the emergence of MNCs, exchange offers, discounts, and intense competition. The market share of MNCs in consumer durables sector is 65%. 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. However, the penetration Level of the consumer durables is still low in India. Indian Consumer durables market used to be dominated by few domestic players like Godrej, Voltas, Allwyn and Kelvinator. But post liberalization many foreign companies have entered into Indian market dethroning the Indian players and dominating Indian market the major categories being CTV, REFRIGRATOR, MICROWAVE OVEN and WASHING

MACHINES. India being the second largest growing economy with huge consumer class has resulted in consumer durables as the fastest growing industries in India. LG, SAMSUNG the two Korean companies have been maintaining the lead in the market with LG being leader in almost all the categories. The rural market is growing faster than the urban market, although the penetration level is much lower .The CTV segment is expected to the largest contributing segment to the overall growth of the industry. The rising income levels double-income families and consumer awareness were the main growth drivers of the industries.

ACKNOWLEDGEMENT

We express our sincere thanks to Prof. Praneti Shah, our Grand Project guide to have given us the opportunity to work on such a challenging project. We also thank our institute N.R. Institute of Business Management for providing us all the necessary resources required in our study.

Again we would like to earnestly thank those all people who give us their valuable time for us in questionnaire survey. All the interaction with them was really a good experience and added some valuable knowledge and experience.

Last but not the least I would also like to thank our friends who took time off to share insights about their experiences this helped us immensely to understand the psyche of the consumer. We just hope that the recommendations and suggestions presented by us are considered seriously.

On the onset, we would like to take this opportunity to express our gratitude to all those great minds and hearts that have touched this project in the path of its success.

PRIYAM MEHTA UMESH LUKHI

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EXECUTIVE SUMMARY
The goal of marketing research is to provide the facts and direction that managers need to make their more important marketing decisions. Marketing research covers a wider range of activities. Marketing research is having following steps

Determine research design, Identify data types and sources, Design data collection forms and questionnaires, Determine sample plan and size, Collect the data, Analyze and interpret the data, Prepare the research report

In this report, we have done a market research on consumer durables, and come with some suggestion, limitation, and conclusion on the basis of marketing research work As far is summary part is concern, in research project we have selected market survey on Consumer durables.

Consumer durable industry, we have to do market survey for electronic products preference toward, so we were collected primary and secondary data for research methodology and follow up with the analysis part.

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TABLE OF CONTENT
Sr.No. 1 2 3 4 Preface Acknowledgement Executive Summary Chapter : 1 Literature Review & Research Methodology Literature Review 1.1 Research Objectives 1.2 Scope of the study 1.3 Literacy Survey 1.4 Research Design 1.5 Data Collection 1.6 Sampling Design 1.7 Tools & Techniques of data collection 1.8 Limitation of study Chapter :2 Industry Profile 2.1 Introduction 2.2 Industry size & Growth Trends 2.3 Consumer Electronics 2.4 Evolution of organized retailing in the world 2.5 Organized vs. Unorganized Retail 2.6 Spread of modern Retail in Developing Countries 2.7 Globalization of Retail 2.8 Regulatory Framework 2.9 Future Trends 2.10 Indian Retail 2.11 Future Scenario In Retailing 2.12 Recent Developments 2.13 Key Consumer Durables & Growth Trends CONTENT Page no.
I II III

1-5 2 4 4 4 4 5 5 5 5

6-24 10 11 11 12 13 15 16 17 18 18 20 21 22

Chapter :3 Changing Behavior Of Consumers 3.1 Consumer Classes 3.2 Factors Affecting To the Consumer Behavior 3.3 Consumer Buying Process 3.4 Industry Classification 3.5 The Key Players & their Products 3.6 Market Analysis 3.7 The Road Ahead Chapter :4 Major Organized & Unorganized Players 4.1 Major Players 4.2 Sector Outlook 4.3 The Threat Of Retail Chapter :5 Industry Analysis 5.1 PEST Analysis 5.2 SWOT Analysis Chapter : 6 Micro Level Analysis Chapter :7 Hypothesis Analysis Chapter :8 Key Findings Chapter:9 Recommendations & Suggestions Chapter:10 Conclusion Bibliography Annexure

25-42 26 26 27 27 28 29 39 43-62 44 53 59 63-72 64 70 73-100 101-104 105-107 108-109 110-111 112 114-118

9 10 11 12 13 14 15

Chapter 1 Literature Review & Research Methodology

Literature review:
The Indian retail market, which is the fifth largest retail destination globally, has been ranked as the most attractive emerging market for investment in the retail sector by AT Kearney's eighth annual Global Retail Development Index (GRDI), in 2009. As per a study conducted by the Indian Council for Research on International Economic Relations (ICRIER), the retail sector is expected to contribute to 22 per cent of India's GDP by 2010. With rising consumer demand and greater disposable income, the US$ 400 billion Indian retail sector is clocking an annual growth rate of 30 per cent. It is projected to grow to US$ 700 billion by 2010, according to a report by global consultancy Northbridge Capital. The organized business is expected to be 20 per cent of the total market by then. In 2008, the share of organized retail was 7.5 per cent or US$ 300 million of the total retail market. A McKinsey report, 'The rise of Indian Consumer Market', estimates that the Indian consumer market is likely to grow four times by 2025. Commercial real estate services company, CB Richard Ellis' findings state that India's retail market has moved up to the 39th most preferred retail destination in the world in 2009, up from 44 last year. India continues to be among the most attractive countries for global retailers. Foreign direct investment (FDI) inflows as on September 2009, in single-brand retail trading, stood at approximately US$ 47.43 million, according to the Department of Industrial Policy and Promotion (DIPP). India's overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.3 trillion by 2018, at a compound annual growth rate (CAGR) of 10 per cent. As a democratic country with high growth rates, consumer spending has risen sharply as the youth population (more than 33 percent of the country is below the age of 15) has seen a significant increase in its disposable income. Consumer spending rose an impressive 75 per cent in the past four years alone. Also, organized retail, which is pegged at around US$ 8.14 billion, is expected to grow at a CAGR of 40 per cent to touch US$ 107 billion by 2013. The organized retail sector, which currently accounts for around 5 per cent of the Indian retail market, is all set to witness maximum number of large format malls and branded retail stores in South India, followed by North, West and the East in the next two years. Tier II cities like

Noida, Amritsar, Kochi and Gurgaon, are emerging as the favored destinations for the retail sector with their huge growth potential. Further, this sector is expected to invest around US$ 503.2 million in retail technology service solutions in the current financial year. This could go further up to US$ 1.26 billion in the next four to five years, at a CAGR of 40 per cent. Moreover, many new apparel brands such as Zara, the fashion label owned by Inditex SA of Spain, UK garment chain Topshop, the Marc Ecko clothing line promoted by the US entrepreneur of the same name and the Japanese casual wear brand Uniqlo are preparing to open outlets in India. Buoyed by improved consumer spending, sales of listed retailers increased by 12 per cent in the September 2009 quarter compared with the same period in 2008. Australia's Retail Food Group is planning to enter the Indian market in 2010. It has ambitious investment plans which aim to clock revenue of US$ 87 million from the country within five years from start of operations. British retail major Marks & Spencer (M&S) is looking at scaling up its India operations and plans to open at least 50 more outlets in the country over the next few years. Koutons Retail India plans to open 200 stores in FY11 in addition to its existing 1,400. Of the 200 stores, 100 would be family concept stores, which would include women and children's wear. Reliance Footprint, part of Reliance Retail, plans to spend US$ 86.62 million to add 100 outlets across the country in two years to sell branded footwear. It currently has 16 outlets. Retail chain Suvidhaa Infoserve plans to open 1,000-1,200 new outlets every month across the country and is eyeing a 100,000 strong network in the next two to three years. At present, the Mumbai-based firm has 18,000 convenient neighbourhood stores called 'Suvidhaa Point' across the country in over 20 states and over 400 cities. Lifestyle International, part of the Dubai-based US$ 1.5 billion Landmark Group, plans to have over 50 stores across India by 201213. These will include 35 Lifestyle stores for retailing apparel, cosmetics and footwear, besides 15 Home Centres that sell home furnishing goods.

Wills Lifestyle plans to expand its operations by opening 100 new stores in the next three years. It also plans to concentrate on online buyers. Pantaloon Retail India (PRIL) is planning to invest US$ 77.88 million this fiscal to add up to 2.4 million sq ft retail space at its existing operations. Pantaloon Retail is also looking to hive off its value retail chain, Big Bazaar, into a separate subsidiary, which may eventually go for an initial public offer (IPO). PRIL proposes to open 155 Big Bazaar stores by 2014, increasing its total network to 275 stores. Source: IBEF.org

1.1

Objectives:
To study the factors affecting purchase of consumer durables To study brand preference of consumers for consumer durable goods To study brand preference of consumers towards organized & unorganized outlet for the consumer durable goods.

The research was aimed at studying the purchase pattern of consumers for consumer durable.

1.2 Scope of the study:

The research is conducted in ahmedabad city to study purchase pattern of consumer durables which includes major factors affecting the decision, brand preference and preference towards organized and unorganized formats to purchase the same.

1. 3 Research design:
Research design is descriptive in nature. Preference of people is analyzed and quantified to know the factors responsible for their preference. Further preference is quantified in terms of organized and unorganized retail formats.

1.4 Data Collection Sources:

.Secondary

Data:

Information regarding the project, secondary data was also required. These data were collected from various past studies and other sources like magazines, newspapers, and websites which qualified as reliable.

Primary Data:
These data was collected through survey of consumers with the help of questionnaire.

.Research instrument: Structured questionnaire

1.5 Sampling plan:

Target population: Households of Ahmedabad Sampling unit: households & People purchasing consumer durables from stores at the time of research Sampling method: convenience and Step out sampling Sample size: 200

1.6 Analytical tools:

Graphical presentation Hypothesis Weighted average

1.7 Contribution of the study

The study reveals preferential criteria for the purchase of consumer durables. it also gives insights into the preference towards organized and unorganized store along with reasons which may become helpful to the marketers to redesign strategies

1.8 Limitation of the Study:

As the time given to complete the project is lesser than actual time required completing similar studies, the quality of findings may get affected. The sample size s 200 (hundred), thus the findings from the same may not be representative of the actual population.

Chapter 2

Industry Profile

Definition of the Consumer Durable Industry:

Consumer goods like washing machines, motorcars, TV sets, audio-video systems etc, which yield services or utility over time rather than being completely used up at the moment of consumption can be termed as the consumer durables. Most consumer goods are durables to some degree, and the term is often used in a more restricted sense to denote relatively expensive, technologically sophisticated goods consumer durables such as the examples given above which implies high involvement at the time of purchase.

The consumer durables segment can be segregated into consumer electronics (TVs, VCRs/VCPs and audio systems) and consumer appliances (also known as white goods) like refrigerators, washing machines, air conditioners (ACs), microwave ovens, vacuum cleaners and dishwashers.

Over the years demand for consumer durables has increased with the rising level of incomes, double income families, changing lifestyles, availability of credit, increasing consumer awareness and the introduction of new models by the Indian as well as multinational companies. Consumer durable industry was once considered to be luxury item with targeting the upper-middle class for consumption. With increasing competition, price wars, branding and promotional strategies, the concept has melted down to the masses and has become a part of the households necessities even in the lower-middle class and rural part of the countries.

Most of the segments in this sector are characterized by intense competition, emergence of new companies (especially MNCs), and introduction of state-of-the-art models, price discounts and exchange schemes. Despite of that MNCs are entering in to Indian market because growing Indian middle class of around 250 millions. Also it is widely accepted that consumer durable penetration increases rapidly after per capita income (PCI) crosses a threshold limit of $2000. In India, the PCI is low at $370, though it is equivalent to $600 on PPP (Purchasing Power Parity) basis and expected to see a consistent growth of over 6% over the next years to come.

According to NCEAR survey estimates, the number of households in the higher and middleincome categories will rise rapidly. There will also absolute reduction in the number of households in the low incomes. This will lift large number of households to income levels at

which they can become purchasers of consumer durable products. Continuous economic growth and higher income levels will drive growth in volumes, any reduction in the duties will leads to lower down of the values and this will bring more customers for the durable products.

The biggest attraction for MNCs is the growing Indian middle class (approx. 250 m). This market is characterized with low penetration levels. MNCs hold an edge over their Indian counterparts in terms of superior technology combined with a steady flow of capital, while domestic companies compete on the basis of their well-acknowledged brands, an extensive distribution network and an insight in local market conditions.

The Indian middle class market of 250 million is the biggest attraction for the MNCs along with the level of the penetration of consumer durables in the India has more attracted Multinationals to the India, in the case of consumer durables penetration levels of TV is believed to the highest, and after that the penetration of the refrigerator comes.

In the future, earnings will be driven by rising demand for consumer durables in general. As per the National Sample Survey Organization report of "Use of durable goods by Indian households", the per capita total expenditure on durable goods increased from Rs112.89 in 1987-88 to Rs148.02 in 1993-94. Similarly, NCAER estimates point to the fact that the number of households with monthly incomes above Rs 10,000 in metros and Rs 5,000 in non-metros is expected to rise from 22.7 million in 1995-96 to a huge 57.2 million in 200506. This will mean that firstly, there will be a perceptible shift towards branded products and secondly, the level of aspiration buying will increase.

Size of The Market:

The total Rs. 15500 crore consumer durables industry consists of Colour Televisions, Black and White Televisions, Refrigerators, Washing Machines, Air-conditioners, Microwave Ovens, Vacuum Cleaners, Audio Systems, Electronic Appliances and Water Purifiers. The table below shows the Estimated industry size and the competition in the various segments.

Estimated industry size: (Figures are in crore Rs.) Segment (E) Color Television B&W Television Refrigerators Washing Machines Air-Conditioners Audio Systems Microwave Ovens, Vacuum Cleaners, Electronic Appliances and Water Purifiers (Source: BPL annual report 2000-01) 550 1000 6500 1250 3700 1500 1000 1000 9100 500 5460 3200 2100 2000 2000-01 2006-07

Now considering consumer durables industry in general, the drivers that will leads to the growth of the industry in general will be: The degree of distribution network in the market. The advertising and marketing strategy adopted by the players in the industry. The brand image of the product as perceived by the consumer. The technology used by the company viz. state-of-the art technology or and older version. The ability of the company to introduce newer products and newer product features. The capability of the company to service its products. The discount schemes and consumer finance facility available. The market positioning of the product. The cost competitiveness and pricing strategy of the company. The financial strength of the players.

