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 are also included in this category. This sector has been witnessing significant growth in recent years. It is assisted several factors such as the emerging retail boom, real estate and housing demand, greater disposable income and an overall improvement of standard of life of a significant section of the population. The industry is represented by major international and local players such as BPL, Videocon, Voltas, Blue Star, Titan, Whirlpool, etc.

Consumer durable market overview:

Indian markets have become contestable only recently as a result of market reforms. Until the reforms, incumbents in these markets were protected by an industrial licensing regime which prevents them from contest. Incumbents in domestic industries thus worked without much concern for potential entrants. Their prices or product position in the quality space were not typical of incumbents who fear potential entry, but were more akin to monopolists or cartelized oligopolies.

As a result, they had not made the usual entry due to deterrent investments and later when licensing was abolished and markets made contestable, they were at a disadvantage position. Besides, the pre-reform import-substituting package of the government of India had protected domestic producers from imports as well as generally leading producers to product quality below international standards. Thus, even though the brands of the incumbent firms were widely sold and bought over the whole country, they had not generated significant brand loyalty that could be used against potential entrants in the post-reform era. On the other hand ,due to the large size of the Indian market, incumbents had significant sunk costs in production capacity that would act as an inertial force against quick changes in product quality or product innovation in the post-reform competitive phase. Entry of foreign players led to the improvement in product quality as well as a general fall in prices. Thus it has made the Indian consumer durable market more competitive and has also led to its exponential growth in recent years.

Apart from these India provides a liberal, attractive, and investor friendly investment climate. India has the most liberal and transparent policies on foreign direct investment (FDI) among major economies of the world. India is among the top 10 FDI destinations. In addition to all this Government of India accords high priority to development of infrastructure in highways, ports , railways, airports, power, telecom..

Advantage India at a Glance:

General:

· A stable Government with second stage reforms in place

· Well established corporate ethics

· Major tax reforms including implementation of VAT

Strengths: Indian consumer durable Sector:

· Well-established distribution network extending to rural areas

· Strong brands in the consumer durable sector

· Low cost operations

Opportunities:

· Large domestic market

· Export potential

· Increasing income levels will result in faster revenue growth

Market:

· India has the largest young population with over 890 million people below 45 years of age

· 600 million-plus consumers by year 2010

· 550 million-plus people under the age of 20 by year 2015

· 70 million-plus people earn over Rs.8,00,000 ($18,000) a year - number to rise to 140 million by year 2011

Consumer Spending Pattern:

· In India the Total Consumer Spend was Rs.20,00,000 crore ($445 billion) in the year 2005

· Size of Retail market Rs.10,50,000 crore ($233 billion);

· Organised Retail sector is worth Rs.35,000 crore ($8 billion)

· Leading retailers' sales growth (2005): 50-100%

· India is the fourth largest economy in terms of purchasing power

· A consumer market of 1.02 billion

· A growing middle class of over 400 million with increasing purchasing power

Market share of consumer Durables

During FY07, volume share of the single largest consumer durable was colour 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.

Chart 1:

Source: Cygnus Quarterly Report, Aug 2007, Edelweiss Report on Industrial Production

COMPETITION OVERVIEW:

Chart 2: Market share of major players in refrigerator market

Source: ORG-MARG

Chart 3: Market Share of the Major players in Washing Machine segment

Source: ORG-MARG

Table 2: Key Players operating in the Consumer durable segmentation and their Major Products

Companies	Products
Videocon Industries	Refrigerators , Washing Machine, Television, Air Conditioner, Microwave Ovens
Godrej	Refrigerators, Air Conditioner
Whirlpool India	Refrigerators , Washing Machine
Panasonic	Television
Voltas	Refrigerators, Air Conditioner
BPL Ltd	Television, Refrigerators
Electrolux	Vacuum Cleaner
Samsung	Television, Refrigerators, Mobile Phones
Hoover	Vacuum Cleaner
LG Electronics	Washing Machine, Television, Refrigerators, Mobile Phones
Eureka Forbes	Vacuum Cleaner
Sony	Television, Mobile