The competition in the industry has intensified after the liberalization and more and more MNC are coming to India to target the huge middle class of the country. The competition is dependent upon the brand strength and distribution network. In other words, the advertising and marketing expenses play a vital role in competition. As a result of the increased competitive activity, the advertising and marketing costs as a percentage of operating income

have increased over the years. This ratio for the industry has increased from 4.4 percent in 1993 to 6.7 percentage in 2000.

However, the export prospects are least or minimal because indigenous manufacturers do not possess adequate brand equity or excellent product quality. There are even constraints like transportation due to poor infrastructure and relatively under developed markets in the neighboring countries.

Changes In The Strategies:

There is a shift in trend as the emphasis has moved from the manufacturing process to marketing and advertising strategies. In other words, the marketing game has become a vital factor for driving sales as against the manufacturing process of the products in the past. Players are now concentrating on the creation of brand image in order to economize their scale of operations and to increase their brand strength. The advertising expenses of the companies operating in this segment are going high every year and the returns are diminishing still the brand will play a major role in selling of the product.

Because of this, most of the manufacturers like, Videocon and Electrolux are acting as OEM manufacturers for manufacturing refrigerators of Samsung and LG. Even, players have increased the percentage of their advertising and marketing costs as a percentage to operating income over the years; the ratio for the industry has increased from 4.6% in 1993 to around 7% in 2000. The brand building is very critical in the industry and constant advertising is necessary.

2.1 Introduction:

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 were also included in this category.

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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, etc. The consumer durables industry can be broadly classified into two segments: Consumer Electronics and Consumer Appliances. Consumer Appliances can be further categorized into Brown Goods and White Goods. The key product lines under each segment were as follows.

2.2 Industry Size, Growth, Trends:

The consumer durables market in India was estimated to be around US$ 5 billion in 2007-08. More than 7 million units of consumer durable appliances have been sold in the year 2006-07 with colour televisions (CTV) forming the bulk of the sales with 30 percent share of volumes. CTV, refrigerators and Air-conditioners together constitute more than 60 per cent of the sales in terms of the number of units sold. In the refrigerators market, the frost-free category has grown by 8.3 per cent while direct cool segment has grown by 9 per cent. Companies like LG, Whirlpool and Samsung have registered double-digit growth in the direct cool refrigerator market. In the case of washing machines, the semi-automatic category with a higher base and fully-automatic categories have grown by 4 per cent to 526,000 units and by 8 per cent to 229,000 units, respectively. In the air-conditioners segment, the sales of window ACs have grown by 32 per cent and that of split ACs by 97 per cent. Since the penetration in the urban areas for these products is already quite high, the markets for both C-TV and refrigerators were shifting to the semi-urban and rural areas. The growth across product categories in different segments is assessed in the following sections.

2.3 Consumer Electronics:

The CTV production was 15.10 million units in 2007-08 and is expected to grow by at least 25 per cent. At the disaggregated level, conventional CTV volumes have been falling while flat TVs have grown strongly. Market sources indicate that most CTV majors have phased out conventional TVs and have been instead focusing more on flat TVs. The flat segment of

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CTVs now account for over60 per cent of the total domestic TV production and is likely to be around 65 per cent in 2007-08.High-end products such as liquid crystal display (LCD)and plasma display CTV grew by 400 per cent and 150 percent respectively in 200910 following a sharp decline in prices of these products and this trend is expected to continue. The audio/video player market has seen significant growth rates in the domestic market as prices have dropped. This trend is expected to continue through 2009- 2010, as competition is likely to intensify to scale and capture the mass market.

2.4 Evolution of Organized retailing in world:

An important aspect of the current economic scenario in India is the emergence of Organized retail. There has been considerable growth in organized retailing business in recent years and it is poised for much faster growth in the future. Major industrial houses have entered this area and have announced very ambitious future expansion Plans. Transnational corporations are also seeking to come to India and set up retail chains in collaboration with big Indian companies. However, opinions are divided on the impact of the growth of organized retail in the country. Concerns have been raised that the growth of organized retailing may have an adverse impact on retailers in the unorganized sector. It has also been argued that growth of organized retailing will yield efficiencies in the supply chain, enabling better access to markets to producers (including farmers and small producers) and enabling higher prices, on the one hand and, lower prices to consumers, on the other. In the context of divergent views on the impact of organized retail, it is essential that an in-depth analytical study on the possible effects of organized retailing in India is conducted. Effect on small retailers and vendors in the unorganized sector keeping in Mind the likely growth in the overall market. Effect on employment. Impact on consumers. Impact on farmers and manufacturers. Impact on prices. Overall impact on economic growth.

International Retail:

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Global retail sales are estimated to cross US$12 trillion in 2007.1 Almost reflecting the growth in the world economy, global retail sales grew strongly in the last five years (200106) at an average nominal growth of about 8 per cent per annum in dollar Terms. This is in contrast to near stagnant global retail sales during the Previous five years, 1996-01. Grocery dominates retail sales with a share of approximately 40 per cent which varies from about 30 per cent in rich Japan to an Average of 60 per cent in poor Africa. Retail sales through modern formats have been rising faster than total retail sales; the share of modern retail has risen from about 45 Per cent in 1996 to over 52 per cent in 2006.

2.5 Organized vs. Unorganized Retail:

In the developed economies, organized retail is in the range of 75-80 per cent of total retail, whereas in developing economies, the unorganized sector dominates the retail Business. The share of organized retail varies widely from just one per cent in Pakistan and 4 per cent in India to 36 per cent in Brazil and 55 per cent in Malaysia. Modern retail formats, such as hypermarkets, superstores, supermarkets, discount and convenience stores are widely present in the developed world, whereas such forms of retail outlets have only just begun to spread to developing countries in Recent years. In developing countries, the retailing business continues to be dominated By family-run neighborhood shops and open markets. As a consequence, wholesalers And distributors who carry products from industrial suppliers and agricultural producers to the independent family-owned shops and open markets remain a critical part of the supply chain in these countries.

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Organized Retail Sector

Unorganized Retail Sector

Factor

Organized Retail Sector

Unorganized Retail Sector

Definition

Modern form of retailing

Traditional form of retailing

Examples

Hypermarket, Retail chain etc.

Mom n Pop stores, hand cart, pavement vendors etc

Market Share

3%

97%

Market Growth

35%

6%

Challenges

Poor

supply

chain aggressive

Use of labour intensive technology, lack of

management, expansion etc.

government support etc.

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2.6 Spread of Modern Retail in Developing Countries:

The arrival of modern retail in developing countries occurred in three successive Waves (Reardon and Hopkins, 2006; Reardon and Berdegue, 2007). The first wave took place in the early to mid-1990s in South America (e.g., Argentina, Brazil, and Chile), East Asia outside China (South Korea, Malaysia, Philippines, Thailand, and Taiwan), North-Central Europe (e.g., Poland, Hungary, and Czech Republic) and South Africa. The second wave happened during the mid to late 1990s in Mexico, Central America (e.g., Ecuador, Colombia, and Guatemala), Southeast Asian Countries (e.g., Indonesia), Southern-Central Europe (e.g., Bulgaria). The third wave has just begun in the late 1990s and early 2000s in parts of Africa (e.g., Kenya), some countries in Central and South America (e.g., Nicaragua, Peru, and Bolivia), Southeast Asia (e.g., Vietnam), China, India, and Russia.

Thus, the third wave countries which include China, India and Russia are late comers in the diffusion of modern retail. According to the authors, the main reason why they lagged behind was the severe restrictions on foreign direct investment (FDI) in retailing in these countries. The demand side features of these countries, such as income, size of the middle class, urbanization, and the share of women in workforce, etc., have been similar to countries in the second wave. In China and Russia these restrictions were progressively relaxed in the 1990s and in India partially in the 2000s. In January 2006, India allowed foreign companies to own up to 51 per cent in single brand retail joint ventures (JVs), but multiple-brand foreign firms are still barred in Retail although they can set up wholesale operations.

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Share of Organized Retail in Selected Countries, 2006

Source: Planet Retail and Technopak Advisers Pvt. Ltd.

2.7 Globalization of Retail:

There has been a creeping internationalization of retailing over the recent period. As home markets have become crowded and with opportunities in emerging markets rising, modern retailers from developed countries have been turning to new markets. On an average each of the top 250 retailers in the world has operated on an average in 5.9 countries in 2005-06 (July-June) against five countries in 2000-01 (Deloitte- Stores Report, 2007). Foreign business accounted for 14.4 per cent of retail sales of these companies in 2005-06 up from 12.6 per cent in 2000-01. The retail sales growth of companies which have ventured into

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foreign markets has been faster than those that have confined themselves to home markets. As far as the international expansion is concerned, West European and South African retail companies are the most outward looking. The West European firms, among the top 250 retailers, expanded into an average of 9.9 countries in 2005-06 and generated 28.1 per cent of their sales from foreign operations, largely in Central and Eastern Europe. The five South African retailers in the top 250 list conducted business in an average of 8.8 countries particularly in the African continent in 2005-06, generating on an average 13 per cent of these companies sales. The US retailers are mostly home-market based operating just in an average of 3.7 countries outside US in 2005-06 up f rom three countries in 2000-01 and two countries in 1996-97. The US retailer Wal-Mart, the worlds biggest retailer, is a notable exception operating in 14 countries in 2007. Most of the Japanese retailers are insular operating only domestically.

2.8 Regulatory Framework:

It is interesting to note that regulatory restrictions on the growth in modern retail is more stringent in developed rather than in developing countries. For example, in most West European countries, setting up of hypermarkets has become very difficult since the late 1990s and early 2000s as governments became alive to the demands of traditional small retailers and non-mobile consumers in these countries. Merger and acquisition plans are now looked at more critically by the national and European competition authorities. While in most countries opening hours are liberalized including holiday trading, the very small number of countries where opening on Sundays are prohibited include developed countries such as Germany and Austria (Planet Retail). As noted by Reardon and Hopkins (2006), there are four types of policy regulations that can be seen in countries which have experienced advanced retail expansion. They are: Competition policy that limits concentration and collusion. Zoning and hours regulations to limit the diffusion, market penetration, and convenience of organized retail. Pricing regulations that prevent modern retail companies from pricing below cost and prompt-payment regulations to secure speedy payment to suppliers. Policies to strengthen traditional retailers and suppliers through technology and practice upgrading, enhancing organizational capacity, and financial access. The above regulations

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were put in place in different countries basically with a view to balance the conflicts of interests between modern retail, on the one hand and the traditional retailers and suppliers to the modern retail, on the other. Recently, countries in Southeast Asia (Malaysia, Indonesia, and Thailand) imposed a number of restrictions on the growth of large retail companies particularly the transnational companies in contrast to a fairly liberal approach to the retail sector followed until the late 1990s. These restrictions involve the use of a combination of competition laws, FDI regulation, land use restrictions (zoning laws), and limits on operating hours (Mutebi, 2007).

2.9 Future Trends:

The Deloitte-Stores (2007) study held that the retail business would slow down definitely over the next decade in developed countries, while it would grow strongly in developing countries. This is based on a projection of three significant changes that will occur. First, the population in the age-group 50-70 years and above in the developed world will explode, shifting the share of consumer spending further away from goods towards services, such as travel, healthcare and maintenance of the elderly. Second, the population growth in the agegroup 20-35 years in these Countries will be relatively modest making the hiring of entry-level workers difficult, while the population in the age-group 35-50 years will decline leading to acute shortage of middle and upper management positions. Third, in developing countries, there will be plentiful supply of workforce and consumers in the younger age groups. Besides, this demographic shift will make the developing countries more dynamic and risk-taking enabling them to grow much faster than the developed world. Driven by these trends, it is expected that retailers in developed countries will increasingly move to the markets of developing countries for growth.

2.10 Indian Retail:

The growth of the retail trade in India is associated with the growth in the Indian economy. Gross domestic product (GDP) grew by an annual rate of 6.6 per cent during 1994-00 but the growth slackened to 4.7 per cent per annum during the next three years before the growth

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remarkably rose to 8.7 per cent per annum in the last four years (Table 2.3). This meant a substantial rise in disposable income of Indian households since the mid-1990s. Based on the Market Information Survey of Households (MISH) of the National Council of Applied Economic Research (NCAER), the number of people in the income groups of aspirers and the middle class with annual income ranging from Rs. 90,000 to one million, more than doubled from 157 million to 327 million during the last decade 1995-96 to 2005-06.3 The data from the Central Statistical Organization (CSO) indicate that the growth of real private final consumption expenditure, which dipped from an average of 5.7 per cent per annum during 1994-00 to 4 per cent per annum during 2000-03, shot up to 6.7 per cent per annum during 2003-07. Retail sales (in nominal terms) in the country also followed a similar pattern: a high annual growth of 13.6 per cent during 1994-00, a low growth of 4.8 per cent during 2000-03 and a smart pick up in the last four years, 2003-07 at around 11 per cent.

GDP, Private Final Consumption Expenditure and Retail Sales Growth, 1994-07 (Compound Annual Growth Rate)

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Growth India Retail - Total vs Organized

2.11 Future Scenario in Retailing:

Introduction The emergence of organized retail has been a recent phenomenon in the country, starting in the late 1990s. Its growth till 2006-07 was reasonably fast, at nearly 20 per cent per annum during the past three years. Unorganized retail also grew but at a slower pace of nearly 11 per cent per annum. There are signs that the growth of organized retail has accelerated in 2007-08 and is expected to gather further momentum during the coming years. This chapter highlights the following issues: (a) industrial estimate of future growth in total retail during the next five years; (b) relative share of organized vs. unorganized sectors; (c) the amount of additional investments that are envisaged in retail in the medium term; (d) estimates of employment

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generation; (e) geographical penetration of organized retail; (f) Projection of real estate availability; and (h) the concentration in retail industry.

Growth of Retail and its Distribution The NCAER, based on its Market Information Survey of Households (MISH), has projected that the consuming class consisting of the aspirers, the middle class and the rich with annual household income of above Rs. 90,000 will rise from about 336 Million in 2005-06 to 505 million in 2009-10. This implies a huge growth potential of Retail in the country. The sales of the Indian retail industry have been about US$ 322 billion (Rs. 14,574 billion) in 2006-07, amounting to about 35 per cent of Indias GDP. It is the seventh largest retail market in the world. Indian retail industry is projected to grow to about US$ 590 billion by 2011-12 and further to over US$ 1 Trillion by 2016-17.

2.12 Recent Developments: Consumer Durables

IBEF: December 02, 2009

Several key factors are driving growth in the consumer durables sector: disposable income levels are rising, consumer financing has become easier and urban and rural markets are growing at the annual rates of 7 per cent to 10 per cent, and 25 per cent, respectively, with organized retail expected to garner about 15 per cent share by 2015 from the current 5 per cent. Consumer durables is one of the fastest growing industries in India. Industry sales were estimated to be about US$ 5 billion in value in 200708, a growth of more than 25 percent over 200607, and are expected to grow at 20 percent in 200809. Some of the prominent global players in the consumer durables sector include Philips, Samsung, Sony and Nokia.

Overview:
With the increase in income levels, easy availability of finance, increase in consumer awareness, and introduction of new models, the demand for consumer durables has increased significantly. Products like washing machines, air conditioners, microwave ovens, color

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televisions (CTVs) are no longer considered luxury items. However, there are still very few players in categories like vacuum cleaners, and dishwashers. Consumer durables sector is characterized by the emergence of MNCs, exchange offers, discounts, and intense competition. The market share of MNCs in consumer durables sector is 65%. MNC's major target is the growing middle class of India.

MNCs offer superior technology to 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. However, the penetration level of the consumer durables is still low in India. An important factor behind low penetration is poor government spending on infrastructure. For example, the government spending is very less on electrification programs in rural areas. This factor discourages the consumer durables companies to market their products in rural areas.

2.13 KEY CONSUMER DURABLES, & GROWTH TRENDS:

The consumer durables market in India was estimated to be around US$ 4.5 billion in 200607. More than 7millionunits of consumer durable appliances have been sold in the year 200607 with color televisions (CTV) forming the bulk of the sales with 30 per cent share of volumes. CTV, refrigerators and Air-conditioners together constitute more than 60 per cent of the sales in terms of the number of units sold.

Key Consumer Durables - Share by Volume

Source: Cygnus Quarterly Report, Aug 2007.

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Body of thesis:
Research Progress

The research has found significant factors which affects consumers purchase decisions, it has been observed that the purchase decisions are affected by a combination of two or more factors, the final part of the thesis will try to draw a clearer picture on these factors,& how do they affect the purchase decisions. Many factors inside the factor of Family Influence are also present, family members from time to time play many roles of

influencer,decider,gatekeeper etc.( These are explained in the annexure). It has also been found that, a factor which is most common during purchase of CTV,the same factor may not be having equal importance during the purchase of refrigerators, Computers etc. The consumer durables industry in India is set for sustained growth over the long term, fuelled by favourable consumer demographics, overall growth in services and industrial sectors and infrastructure development in suburban and rural areas. Several Indian and MNC players are looking to strengthen their presence in India to leverage this opportunity. Findings till date : Product wise Analysis CTV The CTV production was 15.10 million units in 2006-07 and is expected to grow by at least 25 per cent. At the disaggregated level, conventional CTV volumes have been falling while flat TVs have grown strongly. Market sources indicate that most CTV majors have phased out conventional TVs and have been instead focusing more on flat TVs. The flat segment of CTVs now accounts for over 60 per cent of the total domestic TV production and is likely to be around 65 per cent in 2007-08. High-end products such as liquid crystal display (LCD) and plasma display CTV grew by 400 per cent and 150 percent respectively in 200607 following a sharp decline in prices of these products and this trend is expected to continue. Refrigerators are one of the most sought after appliances in Indian middle class homes. The refrigerator market has two segments: Direct Cool and the relatively new Frost-Free type. The market for refrigerators in 2006-07 was about 6.5 million units. The growth of refrigerator segment is projected to be between 18 to 22 per cent over the next5 years. A critical success factor for the refrigerator market, given its widespread use, is deeper reach into the market and increased penetration. Recently, the market is getting reinforced by the replacement segment as well.

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Computers:

Purchase decisions for computers are largely affected by the factor of Assembled & Branded. The topic of the study is not about finding the factor behind buying assembled or branded PC/laptops. Thus the study is mainly focused on finding the major factors affecting consumers Purchase decisions while buying branded computers. Brands account for 10 per cent of the total consumer goods market in India, while organized retailing is around 2 per cent of the total industry. Though branded computers are perceived to be costlier than nonbranded computers, the penetration of branded products is increasing. The relative shares of branded computers at the organized sector indicate that a significant share of branded products is being sold through unorganized channels. This highlights the need for a strong distribution network to penetrate deeper into the potential market.

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Chapter 3

Changing behavior of consumers

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3.1 Consumer classes:

For the purpose of study I am using the classification given by NCAER .According to the National Council for Applied Economic Research (NCAER), Indias premier economic research institution, based on consumption indicators, which is more relevant for ascertaining consumption patterns of various classes of goods there are five classes of consumer households, ranging from the destitute to the highly Affluent, which differ considerably in their consumption behavior and ownership patterns across various categories of goods. These classes exist in urban as well as rural households both, and consumption trends may differ significantly between similar income households in urban and rural areas. Structure for Indian consumer market: Consumer classes Structure for Indian consumer market: Consumer classes The rich The consuming class The climbers The aspirants The destitute Total Annual income 1996 2001 Annual income 2007 Change

215,000&more 45 215,000 22 45,0000 16 22, 0000 Below Rs- 16,0000

1.20 32.50 54.10 44.00 33.20 164.80

2.00 54.60 71.60 28.10 3.40 180.70

6.20 90.00 74.10 15.30 12.80 199.20

4.16 1.79 0.37 0.65 0.61 0.21

3.2 Factors affecting to the consumer behavior:

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3.3 Consumer buying process:

3.4 Industry classification:

The consumer durables industry can be broadly classified as consumer electronics and consumer appliances. The consumer appliances category can be further segmented as white goods and brown goods.

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3.5 The key players and their products:

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3.6 Market analysis:

Industry sales were US$ 4.5 billion in value in 2006-07 and more than 7 million units in volume terms. Plasma display panels and liquid crystal display TVs have registered an average growth of more than 250% 2006-07 and the trend is expected to continue. Split ACs have been g rowing at a much faster rate than window ACs- growth of 97% in the year 2006-07 and the trend is expected to continue. Mobile phone production is expected to grow at a compound annual growth rate of 28.3% from 31 million units in 2006 to 107 million units in 2001 The sectors which have recorded excellent growth rates of more than 20 per cent in terms of quantity produced are Air Conditioners (25 per cent), Split Air Conditioners (42.6 per cent) Micro Wave Woven (27.3 per cent), DVDS (25 per cent) VCD/MP3 (20 per cent), Color Picture Tube (23 per cent,). The sectors which have recorded high growth rates between 10 and 20 per cent in April-March 2004-05 over the corresponding previous period are Color Television (12%), Window Air Conditioners (18.8 per cent), Washing Machines (18.1 per cent Watch (10%), Frost Free Refrigerators (13.8%), Some sectors which have recorded moderate growth of 0 to 10 per cent are refrigerators (5 per cent),), clock (8 per cent), Direct Cool Refrigerator (2.8 per cent) The sector recording negative growth is B&W TV (- 16.7%) The Refrigeration Industry has reached 3.9 million units in 2004-05 from 3.7 million units in the last year with a growth of 5 per cent. The Air-Conditioners Industry has reached at 1.2 million units during 2004-05 with a growth of 25 per cent from 9.8 lakh units in 2003-04. Washing Machines is estimated to have grown by 18.1 per cent from 1.35 million units in 2003-04 to 1.6 million units in 2004-05.

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 Microwave ovens has grown by 27.3 per cent growth with 3.5 lakh units compared to 2.75 lakh units in 2003-04. The Indian Colour Television industry has grown by 12.1 per cent in 2004-05 by reaching 9.25 million units in 2004-05 from 8.25 million units in 2003-04. The B&W TV has recorded a negative growth of 16.7 per cent from 3 million units in 2003-04 to 2.5 million units in 2004-05. Watch and clock have registered growth of 10 per cent and 8 per cent from 20.6 mn units and 26.3 million units in 2003-04 to 22.6 mn units and 28.4 mn units in 2004-05.

The VCD/MP3 industry has registered 20% growth and has achieved production of 8.4 million units. The unorganized sector has occupied a major share in manufacturing and supplying VCD/MP3. DVD Players are estimated to have grown by 25 per cent in 2004-05 with the volume estimated to be 625000 units. The first half of the year and the first quarter of the financial year, 2005 has seen a little setback for the domestic consumer electronics and durables industry with the two largest segments of the industry - color televisions (CTV) and refrigerators facing decline in production and sales during the period. But the Air conditioners and washing machines market have grown at the rate of 20% . The de-growth seen in the first quarter of the current fiscal has been mainly due to the value added tax (VAT) regime introduced in April, 2005, as held by the industry representative. Overall, the refrigerator segment had achieved a negative growth of 4.3 per cent in volume terms and two per cent in value terms during the period.

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Production of consumer durables:

Production item Consumer durables/white goods Refrigerator Frost free Direct cool Air conditioners Window Split Washing machines Microwave ovens Consumer electronics Value overall Color television Color television B&W TV B&W TV VCD DVD Watch Clock Lakh units Rs Crore Lakh units Rs crore MN units Nos Lakh units Lakh units 14500 82.5 7000 30 482.55 7.2 50,000 206 263 156600 92.5 7580 25 361.5 8.4 62500 226 284 8.0 12.1 8.0 -16.7 -25.0 16.7 25 9.7 8.0 Lakh units 2.75 3.5 27.3 Lakh units Lakh units Lakh units 7.22 2.58 13.55 8.58 3.68 16 18.8 42.6 18.1 Lakh units Lakh units Lakh units Lakh units 37 7.33 29.67 9.8 38.85 8.34 30.51 12.25 5.0 13.8 2.8 25 unit 2003-2004 2004-2005 % growth

Key growth drivers for consumer durables:

Rise in disposable income: The demand for consumer electronics has been rising with the increase in disposable income coupled with more and more consumers falling under the double income families. The growing Indian middle class is an attraction for companies who are out there to woo them.

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Availability of newer variants of a product: Consumers are spoilt for choice when it comes to choosing products. Newer variants of a product will help a company in getting the attention of consumers who look for innovation in products.

Product pricing: The consumer durables industry is highly price sensitive, making price the determining factor in increasing volumes, at least for lower range consumers. 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 loan determine the affordability of the product. Sale of a particular product is determined by the cost of credit as much as the flexibility of the scheme.

Rise in the share of organized retail: Rise in organized retail will set the growth pace of the Indian consumer durables industry. According to a working paper released by the Indian Council for Research on International Economic Relations (ICRIER), organized 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 total retail pie 16% by 2011-2012. The share will grow with bigger players entering the market.

Innovative advertising and brand promotion: Sales promotion measures such as discounts, free gifts and exchange offers help a company in distinguishing itself from others.

Festive season sales: Demand for color TVs usually pick up during the festive seasons. As a result most companies come out with offers during this period to cash in on the festive mood. This period will continue to be the growth driver for consumer durable companies. Consumer Durables: Industry size, growth and trends:

During FY07, volume share of the single largest consumer durable was color TVs at 30%, followed by refrigerators and air conditioners at 18% and 13% respectively. Washing machines and other assorted consumer durables captured a share in the total volume by 5% and 34% respectively.

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Television Sets: Growth in sales:

FY07 witnessed the highest number of TV sets being sold when compared to the previous two corresponding years. As per CMIE, growth in sale of TV sets was slower at 14.3% during FY07 when compared to a 21% growth in the previous year. On the demand side, domestic consumption of refrigerators declined by almost 4% between FY05 and FY08, while imports climbed. The imposition of anti-dumping duties on import of colour picture tubes will hit the manufacturing costs of CTVs produced in India. Further, the reduction in the general rate of excise duty (CENVAT) from 16% to 14% as proposed in the Union Budget for FY09 will not have any effect on the selling price of colour TVs. This is because the combined effect of rising input costs and a higher interest burden will negate the effect of such reduction.

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34

Refrigerator: demand and supply side dynamics:

According to CMIE statistics, domestic consumption of refrigerators witnessed a decline between FY05 and FY08, while exports grew. From 3% of the total consumption in FY05, exports grew to7% of the total consumption in FY08. On the supply side, domestic production of refrigerators in the total supply remained at the same levels in the past three years ended FY08. At 99% each in FY06-08, the share of production reported a mere 100 basis point increase over FY05, as imports slided. The refrigerator industry posted a sluggish performance since the beginning of FY09 on the back of volatile steel prices. The first quarter saw a production growth of a mere 50 basis points to 2.18 mn units, as per CMIE.

Sales of Consumer Electronic Companies:

The consumer electronic goods industry underwent a slowdown during the last quarter of FY08. According to CMIE, the industry witnessed a slower 10.5% growth in the Mar 08 quarter compared to a substantial 17.4% growth in the previous corresponding quarter. Domestic consumer electronics companies together reported a subdued sales growth of almost 17% in FY07, on the back of a robust 40.5% growth in FY06. While the larger companies reported robust growth in sales, it was the smaller ones whose sales were negatively affected that eventually brought down the industry sales growth.

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Changing attitudes of Todays customers:

Today customer likes to indulge in buying spree. No more the customers buy only to fulfill their basic needs and emphasise on savings itself.

Indian consumers have become value sensitive and are not much price sensitive as was the case earlier. If they feel that a particular product offers them more value and its price is high, even then they are willing to buy the product.

The Indian consumers strictly follow their culture, tradition and values, as a result of which foreign companies were forced to give an Indian touch to them in order to succeed in India. McDonalds, MTV, Pepsi, Star TV, Coca Cola India and many more had to Indianise themselves to flourish in India. Karva Chauth is celebrated with more zeal and enthusiasm than the Valentine Day. The Indian consumer of today gives preference to features of a product rather than its brand name. The trend that higher segment consumers only buy the top brands has also come to an end.

Even after liberalization Indian companies and brands are doing very well. It is clearly evident from the fact that despite many foreign brands being sold in India, Raymond is still Indias largest textile company and Haldiram is doing well despite the presence of McDonalds and Pizza Hut. The consumers today are not confined to a single brand and prefer change rather than sticking to the same brand. Not often do we see any home with cars of the same brand or household products of the same brand. The use of credit card for shopping is a new emerging trend in India. Also consumers are availing credit or loan from banks and other financial institutions to fulfill their needs and wants.

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The Indian consumers are spending thick and fast on premium and luxury products. The Indian consumers have shown another major change in their buying behaviour. They just dont want availability of products, they also want better experience, services and ambience. This has led to the growth of shopping malls where shopping, entertainment and better facilities are all available under one roof. To a great extent the presence of heavy weight such as the pantaloons, big bazaar, croma , nilgiris etc has given a huge fillip to the growing market by not only selling products but also the experience. The Indian consumer are much more inclined to the organized sector.

The rural Indian consumers are also showing signs of change. They have all the modern amenities at their home and their standard of living is fast improving. The rural households have earned huge money due to price rise in real estate. They are also shifting towards industrial and services sector, hence their purchasing power is increasing. It is reflected in their living standard and possession of all electronic gadgets and luxury cars. There is a stiff competition in the Indian market today and it has become a buyers market from sellers market. Customers are the ultimate beneficiary of the fierce competition in the market. Competition has reduced prices to a great extent and has forced the manufacturer to maintain product quality to sustain in the highly competitive market.

Though in a small way internet and and telemarketing have also caught the attention of the Indian customers. Dell. Amazon .com, etc have carved a good niche for them in the sector. The consumers today do not mind availing credit as when needed. So credit availability has become a key factor for determination of a buying a good. Consumers are also availing the information available on net through various forums and websites.

Marketers response to Consumer attitude:

With change in consumer buying behavior the companies also made necessary changes in their marketing strategies. The changes include: 1) Launching of premium products by companies to fulfill requirements of high class consumers.

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2) Since purchasing power of rural India has increased, the companies have started shifting their focus towards rural India to capture untapped rural market. This has reaped huge benefits for companies like in cases of PepsiCo, Coca Cola India and other FMCG companies. 3) Companies not only aim to sell their products but also aim to provide better after sales services to its consumers. For example companies have provisions to send their technicians to repair the cars struck at highways or other outer locations due to technical failure or in case of a mishap. This improves the companys credibility and helps to build its customer base .

4) Companies design their products on the basis of market segmentation so that they have products to suit every pocket and requirement.

5) Due to sharp growth in the communication sector, companies are providing many schemes and plans to attract customers. For example mobile service providers provide lifetime option and free calls to other mobile users under a specific plan of the company. 6) Due to fierce competition in the electronics market and peoples willingness to purchase hi-tech products the rates of LCD and plasma TVs have been slashed by 25%-30%. Through this strategy electronic companies received very good response from the consumers in the recent past and were able to build a considerable market for their products. 7) Indian consumers have developed a liking for foreign tours and holidays. This has led to development of many travel agencies that provide a planned foreign tour at a reasonable price. What is even more interesting is that the customer does not have to pay the amount in lump sum; instead, he has the facility to make the payment in monthly installments according to his convenience. 8) Consumers of India have developed a tendency to save travel time. For such consumers low fare or low cost carriers are available that provide air travel facility at a very affordable price. 9) Consumers of India want better housing facilities. The construction companies are fulfilling this requirement of consumers by providing them luxurious houses, exquisite

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interiors, round the clock water and electricity supply, full time security, club house, gymnasium, etc. within the premises. 10) Indian consumers are increasingly becoming aware of the importance of health and hygiene. Hence companies are making products to suit their health like low calorie, low fat food. As far as hygiene is concerned companies have fully mechanized their plants to maintain hygiene and pack the food in such a way that it remains fresh for longer period of time and does not lose its nutritive value before consumption. 11) The need for internet is fast growing. To fulfill this need of consumers, mobile manufacturing companies are providing internet access facility on mobile phones. This has revolutionized the communication sector and provided a means of communication that was never ever in anybodys dreams till a few years back. 12) Indian consumers liking for credit is also increasing rapidly. Hence many financial institutions have come into existence in India and are flourishing. Banks have also become liberal in their loan and credit policies.

3.7 The road ahead:

The rising rate of growth of GDP, rising purchasing power of people with higher propensity to consume with preference for sophisticated brands would provide constant impetus to growth of white goods industry segment.

Penetration of consumer durables would be deeper in rural India if banks and financial institutions come out with liberal incentive schemes for the white goods industry segment, growth in disposable income, improving lifestyles, power availability, low running cost, and rise in temperatures.

While the consumer durables market is facing a slowdown due to saturation in the urban market, rural consumers should be provided with easily payable consumer finance schemes and basic services, after sales services to suit the infrastructure and the existing amenities like electricity, voltage etc.

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Currently, rural consumers purchase their durables from the nearest towns, leading to increased expenses due to transportation. Purchase necessarily done only during the harvest, festive and wedding seasons April to June and October to November in North India and October to February in the South, believed to be months `good for buying, should be converted to routine regular feature from the seasonal character.

Rural India that accounts for nearly 70% of the total number of households, has a 2% penetration in case of refrigerators and 0.5% for washing machines, offers plenty of scope and opportunities for the white goods industry.

The urban consumer durable market for products including TV is growing annually by 7 to 10 % whereas the rural market is zooming ahead at around 25 % annually. According to survey made by industry, the rural market is growing faster than the urban India now. The urban market is a replacement and up gradation market now. The other factor for surging demand for consumer goods is the phenomenal growth of media in India. The flurry of television channels and the rising penetration of cinemas will continue to spread awareness of products in the remotest of markets.

The vigorous marketing efforts being made by the domestic majors will help the industry. The Internet being now used by the market functionaries that will lead to intelligence sales of the products. It will help to sustain the demand boom witnessed recently in this sector.

The ability of imports to compete is set to rise. However, the effective duty protection is still quite high at about 35-40 per cent. So, a flood of imports is unlikely and would be rather need based.

Reduction in import duties may significantly lower prices of products such as microwave ovens, whose market size is quite small in India. Otherwise, local manufacturing will continue to stay competitive. At the same time, there will be some positive benefits in the form of reduction in input costs. Washing machines and refrigerators will also benefit from lower input costs.

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According to a study by the McKinsey Global Institute (MGI), Indian incomes are likely to grow three-fold over the next two decades and India will become the world's fifth-largest consumer market by 2025. In the given scenario, urban markets will continue to fuel the Indian economy for quite some time to come. Moreover, expenditure by the middle class accounts for the bulk of Indias urban consumer expenditure. About 61 per cent of total urban income comes from households that can be classified as middle classearning between US$ 1,493 and US$ 9,955 a year.

Further, India is likely to see rapid urbanization, with around 45 per cent of Indians living in urban areas by 2050, up from 30 per cent in 2007-08, according to a study co-authored by National Council of Applied Economic Research's (NCAER) Rajesh Shukla and Future Capital Research's Roopa Purushothaman.

According to a report by McKinsey, India's overall retail sector is likely to grow to US$ 419.93 billion by 2015.

According to global real estate consultant, CB Richard Ellis, India has moved up to the 39th most preferred retail destination in the world in 2009, up from 44 last year. The turnover of the organized retail segment in India is pegged at around US$ 8.1 billion. It is expected to reach US$ 51 billion by 2010.

Retail opportunity is slated to rise by about US$ 160 billion in India in five years. In urban India, modern retail is likely to grow from the current 9.6 per cent of total retail to 26 per cent in the next five years, as per Technopak Advisors

The Indian consumer durables market seems to be relatively untouched by the economic slowdown. The consumer durable goods output witnessed a 2.5 per cent rise in durables output in the first quarter of 2009, according to a report by the Development Bank of Singapore (DBS). Colour televisions have seen an increase in sales, growing 2 per cent to 2.8 million units in January-March 2009, according to the figures released by ORG-GFK.

Whirlpool is on the expansion mode and is targeting a 22 per cent share of the US$ 423.28 million washing machine market in India by the end of 2009, and is launching a range of new products with an investment of US$ 4 million for the same.

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Moreover, a large number of hi-technology durables are expected to flood the US$ 4.03 billion Indian durables market in 2009. Samsung, LG, Haier and Videocon are among companies planning new product launches in the coming months

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Chapter 4

Major Organized & Unorganized Players

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4.1 Major players:

The major players in the consumer durables industry, operating in different sectors such as air conditioners, washing machines, refrigerators & television include:

Competition analysis

COMPETITION OVERVIEW:

Samsung India (CURRENT MARKET SHARE-37%):

Initially the strategy of Samsung in India was to create premium image by emphasizing global brand. After facing stiff competition from another Korean major- LG, Samsung also started playing price game. In 2004 it reverted back to its premium positioning, although it resulted in some loss of market share. In line with the Global Digital Initiative of the Parent Company.

Samsung India:
Acquired digital leadership in India by introducing its digital ready televisions like the 40" LCD Projection TV, 43"Projection TV and the Plano series of Flat Colour televisions.

LG India (CURRENT MARKET SHARE-23%):

LG Electronics rightly understood the consumer motivations to create magnetic products, price them strategically, position them sharply and keep making the magnetism more potent. Having understood the finer differences in consumer motivations, it opted for sharp-arrow reasons-to buy differentiation over the blanket-all approach taken by most of the other players. It is an aggressive marketer. It focuses on low and medium price products.

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Toshiba India:

Toshiba India Private Limited (TIPL) is the wholly owned subsidiary of Japanese Electronics giant Toshiba Corporation and was incorporated in India on September 2001. Toshiba had a presence in India since 1985 and was represented in India through their Liaison Office.

Sony India (CURRENT MARKET SHARE-21-22%):

Sony Corporation, Japan, established its India operations in November 1994. In India, Sony has its distribution network comprising of over 7000 channel partners, 215 Sony World and Sony Exclusive outlets and 21 direct branch locations. The company also has presence across the country with 21 company owned and 172 authorized service centres.

Sharp India Ltd:

Sharp India ltd was incorporated in 1985 as Kalyani Telecommunications and Electronics Pvt Ltd, the company was converted into a public limited company in the same year. The name was changed to Kalyani Sharp India in 1986. The company was entered into a joint venture with Sharp Corporation, Japan - a leading manufacturer of consumer electronic products to manufacture VCRs/VCPs/VTDMs. The company manufactures consumer electronic goods such as TVs, VCRs, VCPs and audio products. The products were sold under the Optonica brand name. Sharp has a production base in 26 countries with 33 plants, and its products are used in 133 countries. The company was accredited with the ISO-9001 certification in the month of February, 2001.

Hitachi India:
Hitachi India Ltd (HIL) was established in June 1998 and engaged in marketing and sells a wide range of products ranging from Power and Industrial Systems, Industrial \Components & Equipment, Air Conditioning & Refrigeration Equipment to International Procurement of software, materials and components. Some of HILs product range includes Semiconductors

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and Display Components. It also supports the sale of Plasma TVs, LCD TVs, LCD Projectors, Smart Boards and DVD Camcorders.

Mirc Electronics (ONIDA):

The company commands strong brand equity among consumers largely owing to the success of its Onida brand. High-quality designs have made the company a leading player in the electronics and entertainment business. Its popular devil ad although had engendered a strong emotional pull towards the brand, Technologically it represented no advancement. The company plugged the gap by touting its digital technology. Like Videocon, it has also been able to hold its market share. The world-class quality of Onida has enabled the company to make a breakthrough on the export front. Onida is a leading brand in Gulf market and also exports its models to Africa, Bangladesh, Sri Lanka and Nepal. It has technical tie-up with the Japan Victor Company, better known as JVC. So focused is Onida on positioning itself on the premium, high-tech plank that it is even planning to push its own envelope on obsolescence, much like Intel has been doing in its own industry. The strategy is aimed at further broad basing the product offering of the company, which has largely dominated the top-end of the television market, across multiple market segments. Besides understanding the strategy adopted by different players, several other factors- industry growth, concentration and balance, corporate stakes, fixed cost, and product differences need to be analyzed to determine the extent of rivalry between the existing players.

Videocon (CURRENT MARKET SHARE-12%):

It is the market leader in the consumer electronics and home appliances segments in India; the company manufactures home appliances such as refrigerators, microwave ovens, compressors, air conditioners and washing machines. It has plans to acquire Daewoos consumer electronics businesses worldwide to bring LCD TVs, plasma TVs and components into its fold; the move would also help it acquire a consuming partner for the recently-acquired Thomsons picture tube business. Videocon has always been a price player and has an image of a low price brand. This entails providing more features at a given price vis--vis competitors. It has taken over multinational brands to

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cater to un served segments, like Sansui- to flank the flagship brand Videocon in the low to mid priced segment, essentially to fight against brands like BPL, Philips, and Onida and taken over Akai- tail end brand or brands like Aiwa. Videocon is one of the largest manufacturers of television and its components in India and thus has advantages of economies of scale and low cost due to indigenization. It has the widest distribution network in India with more than 5000 dealers in the major cities .It also has a strong base in the semiurban and rural markets. Due to its multi-brand strategy, it has at present multiple brands at the same price point. This has led to a state of diffused positioning for its brands. It has also led to a cannibalization of sales among these brands. The flagship brand Videocon has lost market share due to the presence of Sansui in the same segment. Because of reduction in import duties on CPT the cost advantage of Videocon is also on the decline. Hence it is facing rough weather and also trying to boost exports.

Panasonic India (CURRENT MARKET SHARE-6%):

Panasonic Corporation based in Osaka, Japan is a worldwide leader in the development and Manufacture of electronic products for a wide range of consumer, business, and industrial needs. Panasonic Electric Works Co., Ltd. traces its roots to the company started in 1918 by Konosuke Matsushita. Panasonic India plans to invest USD 100 million in its new plasma TV production facility in 2011.

The company currently has five production units in the country, at Noida, Gurgaon, Vadodara, Chennai and Delhi. It also launched the worlds slimmest, 1-inch plasma TV called Vierra PDP Z1.According to Panasonic The market potential for plasma TV was much greater in India than China, The demand for such high-end sets was increasing at a rate of 410 per cent in the country. The company has priced its plasma TV between Rs 24,000 and Rs 30 lakh (for a 103-inch screen). It has already sold ten such units this month.

Agrawal Group - Manufactures consumer electronic products; radios, tape-recorders,

car stereos and CD systems. View profile.

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Anchor -

Manufactures electrical switches, accessories, lighting luminaries, and PVC

wires, domestic appliances like electrical irons, mixers, grinders, toasters and fans.

Bajaj International -

Exporters of electrical fans, household appliances, lamps,

fluorescent tube lights, light fittings, hoists etc. Imports steel and engineering items .

BOSS Portable Blenders -

Manufacturer and exporter of portable blender and

home appliances includes hand held mixers, juice makers, stainless steel blender and more.

E.P.C Industrial Fans & Motors -

Manufacturers & Exporters of industrial

fans, domestic fans, instrument cooling fans, cabin fans, electric fans & electric motors.

Eureka Forbes -

Details on consumer products include vacuum cleaners, floor care

equipment, high pressure water jet cleaners and electronic security systems.

Global Wonders -

The fastest search engine, directory, map and web guide for

information on the most popular websites. Features list of wholesaler, retailer along with products list, consumer durable and more.

Hot shine Appliances - U.P -

Manufacturers of gas cookers & stoves & electrical

appliances, product range includes cooking ranges, steam irons, oven toaster and grillers .

Kelvin Systems cleaners).

Dealers for Carrier Aircon Ltd (air-conditioning equipment), Honda

(Siel) Power Products Ltd (portable electric generators), and Eureka Forbes Ltd (vacuum

Mangal Singh & Sons -

Dealers in home appliances, consumer goods and electrical

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appliances, includes television, refrigerator, audio products, washing machines, vacuum flask, cooking range, oven and dining sets.

Moniba -

Manufactures chemical pump, air operated pump, water purifier, health care

product, and bacteria free water, home appliances and chemical plant machinery .

Nadi Industrial Fans centrifugal fans and special fans.

Manufacturers of fans; product range includes axial fans,

Onida -

Provide an online showroom to purchase the entire range of Onida products.

Offers free delivery.

Orient Fan -

Specialized in manufacturing mini motors, deluxe decorative ceiling fans,

shaded pole motors, box fans, food blender, food mixer, fruit juicer, vacuum cleaner etc.

Padmini Appliances -

Manufacturers of gas stoves, oven-toaster-griller, juicer-

mixer-grinder, electric hot plates, washing machines, ceiling fans, water heaters, irons etc.

Philips -

Details for consumer electronics, lighting, domestic appliances, semi conductors,

components, enabling technologies, multi media projectors etc.

PICASSO Home Products Appliances and more.

Manufacturer and Exporter of various home

appliances like roti maker, mixer grinder, sandwich maker, oven toaster griller, Non Stick

Salora -

Manufactures black-and-white & color television sets, Panasonic fax machines,

printers, and digital cameras; color monitors and cordless phones.

49

Sansui - India -

Manufacturer of electronic products, audio systems, home theatres,

projection TVs, video CDs and home appliances.

Singer -

Manufacturers of sewing machines, food processors, refrigerators, televisions,

oven, toasters, washing machines, electric irons etc.

Sony India Wega T.V etc.

Details of product ranges from color TVs, hi-fi music systems, video CDs,

home theatre systems, DVDs, portable audio systems, digital cameras, RMEG products,

Sony World Televisions.

Features wide ranges of products: car audios, handy cams, digital

cameras, VCD, LD, DVD players, cordless phones, walkman, and disc mans, and

Sumeet -

Manufacturers of mixer-grinders. Offers details about the machines, recipes,

Sumeet outlets and more.

Sunflame Appliances electrical appliances in India.

Manufacturers of kitchen appliances, home appliances and

Usha International -

Manufacturer of sewing machines, fans, air conditioners, water

coolers, home appliances, agricultural and domestic pump sets, and auto products.

Usha Lexus -

Makers of home appliances like sandwich toasters, juicer, mixer grinders,

ovens, ventilating fans, irons and room coolers.

Videocon -

Suppliers of home appliances, TVs, refrigerators, ACs, air conditioners,

audios, tape recorder, colour monitors, digital organizers, Kenwood digital hi-fi systems, television sets etc.

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Vijay Sales -

Dealers in consumer durables includes details for their product, customer

care, schemes, consumer finance, and more.

Voltas Limited -

Makers of room air conditioners and refrigeration equipment, water

coolers, cranes, pumps and office furniture; includes machine tools, industrial chemicals etc.

L.G India -

Details of product ranges from colour TVs, hi-fi music systems, video CDs,

home theatre systems, DVDs, portable audio systems, digital cameras, RMEG products, T.V etc. Features wide ranges of products: car audios, handy cams, digital cameras, VCD, LD, DVD players, Cdma mobiles, walkman, and disc mans, and Televisions.

Samsung Electronics India Ltd - Details of product ranges from colour TVs, hifi music systems, video CDs, home theatre systems, DVDs, portable audio systems, digital cameras, RMEG products, T.V etc. Features wide ranges of products: car audios, handy cams, digital cameras, VCD, LD, DVD players, mobiles, walkman, and disc mans, and Televisions. There has been strong competition between the major MNCs like Samsung, LG, and Sony.

LG Electronics India Ltd has announced its extension plan in 2006. The company
is going to invest $250 million in India by 2011 and is planning to establish a manufacturing facility in Pune.

TCL Corporation is also planning to establish a $22 million manufacturing facility in

India. The Indian companies like

Videocon Industries and Onida

are also

planning to expand. Videocon has acquired Electrolux brand in India. Also, with the acquisition of Thomson Displays by Videocon in Poland, China, and Mexico, the company is marking its international presence.

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According to supply Corporation (Applied Market Intelligence), country's fiscal policy has encouraged Indian consumer electronic industry. The reduction on import duty in the year 2005-06 has benefited many companies, such as Samsung, LG, and Sony. These companies import their premium end products from manufacturing facilities that are located outside India. Indian consumers are now replacing their existing appliances with frost-free refrigerators, split air conditioners, fully automatic washing machines, and color televisions (CTVs), which are boosting the sales in these categories. Some companies like Samsung Electronics Co. Ltd. and LG Electronics India Ltd. are now focusing on rural areas also. These companies are introducing gift schemes and providing easy finance to capture the consumer base in rural areas.

Growth in 2005-06
Consumer Durables
Air Conditioner Refrigerator Microwave Ovens Washing Machines Color Televisions (CTVs) Black & White Televisions Clock Watch VCDs Consumer Electronics (Overall)

Growth
20-25% 5-10% 25% 5-10% 15-20% -20% 10% 10% 30% 9%

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Some Facts:
1. Bargaining power of suppliers in consumer durables sector is limited due to threat of imports and intense competition.

2. Some of the entry barriers in consumer durables sector are distribution network, capital, and ability to hire purchases.

3. Demand is seasonal and cyclical.

4. Competition among players is on the basis of difference in prices and well-acknowledged brands.

4.2 Sector Outlook:

Consumer durables Sector can be classified as follows: 1. Consumer Electronics includes VCD/DVD, home theatre, music players, color televisions (CTVs), cameras, camcorders, portable audio, Hi-Fi, etc.

2. White Goods include dishwashers, air conditioners, water heaters, washing machines, refrigerators, vacuum cleaners, kitchen appliances, non-kitchen appliances, microwaves, built-in appliances, tumble dryer, personal care products, etc.

3. Molded Luggage includes plastics.

4. Clocks and Watches

5. Mobile Phones

Acc. Ac Nilsson Consumer Markets Last Updated: January 2010

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According to a study by the McKinsey Global Institute (MGI), 'Bird of Gold': The Rise of India's Consumer Market, Indian incomes are likely to grow three-fold over the next two decades and India will become the world's fifth largest consumer market by 2025, moving up from its 2007 position as the world's 12th largest consumer market. India ranks second in the Nielsen Global Consumer Confidence survey released on January 7, 2010an indication that recovery from the economic downturn is faster in India with consumers more willing to spend. The survey showed that in addition to the emerging markets of Indonesia and India, eight of the top ten most confident markets in the fourth quarter of 2009 came from the Asia Pacific region.

Retail
Estimates by the Retailers Association of India (RAI), the apex body of organized, modern retailers, have shown that the country's US$ 21.05 billion organized retail segment has grown 20 per cent in the September quarter 2009-10. Approximately 315 hypermarkets are expected to come into existence in tier-I and tier-II cities across India by the end of 2011, says a joint study by consultancy firm KPMG and industry body, Associated Chambers of Commerce and Industry of India (ASSOCHAM) named `Reinventing India's Retail Sector'. The country's largest retailersFuture Group, Spencer's Retail and Shoppers Stophave lined up investments of at least US$ 128.3 million for 2010.

Rural Consumers
As socio-economic changes sweep across India, the country is witnessing the creation of many new markets and a further expansion of the existing ones. According to Pradeep Kashyap, chief executive officer of MART Rural Solutions, speaking at the Calcutta Management Association Rural Marketing Meet, over 300 million people would move up from the category of rural poor to rural lower middle class between 2005 and 2025 and rural consumption levels are expected to rise to current urban levels by 2017.

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Mega retail chains are looking to build a high-quality supply chainretailers such as BhartiWal-Mart, Carrefour and Reliance are working to strengthen their supply chain formula by roping in farmers as stakeholders. Despite being the biggest names in the trade, these retailers are ploughing rural areas to teach innovative farming methods and find the best suppliers among them.

FMCG
According to a FICCI-Technopak report, despite the economic slowdown, India's fast moving consumer goods (FMCG) sector is poised to reach US$ 43 billion by 2013 and US$ 74 billion by 2018. The report states that implementation of the proposed Goods and Services Tax (GST) and the opening of Foreign Direct Investment (FDI) are expected to fuel growth further and raise the industry's size to US$ 47 billion by 2013 and US$ 95 billion by 2018. The Ministry of Food Processing Industries is also planning to double the market size of the food processing industry to US$ 165.1 billion by 2009-10 and trebling it to US$ 271.8 billion by 2014-15. Demand for personal care products such as shampoos, toothpastes and hair-oils grew faster in rural areas than urban areas during April-September 2009, a period that includes the peak monsoon months, as per the numbers released by market researcher AC Nielsen.

Consumer Durables
A combination of changing lifestyles, higher disposable income, greater product awareness and affordable pricing have been instrumental in changing the pattern and amount of consumer expenditure leading to strong growth in the consumer durables industry. Companies such as LG Electronics India Ltd (LGEIL), Samsung India and Whirlpool are reporting strong sales figures. Samsung has posted a growth of nearly 80 per cent in its refrigerator category. In 2009, overall industry sales of LCD televisions grew by 93-94 per cent over the earlier year. Multimedia mobile phones have grown from 800,000 units in 2008 to 1.8 million in 2009.

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Japanese consumer durables company Panasonic expects to double its sales in India to US$ 945.09 million in the 2010 fiscal and subsequently expects the contribution from the country to its global business to increase by 10 per cent by 2014.

Consumer Durables IBEF: December 02, 2009

Several key factors are driving growth in the consumer durables sector: disposable income levels are rising, consumer financing has become easier and urban and rural markets are growing at the annual rates of 7 per cent to 10 per cent, and 25 per cent, respectively, with organized retail expected to garner about 15 per cent share by 2015 from the current 5 per cent. Consumer durable is one of the fastest growing industries in India. Industry sales were estimated to be about US$ 5 billion in value in 200708, a growth of more than 25 percent over 200607, and are expected to grow at 20 percent in 200809. Some of the prominent global players in the consumer durables sector include Philips, Samsung, Sony and Nokia.

Vengabeats August 14th, 2006, 01:01 AM

Korean firms LG and Samsung havent won the battle for the consumer durables market. Indian firms such as Onida, Videocon and BPL are making a comeback and retailers like Futures Kishore Biyani are launching store-brands.

Just about when everybody thought that the war for durability in the Rs 25,000-crore consumer electronics industry in India had been fought and won, the industry seems to be gearing up for another battle. On the face of it, nothing seems to have changed, not the game, nor the players and not even the prize. The industry continues to grow sluggishly, an 8 percent compounded average growth rate (CAGR) between 2000 and 2004 (China grew 14 percent CAGR during this period, LG and Samsung continue to rule the market, accounting for around 50 percent of the total Rs 25,000-crore industry and the other Indian as well as

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multinational players like Videocon, BPL, Mirc Electronics, Whirlpool, and Sony continue to play catch-up. Under the surface though, things are stirring.

For one, the also rans are refusing to play their part and are making a strong comeback bid. It is not for nothing that the Devil (a character that represents brand Onida) is back, gushes Gulu Mirchandani, Chairman and Managing Director (MD), Mirc Electronics. He is here to rule the market again. Apart from televisions, where it has historically held its own against competition, Mirc is making an aggressive play in categories such as washing machines, air conditioners, microwave ovens and DVDs. Then says Mirchandani, there are exports. He claims to have sold between 100,000 and 150,000 color televisions each in Ukraine and Russia last year, and hopes to translate this into a competitive advantage in the Indian market.

BPL Ltd, which ruled the CTV market in India till early 2000 and then slipped into heavy losses (the net loss stood at Rs 214 crore in 2003 and Rs 214 crore in 2003 and Rs 74 crore in 2005) , has formed a 50:50 joint venture with Japans Sanyo Electric. The latter has committed $100 million (Rs 450 crore) to its Indian operations. The JV has launched CTVs, LCDs and plasma screens under the Sanyo and BPL brand names and is also foraying into refrigerators, washing machines and DVDs. We intend to be a 2,000 crore venture by 2009 with a considerable market share in all segments, says Ajit Nambiar, Chairman and Chief Executive Officer, Sanyo BPL.

Videocon Industries, another leading Indian player that go battered during the late 90s and early 2000s, boasts revenues of Rs 4,500 crore today. The groups oil business contributes significantly to this, but the consumer electronics business is thriving, too. Chairman Venugopal Dhoot identified a different route to growth: Allwyn, Kelvinator, Hyundai, Toshiba and Electrolux in the domestic market, and of manufacturing facilities such as French Electronics major Thomsons color picture tube, globally. If there is one player that will thrive in Indian market, besides the Korean majors, it is Videocon, says Dhoot. Whirlpool India is another company, which after a long cold winter, is getting back into shape. The company, which recorded a net loss of Rs 38 crore in 2005-06, recently announced a $20-million (Rs 90 crore) investment for 2006 and 2007 and launched several new products. The company says Arvind Uppal, its Managing Director, is committed to India. Then, there are others like Godrej Appliances, Sony, Haier, Sharp, Hitachi and various other smaller companies that are aiming to corner some share in the industry.

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These ambitions plans and strategies would not seem misplaced if the consumer electronics industry were growing the way other industries are. Last year, when GDP grew by around 8.1 percent, the stock markets boomed and most industries, even those that had been in dire straits, fast moving consumer goods, grew at between 15 and 30 per cent; consumer electronics was one sector that grew only 5 percent. In terms of value, the biggest constituent of the segment, CTVs, actually saw a decline. Nor are growth estimates for the future any more sanguine. According to market research agency Data monitor, the industry is likely to grow around 7.7 percent CAGR for five years ending 2009.

There are many reasons for sluggishness in the industry; some immediate and others, historical. Most people attribute last years slow growth to two factors-confusion regarding value-added tax (VAT) and a surge in stock markets. Confusion regarding VAT in the first quarter last year took a heavy toll on sales, says K.R.Kim, intriguing correlation between stock markets and consumer durables industry. It has been observed that whatever stock markets or real estate sectors are booming, consumers tend to postpone their consumer durable purchases and invest their money in these assets. Says Bhuwan B. Singh, Director (Client Service), ORG Gfk

Then, there are historical reasons. When the government opened up the sector, recalls Mirchandani, incumbent players were not ready for competition and most of them died or are still bleeding. Videocons Dhoot holds heavy taxation responsible for industries woes. Total tax incidence in India even now stands at around 25-30 per cent, whereas the corresponding tariffs in other Asian countries are between 7 and 17 percent, he says. Poor infrastructure is another reason that seems to have held back the industry. Regular power supply is imperative for any consumer electronics product. But that remains a major hiccup in India, says Ravinder Zutchi, Deputy Managing Director, Samsung.

Indeed, over 80 percent of the rural market in India remains irrelevant for the industry because of these reasons. But the fact remains that these problems are not going to be resolved in the near future. And the companies will have to factor them in when they draw new growth plans. Which they have now done. Shorter replacement cycles, especially in urban areas, also give companies cause for hope. Over the next few years, the topography of

58

the industry will likely change, with some companies gaining at the expense of others. Eventually, however, the market itself will grow, as rural markets evolve and companies create specific products for them.

4.3 The Threat of Retail: There is another imminent threat for the industry, the emergence of organized retail. World over consumer electronics is used as a loss-leader category to woo consumers, says Ireena Vittal, Principal, McKinsey. Retailers give consumers huge discounts on these products to win over consumers, which, in turn, mean squeeze on margins. Vittal points to another trend that is sure to hit the players, that of organized retailers launching their store brands. That, in fact, is already happening. Electronic bazaar has started importing air conditioners and microwave ovens from China and is selling them, under the brand name Koryo, at prices that are over 40 per cent cheaper than those of competing products. Initial response to these products has been encouraging, says MD Kishore Biyani. We intend to import other products like TV and washing machines soon. Mukesh Ambanis Reliance Retail is also said to be exploring such opportunities. In fact, the group is said to be in talks with some companies that neither have any manufacturing facility nor a strong distribution network in the country, but are keen on a presence here. There are companies that can take advantage of the free trade agreement (FTA) route and import their products to India and then, sell them through us without making any ground-level investments, says a senior executive at the Reliance Retail. To be sure, companies like Hitachi, Sharp and TCL Holdings are already looking at exploiting the FTA route. We are looking at increasing our market share in CTV, LCD and plasma screen business, says Prasun Banerjee, Vice President (Sales and Marketing) Sharp India. We would largely be importing these products, making use of the FTA route.

It is not that the players are oblivious to these challenges; they have no opinion but to look at the brighter side of the picture, which in Indias case is its potential. The Indian market remains heavily under-penetrated, which is a big opportunity for all players, says Zutshi.

Then, foraying into rural markets has a considerable cost component attached to it. Companies not only have to set up the basic infrastructure in terms of office space,

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manpower,

but

also

spend

on

transportation

for

moving

inventory.

Even LG and Samsung, which are touted as having the largest distribution network in the country , have a direct presence only in 15,000 to 18,000 of around 40,000 retail outlets (for consumer durables) in the country.

Players admit that the increasing competition and new challenges will lead to another phase of consolidation with some losing and others winning. Early indications of that are already visible. The buzz in the market is that Samsung incurred losses (around Rs 80-100 crore) for the first time in 2005. Zutshi, however, refutes to this. Our profits did take a hit last year, but there were no losses. Whirlpool India, Godrej appliances and BPL Ltd, companies making a comeback, arent out of woods yet. LGs Kim says that in the next two to three years half the players will be pushed to fringes again. Only two or three players will survive in each category.

And who are the players who will survive? Only those who are resilient, committed to the industry and Indian market and at the same time, are looking at being globally relevant, is the chorus.
Source: Business Today

Marketing Strategies:
They studied closely and picked up the salient features of the Japanese manufacturing and made themselves an expert in that. Their planning is very meticulous on the execution of the job in hand. The Koreans never shown any bias against India. The Americans and Japanese took their brand equity for granted. The Koreans did not. As a result of this they didnt make any value judgments of the Indian customers and introduced contemporary products. This way they got their brand noticed. Both L.G and Samsung have consistently launched contemporary models-be it fuzzi logic washing machines, flat screen TVs or microwave ovens-in step with their launch globally. Further power was added to this strategy of dazzling Indians with global products was their high advertising spends. L.G spent Rs 110 crores in advertising while Samsung

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spent Rs 80 crore in 2001. In 2003 L.G spent Rs 225 crores and Samsung Rs 100 Crores. Such high voltage advertising has made the Koreans the biggest spenders in their businesses, and they outspend competition by a factor of at least two. These spends have placed the Koreans in the class of some of the highest spenders in India such as Colgate, ITC, Dabur and Hindustan Lever. They are huge buyers of advertising so they exude through a lot of visible brand building. The Koreans have also started making a name for their ability to understand what customers want. They practice this shibboleth with unusual vigor. They figure out quickly and very well what the consumer wants. But the important part is they quickly adapt their strategies accordingly. Unlike U.S companies following the office marketing strategy the Koreans follow the principle of Feet marketing. That means even the higher officials roam about the market to give boost to dealers and also to gather the first hand information on the current market conditions. This helps in knowing the ground realities better which results in a better strategy. The Koreans always think big and take risks. Thats why they have infused so investment, which is now bearing the fruits. Players like Whirpool and Electrolux that made a foray into consumer electronics around the same time that L.G and Samsung did. They hedged bets by buying existing brands and capacities here (Kelvinator, Maharaja, Allwyn, and the like) while the Koreans built capacity from scratch and gives them an edge over the competitors. The Koreans want to outdo the Japanese. They dont start on a hunch. Their planning is meticulous. When they take up a job they take it very seriously. All Korean managers bring on board a monk like devotion to their task at hand. This ensures quick execution of the work. The Koreans believe that manufacturing is a key strength and thats why they eschew contract manufacturing and invest in their own manufacturing facilities around the globe. They have culture sensitive workshops to ensure that the Koreans and Indians work well together. They bundle one product with another so as to promote the weaker one backed by the established product.

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 They have well-entrenched the consumers in India by sponsoring a number of premier events like cricket matches and others with a high TRP ratings. According to prof. R.R.Krishnan at center for East Asian Studies of Jawaharlal Nehru University the insecurity element in the history of Korean comprising colonization, acquisition of their country in the past tends them to form a marketing strategy that requires best of them. Though the Koreans are making huge profits in India they have not fully presented themselves in India. Many business like chip manufacturing, humungous chemicals, energy business etc. which they are operating in other countries has not found its way to India. The reason being the instability and lack of infrastructure of India to support these businesses. This shows their marketing tactics and their inclination towards the prelaunch test that they conduct before induction of each product in India. The Koreans always do a prelaunch market survey unlike its Japanese or U.S counterparts who take their brand equity for granted. This research gives useful inputs to the Korean players and also times to adapt them for the new situation.

BACKGROUND:

Prior to liberalization, the Consumer Durables sector in India was restricted to a handful of domestic players like Godrej, Allwyn, Kelvinator and Voltas. Together, they controlled nearly 90% of the market. They were first super ceded by players like BPL and Videocon in the early 1990s, who invested in brand-building and in enhancing distribution and service channels. Then, with liberalization came a spate of foreign players from LG Electronics to Sony to Aiwa.

Both rising living standards, especially in urban India, and easy access to consumer finance have fuelled the demand for consumer durables in the country. Also, the entry of a large number of foreign players means the consumer is no longer starved for choice. But this has also resulted in an over-supply situation in recent times as growth levels have tapered off.

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Chapter 5

Industry Analysis

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5.1 PEST Analysis

Political:
There was a strong hue & cry with entry of the big organized retail chains being owned by the big corporate top guns like Reliance Retail & Aditya Birla group. Strong lobbying was done to protect the interests of local sabjiwala, kirana stores with the intention to increase their vote banks & to protect the interests of some high profile personalities as Reliance announced its intentions of directly sourcing from farmers, thereby disinter mediating the middleman who is accused of escalating costs 1. The lobbying was so strong that the Reliance fresh has to shut down their operations in almost every nook & corner of Uttar Pradesh. After feeling the heat of the issue, the govt. commissioned the economic think tank, Icrier to study the impact of the organized retail on the unorganized one. The finding of the Icrier came as a big relief to all the people who is directly or indirectly concerned with the overall gamut of the retail industry. The findings reveals due to supply crunch in the retail market, both the organized & the unorganized players can comfortably exist & get their share of pie on the basis of competitiveness & by improving customer service to the end customer. The permissible entry of the FDI only in one branded outlet tries to limit the emergence of the positive & healthy competition & growth in this sector. In the country of more than a billion people, the Govt. is more concerned to restrict the entry of the new players than to provide some incentives to the domestic kirana stores in the form of microcredit schemes & alik e. The govt. can insulate the unorganized players from the adverse impact organized sector by providing institutional credit through banks. The low access to banking facilities has been a cause of worry for the unorganized sector, which can be taken care of by the active participation of the govt. & regulatory authorities. The unorganized sector can also take the advantage of different retail formats by a little awareness & positive attitude towards the newly emerging trends in the market. For example the local kiranawala can go for the cash & carry operations, where they can get a better deal & credit as compared to the direct billing from the companies. Now the UPA govt., which has emerged with the clear majority in the Lok Sabha, has express their intentions of big-ticket reforms to be taken in the near future. Even the new ally, the Samajwadi party is also not very rigid on the economic

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reforms, which are likely to take in the next few months 2. FDI in the retail industry is limited to the single brand outlet where the maximum cap is 51%. Multi brands retailers like Wal mart & Carrefour are waiting for the green signal from the govt. to carry out their operations at the earliest. They have strong financial muscles & even turnover of some retailers is greater than the GDP of some countries. Once they entered they will infuse fresh capital to the tune of billion dollars, which will help the govt. to sustain the economic growth rate of 9% in the near future.

Economic:
R.Subramanian, owner Subhiksha (modern retail format) predicts that the top three players in the industry will end up sharing the bulk of the profits. On asking for the prospective exit, Right now I dont see any reason to get out. On the contrary, it might be a good time to acquire something because there may be some consolidation.

One main reason for the exponential growth in the retailing sector is due to the shift in the consumption pattern of the U.S consumer. During the last decade, the ever-increasing growth of consumer spending in the U.S was a driving force for the global economy & for the global retailing industry in particular which was fuelled by the external debt & the cheap availability of loans at very comfortable rates. But the bursting of the housing bubble & the depreciation of the dollar altogether creates a new picture where the U.S growth will come from exports rather than consumer spending. The personal saving rate in U.S is nearly zero & is likely to rise in the near future, thus putting more pressure on the spending pattern.

The bottom line is that the geographic mix of consumer spending growth will shift away from the U.S towards Asia which gives an ample opportunity to the big bosses of retail industry to showcase their energy & charisma. Organized retail in the U.S market is becoming more competitive due to the down turn in the consumption pattern, which is also forcing the big retailers to seek opportunities abroad, particularly in Asia.

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Moreover the business leaders of big conglomerate of Indian industry are getting the pulse of the retail market& are ready to recycle their excess cash flow from engineering, telecoms & manufacturing for a larger cash flow in retail in anticipation. Investment in Indian retail is a worth taking gamble which will pay off in the near future. It is viewed as a long-term proposition & the success for the first mover advantage will replicate in the retail industry too.

Apart from these issues, the main threat which the retail industry as a whole is suffering from the commoditization of the products & services. The rapid expansion of the different formats in Indian retail industry has eventually put the customer in the perplexed state & he is not able to differentiate between the lucrative deals offered by the different retail outlets. Therefore the focus area for the retailers is to hunt for the customer, trap him & keep him for the long lasting affair. The look, the feel, the window display the freshness & the novelty factors are some parameters on which on player can outshine others in the same catchment area. The study reveals that while stores do better in the first year, the second year witnesses a drop, the main reason is the novelty factor- says, Hemant kalbag, consumer & retail practice, AT Kearney. The initial excitement dies out as more players come into fray & then growth steadies eventually. In a business like retailing where processes can be easily replicated, one has to constantly move a notch higher above competition.-explains kalbag3.

Even the retailers now want to play the safe game & are not interested investing money in the format which is not able to get enough footfalls & a stream of revenues. The rising cost of the real estate coupled with low conversion ratio has put a hole in the pockets of the retailers. For example the Hyper City retail, part of K Raheja, also owner of Shoppers stop has dropped the launching of the convenience formats, express city. Reason the profits margins in convenience type of format is quite low & it has to be set in the prime locations to target consumers of mom & pop stores who believe in convenience, & quick deliveries. The current convenience stores format like Subhiksha, Reliance fresh & Spencers are struggling with challenges of operating a convenience stores due to high operating costs & wafer thin margins.

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Social:
The consumer all over the world understands the importance of the term CSR i.e. corporate social responsibility. They now feels the gravity of the situation & are ready to question the companies for their contribution towards the society in terms of better environment friendly products & processes, the conditions of the workers in the countries which manufactures & supply products & the impact of the products on them. They want companies to look after the well being of the society & contribute towards it as per their efforts. Even the consumer is ready to shell extra money from his pocket for the safe & environmental friendly products.

Technological:
The KRAs for the retail industry is to enhance the customer experience & drive revenues by managing costs & improving operational efficiency. To meet these challenges the retail industry is heavily backing on I.T to streamline its operations & to improve its bottom line in the low margin retail industry. Here is the opportunity for the retail industry to tie the knot with I.T. Shortage of real time information exchange between the stakeholders of the retail industry takes a toll on the quality of service, inventory, strategies & management decision making.

Retailers have already increased their IT spending by almost 15% in 2006, allocating almost half of this increase to application software with a particular focus on tools that facilitate multi channel customer relationships, point of sales systems, strategic merchandising & supply chain management. As consumers embrace modern retail formats, technology will play an important role to enhance the experience of shoppers as well as retailers

The critical activities that can be handled by IT are finance, accounting, business intelligence, vendor development & management, merchandising & inventory management, stores management, customer relations management, branding, sales promotion, supply chain management & others. In the last couple of years, the retailing industry is implementing solutions ranging from F&B operations to discount clothing, implementing supply chain management (SCM) solutions to core business such as global sourcing ,distribution, logistics,

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innovations, transparency & visibility in financials & inventory, compliance & management of point of sale(POS) data.

Retailers are experimenting with blue- casting, self-service kiosks, SMS based interactions, digital signage & self-checkout counters. Thus the IT organization has to be agile enough to address the rising expectations, & move on the adoption curve. The future needs are converging as Indians retailers too are striving to create technology led supply chain efficiencies, optimizing revenue opportunities & customer intimacy. It is assumed that merchandise systems & point of sale (POS) will trigger off the operations.

Depending on the size of the warehouse & the no. of SKUs (stock keeping units), a good supply chain system & replenishment model will start driving basic operational activities. The efficiencies are created with POS to warehouse to supplier integration with dynamic & replenishment of stock based on sale data.

The life cycle of the retail industry seems to be squeezing as the big retail juggernauts are laying off of their employees & surprisingly enough this time the axe falls on the middle & top level executive. The management has justified the stand by calling it by another management jargon called staff rationalization. With the focus shifting from driving top line growth to protecting the quickly depleting margins, the retailers are giving pink slips to their top level non performers executives. They have started pruning manpower from the top to sustain their margins where they have been confronted by escalating real estate costs, strong competition, changing consumer behavior patterns, novelty factor & commodization of products & services.

Overall the picture of the retail is not looking very rosy in India as the increasing real estate costs, changing consumers attitudes & increasing competition has forced the retailers to think & act rationally. At todays prices of real estate, retail isnt a viable business. Today most retailers are working on a net margin of 3 percent. But thanks to spiraling real estate costs, occupation costs are double that figure. -Kishore Biyani, Group CEO, Future Group.

68

Indias largest retail conglomerate Reliance Retail has initiated the austerity drive. The company is going for some cost cutting measures including a check on unnecessary travel, mode of travel, courier dispatches, use of stationery office, use of cabs & the type of accommodation while on tour& the no. of times employees can have coffee or tea. Even the top managers are asked to use AC Indica cars instead of luxury sedans on outstations tours. The company which promises to invest Rs.26000 crores in its new retail venture & hired thousand of people with some astronomical salaries has now asked its format head to justify their respective employee strength & the role each employee has in the retail venture.

Finally the billion-dollar question is that can it is possible for all of them to co-exist in the retail ecosystem by nurturing & supporting each other to overcome difficulties & uncertainties & come up with flying colors. The answer lies in the vision, commitment & trust to think positively & act positively.

69

5.2 SWOT Analysis:

70

Strengths:
Recognition as an industry. India tops the annual list of most attractive countries for international retail expansion Growing disposable income of the urban Indian consumer. Availability of manpower. Technology-intensive industry. Least saturated of all global markets studied.

Weakness:
Fast changing needs of consumer FDI norms LAND & PROPERTY

Gap between supply and demand Only Indians can own property in India High stamp duty on property Lease alone costs 6%-10% of sales LABOUR LAWS

71

Restricted working hour Hiring part-time workers difficult TAXES High corporation tax

Opportunities:
India is amongst the least saturated of all major global markets in terms of penetration of modern retailing formats Players emerging across formats and product categories Rapid Expansion for all players The Shopping Mall formats are fast evolving Partnering among Brands, retailers, franchisees, investors and malls

Threats:
Barriers to FDI which limits entry of global players and limits exposure to best international practices Poor Infrastructure which restricts retail growth, creates supply chain bottlenecks and increases wastage of farm produce 2008s economic crisis create some bad effect on sector.

72

Chapter 6

Micro Level Analysis

73

Here, in survey the 69% are male respondents & rest of the respondents are female. Male are more concerned about the consumer durables & also more attracted towards these electronics.

74

Age of Respondents Above 50 17% 18-30 29%

31-50 54%

The age of the respondents can be seen that the most of the respondents are from the age of 31-50. As it can be seen that the 17% of the respondents are coming in the age of 50. & the rest of the candidates are having age of 18-30. As generally the 31-50 age respondents are more settled down in their life so they are highly preferred the consumer durables.

75

As it can be seen that most of the respondents are responded which are in the category of the graduate. It can be said that the respondents who have replied kindly are having at least the knowledge of the industry. Area of living is considered because as the customers are preferable for any one buying area or not that is seen. Generally, the Satellite & ambavadi area are more preferable for the consumer durables. Also the respondents are generally belongs to these particular areas from Ahmedabad.

76

Most of the Respondents were salaried, the students & the self-employed. Because of that the consumer durable survey can be mass segmented. As it can be seen that the 57 no. of the respondents are salaried respondents. While very less are the retired respondents.

As here it is to be seen that not more of the female & the retired persons are interested in purchasing consumer durables.

77

According to respondents, definition of organized and unorganized retail outlet is:

Organized outlet
Avaibility of all brands at same place Manage by professional Presence at many places Large investment Very good infrastructure Running by Employees

Unorganized outlet
Single owner Only famous brand available Not all brands at same time Small investment Extra benefits to loyal customer Payment flexibility

While purchasing consumer durables, which characteristics of following do you consider? (Rank appropriate, as 1 for the Highest & 5 for the Lowest.)

LCD
Rank Characteristics
Durability Price Scheme Technology Service 1 21 41 77 42 19 200 2 20 86 48 31 15 200 3 26 59 35 39 41 200 4 68 11 35 39 47 200 5 65 3 5 49 78 200 200 200 200 200 200

LCD

No. of respondents

Service
Technology Scheme Price Durability

Rank

78

Characteristics
Durability Price Scheme Technology Service

Weighted Mean 2.32 3.755 3.785 2.89 2.25

Rank 4 2 1 3 5

Here, it can be seen that the most of the respondents have given preference to the scheme. And it is because of promotional scheme given by organized outlet. Frequency of scheme is more in organized compare to unorganized.

Refrigerators
Rank Characteristics
Durability Price Scheme Technology Service 1 97 47 31 21 4 200 2 56 38 64 28 14 200 3 26 47 67 33 27 200 4 19 39 27 59 56 200 5 2 29 11 59 99 200 200 200 200 200 200

Refrigerator

No. of respondents

Service Technology

Scheme
Price Durability

Rank

79

Characteristics
Durability Price Scheme Technology Service

Weighted mean 4.135 3.175 3.385 2.465 1.84

Rank 1 3 2 4 5

Here, it can be seen that the most of the respondents have given the preference to the durability while purchasing the refrigerator. Sceme is given the 2 nd most preferable while purchasing the refrigerator. Then the 3 rd ,4th ,5th preferable are the price, technology & service.

Washing Machine
Rank Characteristics
Durability Price Scheme Technology Service 1 27 41 72 23 37 200 2 18 39 77 45 21 200 3 22 67 21 53 37 200 4 54 27 19 67 33 200 5 79 26 11 12 72 200 200 200 200 200 200

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Washing Machine

No. of Respondents

Service Technology Scheme

Price
Durability

Rank

Weighted

Characteristics mean
Durability Price Scheme Technology Service 2.3 3.21 3.9 3 2.59

Rank 5 2 1 3 4

While purchasing the washing machine it can be seen that the promotional schemes are given most importance by the respondents. Price is to be given the 2 nd most preferable than the 3rd,4th & 5th are the technology,services& durability.

Microwave Own
Rank Characteristics
Durability Price Scheme Technology Service 1 27 73 43 45 12 200 2 5 57 62 67 9 200 3 43 27 19 61 50 200 4 60 17 37 23 63 200 5 65 26 39 4 66 200 200 200 200 200 200

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Microwave own

No. of Respondents

Service Technology Scheme Price Durability

Rank

Characteristics
Durability Price Scheme Technology Service

Weighted mean 2.345 3.67 3.165 3.63 2.19

Rank 4 1 3 2 5

Price is given to the most important factor to be considered while purchasing the microwave oven. Technology is to be given the 2 nd most preferable Characteristic for purchasing the microwave oven. & service is generally given the less preference while purchasing the microave oven.

Laptop/Desktop Computers
Rank Characteristics
Durability Price Scheme Technology Service 1 21 32 17 94 36 200 2 12 51 37 62 38 200 3 63 67 49 13 8 200 4 67 29 26 17 61 200 5 37 21 71 14 57 200 200 200 200 200 200

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Laptop/Desktop

No. of Respondents

Service

Technology
Scheme Price Durability

Rank

Characteristics
Durability Price Scheme Technology Service

Weighted mean Rank

2.565 3.22 2.515 4.025 2.675 4 2 5 1 3

Technology is the most important criteria while purchasing any laptop or any desktop. Then the price is given the 2 nd most prefered & People do not give much importance to scheme and durability while purchasing compuers.

Mobiles
Rank Characteristics
Durability Price Scheme Technology Service 1 19 45 42 67 27 200 2 11 91 39 33 26 200 3 37 42 62 17 42 200 4 61 18 24 19 78 200 5 72 4 33 64 27 200 200 200 200 200 200

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Mobiles

No. of Respondents

Service Technology Scheme Price Durability

Rank

Characteristics
Durability Price Scheme Technology Service

Weighted mean 2.22 3.775 3.165 3.1 2.74

Rank 5 1 2 3 4

While purchasing mobiles, the most important characteristic is the price that is to be preferred first. Then the least preferred is the durability while purchasing the mobiles.

Music Systems

Rank Characteristics
Durability Price Scheme Technology Service 1 36 72 21 59 12 200 2 16 47 32 88 17 200 3 29 41 37 26 67 200 4 50 23 47 14 66 200 5 69 17 63 13 38 200 200 200 200 200 200

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Music Systems

No. of Respondents

Service Technology Scheme Price Durability

Rank

Characteristics
Durability Price Scheme Technology Service

Weighted mean 2.5 3.67 2.505 3.83 2.495

Rank 4 2 3 1 5

While purchasing the music system, respondents are giving preference to the technology. & the least preference is to be given the services.

Air Conditioners
Rank Characteristics
Durability Price Scheme Technology Service 1 23 36 28 44 69 200 2 22 23 19 79 57 200 3 24 58 22 44 52 200 4 53 64 74 3 6 200 5 78 19 57 30 16 200 200 200 200 200 200

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Air Conditioner

No. of Respondents

Service

Technology
Scheme Price Durability

Rank

Characteristics
Durability Price Scheme Technology Service

Weighted mean 2.295 2.965 2.435 3.52 3.785

Rank 5 3 4 2 1

Services are given to the most preferred out of all the characteristic while purchasing the airconditioners. & the durability is the least prefered while purchasing A.C.

Camcorder/Digital Camera
Rank Characteristics
Durability Price Scheme Technology Service 1 18 41 33 82 26 2 17 29 52 66 36 3 29 53 37 32 49 4 67 34 40 11 48 5 69 43 38 9 41 200 200 200 200 200

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Camera

No. of Respondents

Service

Technology
Scheme Price Durability

Rank

Characteristics
Durability Price Scheme Technology Service

Weighted mean 2.24 2.955 3.01 4.005 2.79

Rank 5 3 2 1 4

The respondents are preferred the technology 1 st while purchasing the digital camera.While the least prefer is durability as per the research.

87

How frequently you change your consumer durables?

Less than a year CTV/LCD/PLASMA Refrigerator Washing Machine Microwave Oven Laptop/Desktop computer Mobiles Music system Air conditioner Camcorder/Digital camera
9 3 12 17 9 16 29 32 10

Time Duration 1-3 3-5 years 5-10 years years

94 23 59 38 49 112 82 41 32 72 36 37 112 107 53 59 103 91 14 96 72 33 28 19 27 23 67

More than 10 years

11 42 20 0 7 0 3 1 0 200 200 200 200 200 200 200 200 200

No. of Respondents

Less than a year - years - years years years

More than

Product Catagory

Here, it is seen that the consumers generally their digital camera, aircaonditioners, laptop, oven in the time span of the 3-5 years.mobiles and television they replace within three years.

88

From where do you prefer to buy consumer durables? Always Organized Retail Always Unorganized Retail Both

As in the survey of the 200 respondents we found that there are 32% of the respondents who are always purchasing from the organized sector. It is also found that there are also the respondents who are purchasing from unorganized sector which are 12% . There are 56% that is majority of the respondents who are purchasing from both the organized as well as the unorganized sector.

89

What is your preference for the following : (Rank from 1 to 5, as rank 1 is for highest)
Organized Outlet Croma NEXT X-cite Unorganized (give name) Purchasing area

CATEGORY CTV/LCD/PLASMA Refrigerator Washing Machine Microwave Oven Laptop/Desktop computer Mobiles Music system Air conditioner Camcorder/Digital camera

Sales India

e-zone

120

100

No. of respondents

80

60 Sales India 40

Croma
NEXT

20

X-cite e-zone

product category

90

Preference towards Organized & Unorganized Product category

CTV/LCD/PLASMA

Organized 164

Unorganized 34

Refrigerator Washing Machine Microwave Oven Laptop/Desktop computer Mobiles Music system Air conditioner Camcorder/Digital camera

173 176 182 143 114 167 171 157

27 24 18 57 86 33 29 43

no. of Respondents

organized
Unorganized

Product category

91

Most of the respondents perchase consumer durables from organized outlets. In the category of mobiles and computer, people also purchase from unorganized because of price and service.

Rank the given reason behind purchasing from the organized retail? (From 1 to 10, as 1 to be highest & 10 to be lowest)
Preference of people for purchasing in organized retail
Rank Reasons Availability of all brands After sales services Promotional Schemes Display Financial Schemes Status Sales persons interaction Replacement time Proximity Home delivery 1 390 310 270 260 210 100 190 130 60 80 10 2 306 216 297 225 225 171 99 117 27 117 9 3 4 5 6 7 36 72 36 68 92 68 136 48 180 64 4 8 63 9 8 Weighted Prefer 10 Total ence 1 6 9 1 19 7 26 58 16 57 1 1380 1303 1293 1265 1187 1155 963 765 759 730 1 2 3 4 5 6 7 8 9 10

208 133 100 135 248 224 85 80

36 26 51 18 57 4 60 84 24 78 105 42 3 6 6 64 74 98 96 2

272 105 125 110 176 119 210 145 144 266 105 60 184 245 120 170 128 91 140 65 56 119 40 45 72 56 40 105 112 42 35 85 8 7 6 5 Weight

92

Replacement time percentage of respondents proximity After sales services

Home delivery
Sales persons interaction Financial Schemes Promotional Schemes Status Availability of all brands Display

rank preference

Here, it can be seen that 1 st rank given to the avaibility of all brands in the all the categories. & home delivery is not given by the organized outlet so that the least prefered.

Preference of people for purchasing in Unorganized retail Rank 1

Home delivery of all products Availability of financial services After sales services Convenience Promotions Trusted brands (by providers) Trustworthiness in owner 371 154 266 217 147 168 77

2
258 306 138 102 156 102 138

3
110 160 75 170 165 145 175

4
104 192 76 108 124 88 108

5
48 54 123 81 87 126 81

6
48 24 78 42 42 76 90

7
16 17 25 43 39 28 32

Weighted Total

Weighted mean

Preference

955 907 781 763 760 733 701

4.775 4.535 3.905 3.815 3.8 3.665 3.505

1 2 3 4 5 6 7

5 4 Weight

93

No. of respondents

After sales services Availability of financial services Promotions

Home delivery of all products

Trustworthiness in owner Trusted brands (by providers) Convenience

Rank preference

Here the home delivery of the product the most important factor while purchasing form the unorganized retail outlet. Trustworthiness in owner is the main reason behind not purchasing from the unorganized outlet.

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Do you prefer financial schemes to purchase consumer durables? Yes No

Preference for financial schemes

Yes No

There are generally the 138 respondents who are positive towards the financial schemes like to take a loan & buy in the installments it means 31% of the respondents are not interested to take a loan.

95

Would you wait for available discounts for purchase consumer durables? Yes No

Discount Preference
Yes NO

Approximately the 176 respondents are positive towards the discounts. While the rest of the respondents are not preferring the discount schemes.

96

Laptop/Desktop

Camcorder/Digital

100 90 80 70 60 50 40 30 20 10 0
Refrigerator
Washing Machine Microwave Oven

At Ocassions

At Festivals
during financial scheme
Mobiles CTV/LCD/PLASMA Air conditioner Music system

During promotional scheme Others

Generally people buy the mobiles & laptops when the promotional schemes are frequently available. LCD & music system & the oven are generally preferred from the festivals. Refrigerator & the washing machine buy during the financial schemes available. Digital camera is purchased during the occasions.

97

Do promotion schemes change your brand preferences? Yes No

Yes

No

As in the question of the promotional schemes change the brand preferences or not, in that 64% are brand loyal customers. While the 72 customers are loyal to the promotional schemes & they are more attracted to the promotional schemes.

98

If yes, which brand you prefer for all consumer durables?

Category

LG

VIDEOCON

SAMSUNG

BPL

ONIDA

VOLTAS

GODREJ

OTHERS

CTV/LCD/ PLASMA Refrigerator Washing Machine Microwave Oven Laptop/Desktop computer Mobiles Music system Air conditioner Camcorder/ Digital camera

99

No. of respondents

OTHERS

GODREJ VOLTAS
ONIDA BPL

SAMSUNG

Refrigerator

Mobiles

CTV/LCD/PLASMA

Washing Machine

Microwave Oven

Air conditioner

Music system

Laptop/Desktop computer

Camcorder/Digital camera

VIDEOCON
LG

Product category

Digital camera is generally preferred by the consumers company called Sony & canon. Voltas & Samsung air conditioners are preferred by the consumer durables. Laptop is preferred of the sony & dell etc. while the oven, music system is preferred of the Bajaj, IFB. & the Philips.

100

Chapter 7

Hypothesis Analysis

101

Hypothesis: 1

H0: There is no significant relation between occupation and preference towards financial scheme. H1: There is significant relation between occupation and preference towards financial scheme.

Preference of financial scheme Occupation YES NO Total

23

34

57

15

31

46

16

23

20

28

23

23

46

76

124

200

fe

RT x CT n
102

fe = expected frequency in a given cell, RT = row total for the row containing that cell, CT = column total for the row containing that cell, n = total number of observations

X2 = [(fo fe)2 / fe]

Degrees of freedom in a chi-square test of independence = (r 1) (c 1) = (no. of rows 1) (no. of columns 1)

= (6 -1) (2 -1) = 5

fo

fe

(fo fe)2 / fe

23

21.66

0.083

34

35.34

0.051

15

17.48

0.0352

31

28.52

0.0216

8.74

0.346

103

20

17.36

0.401

23

17.48

1.743

23

28.52

1.068

5.127

X2cal = 12.1656

Degree of freedom = 5 @ 95% confidence level Answer: X2tab = 11.071 Here, X2cal < X2tab

So, H0 is accepted.

Result: There is no significant dependence between occupation and preference towards financial scheme.

104

Chapter 8

KEY FINDINGS

105

Organized consumer durable outlet means the large investment, availability of all brands at one place, their presence in major cities of India, professionalism etc.

Unorganized consumer durable outlet is defined by the respondents by the unavailability of the all brands or the specific brands only available, special schemes are there, financial schemes are generally preferred way.

While purchasing LCD & washing machine, generally most of the respondents are preferred the promotional schemes to purchase it.

4 5 6

Refrigerator is preferred by durability characteristic. Price is most important while purchasing the music system & the microwave oven. Technology is more important & preferred while purchasing the mobile, laptop/desktop & Digital camera.

7 8

While purchasing the air conditioners the services are the most important criteria. Generally the consumers change their microwave oven, laptop/desktop, air conditioners,& camera in 3-5 years.

Consumers are generally changes their mobiles within one year.

10 LCD are generally changed in every 1-3 years of time span. 11 Refrigerators are generally changed in 5-10 years because of their durability. 12 Consumers are generally preferred the both organized & unorganized stores. 13 In ahmedabad city, the organized stores like sales India & croma are the most preferred to purchase their consumer durables. 14 While purchasing from organized outlet, consumers prefer availability of all brands, after sales service, & display. 15 While purchasing from unorganized outlet, consumers prefer trustworthiness of owners & availability of financial services. 16 After sales services & employees interaction should be improved here. & the lack of knowledge of the employees should not be there in organized retail outlet.

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17 Availability of all brands at a time should be there in unorganized retail outlet. 18 More than 60% of the respondents are preferred financial schemes to purchase the consumer durables. 19 Approximately 80% of the respondents purchases consumer durables while discounts are available during festivals & promotional schemes. 20 Approximately 35% are respondents which are not the brand specific if they get the promotional schemes. 21 Most of the Respondents are generally not preferred the exclusive showrooms. 22 Sales India & Croma are the most relevant & preferred brand stores according to the consumers. 23 Sales India & croma is also the retail outlet which is very famous & brand recall is there in the mind of the consumers. 24 Generally consumers are not preferred much of the retail outlets for the mobile & all little accessories purchase. 25 Consumers who are brand conscious, they are generally not switch over the brand for the any type of financial or the promotional schemes. 26 Next retail outlet is generally not preferred by the consumers or it is less preferred also the x-cite is less preferred brand outlet for consumers. 27 The reasons behind the les preferred brand outlets are only the marketing & the advertisements are not done by planning. 28 E-zone which is sub brand of big bazaar is the attractive one due to the less prices & discounts are there. 29 Unorganized outlets like the Vijay sales & all that are generally not preferred here in Ahmedabad due to the lack of awareness & trustworthiness. 30 All the types of products in which all of the brands can available, this type of store is of croma. 31 No one is providing all types of facilities like the organized outlet is generally giving except the sales India.

107

Chapter 9 SUGGESTIONS

108

1. Organized outlet should improve its after sales service because its hits badly to the companys market share. 2. More detailed customized services should be provided. 3. The training to in shop demonstration should be given at frequent time interval and feed back should be considered positively. 4. The companies have to look into the matter of person hiring for in shop demonstration. A big showroom should have at least 2 such kind of person. 5. Organized retail outlet should try new dealer who have the potential. So they can target more market. 6. As there is a bottle neck competition between Organized & Unorganized, it is necessary to take measure steps to overcome the area of downfall in Unorganized with respect to Organized. 7. Customer considers quality as their first preference, so the Outlet should give more stress on this. 8. The switching of customer from one brand to other brand is due to the bed after sell service in shop. 9. The product is well aware and it is on top of mind of customer. So organized as well as unorganized retail should always improve services and update their technology.

109

Chapter 10 Conclusion

110

In this study, we found that the Organized & Unorganized retail outlet both are preferable. But generally consumers see the preference of the product & as per the product & the schemes, it differs. Purchase pattern of the consumers are differ from the product to product & store to store. Generally sales India & croma is the most preferable organized outlet.

The study for the how frequently the consumers buy the products, which are generally less than a year, or more than that. So generally, by product wise it differs. The availability of all the products is the main criteria behind purchasing from the organized outlet. While the last reason for purchasing from the organized outlet is only the display of all the products.

Home delivery of all the products is the main & important criteria behind purchasing the unorganized outlet. Convenience is the last reason behind purchasing the unorganized outlet. Financial schemes are generally preferred for the purchasing consumer durables. Promotional schemes are also preferred for the consumer durables by consumers. Normally, the discount schemes are also preferred by the consumers.

Some consumers are also brand specific for the some of the products. Like the laptop is preferred only of sony vaio by the most of the consumers. While some of the consumers have dream for that sony vaio laptop. Generally exclusive showrooms are not so much preferred for the consumer durable electronics.

111

Bibliography
1) Books

Consumer Behavior published by ICFAI Publications Integrated marketing Communications published by ICFAI Publications Consumer Behavior , Text and Cases.by Satish Batra and S.H.H.Kazmi It happened in India by Biyani; Kishore Kotler Philip, Marketing Management, New Delhi, Pearson Education Inc, 2006. Kothari,C.R,Research Methodology methods and techniques ,New Delhi, New Age International (p) Ltd,1990. MARKETING RESEARCH- AN APPLIED ORIENTATION By- Naresh K. Malhotra. BUSINESS RESEARCH METHOD By-COOPER & SCHINDLER 10 TH ED., TATA McGRAWHILL,2008 Consumer Behaviour published by ICFAI Publications Integrated marketing Communications published by ICFAI Publications Consumer Behavior , Text and Cases.by Satish Batra and S.H.H.Kazmi It happened in India by Biyani; Kishore

2) Newspapers

The Economic Times/Brand Equity The Telegraph/Metro The Business line / Brand line

112

3) Magazines

The Business line Retail Biz Business Standard

4) Websites
http://www.cci.in/pdf/surveys_reports/consumer-durables-sector.pdf www.ibef.org/economy/consumermarket.aspx www.cci.in/pdf/surveys_reports/consumer-durables-sector.pdf www.thehindubusinessline.com/2010/02/.../2010021650300400.htm www.indiaonestop.com/consumermarkets.htm www.ncaer.org/downloads/PPT/TheGreatIndianMarket.pdf

113

Annexure

Dear Sir/Madam, We are the students of GLS NRIBM, MBA CAMPUS, AHMEDABAD and presently doing a project on Comparative analysis of consumer behavior at organized and unorganized retail with special focus on consumer durables We request you to kindly fill the questionnaire below and assure you that the data generated shall be kept confidential.

Gender Age Educational Qualification

: : :

10 th or below 10+2 or below Graduate Post Graduate and above Others(please specify)

Area Occupation

: : Salaried Retired Student Self Employed Housewife NRI

1. According to you what is organized outlet for consumer durables? ________________________________________________________________________ ___________________________________________________________________________ _____________________________________________________________________

2. According to you what is unorganized outlet for consumer durables? ___________________________________________________________________________ ___________________________________________________________________________ __________________________________________________________________

114

3. While purchasing consumer durables, which characteristics of following do you consider? (Rank appropriate, as 1 for the Highest & 5 for the Lowest.)

CATEGORY CTV/LCD/PLASMA Refrigerator Washing Machine Microwave Oven Laptop/Desktop computer Mobiles Music system Air conditioner Camcorder/Digital camera Others

Durability

Price

Characteristics Schemes Technology

Service

4. How frequently you change your consumer durables?

CATEGORY CTV/LCD/PLASMA Refrigerator Washing Machine Microwave Oven Laptop/Desktop computer Mobiles Music system Air conditioner Camcorder/Digital camera Others

Less than a year

1-3 years

3-5 years

5-10 years

More than 10 years

5. From where do you prefer to buy consumer durables? Always Organized Retail Always Unorganized Retail Both

115

6. What is your preference for the following : (Rank from 1 to 5, as rank 1 is for highest)

CATEGORY CTV/LCD/PLASMA Refrigerator Washing Machine Microwave Oven Laptop/Desktop computer Mobiles Music system Air conditioner Camcorder/Digital camera

Sales India

Organized Outlet Croma NEXT X-cite

e-zone

Unorganized (give name)

Purchasing area

7. Rank the given reason behind purchasing from the organized retail? (from 1 to 10, as 1 to be highest & 10 to be lowest)

Organized
Reasons
Display Availability of all brands Status Promotional Schemes Financial Schemes Sales persons interaction Home delivery After sales services Proximity/convenience Replacement time

Unorganized
Rank Reasons
Proximity/Convenience Trusted brands (by providers) Trustworthiness in owner Home delivery of all products Promotions Availability of financial services After sales services

Rank

116

8. As per your opinion what is to be provided for better services in organized retail? 1 _________________________________________________________________ 2 _________________________________________________________________ 3 _________________________________________________________________ 9. As per your opinion what is to be provided for better services in unorganized retail? 1 _________________________________________________________________ 2 _________________________________________________________________ 3 _________________________________________________________________ 10. Do you prefer financial schemes to purchase consumer durables? Yes No

11. Would you wait for available discounts for purchase consumer durables? Yes No

If yes, then give details about when you generally go for a purchase.

CATEGORY CTV/LCD/PLASMA Refrigerator Washing Machine Microwave Oven Laptop/Desktop computer Mobiles Music system Air conditioner Camcorder/Digital camera

At Occasions

At Festivals

During Financial Schemes

During Promotional Schemes

Others

12. Do promotion schemes change your brand preferences? Yes No

117

If yes, then which brand you prefer for all consumer durables?

Category

LG

VIDEOCON

SAMSUNG

BPL

ONIDA

VOLTAS

GODREJ

OTHERS

CTV/LCD/ PLASMA Refrigerator Washing Machine Microwave Oven Laptop/Desktop computer Mobiles Music system Air conditioner Camcorder/ Digital camera

13. Do you prefer the Exclusive showroom of a particular company for the brands you purchase consumer durables? Yes No

118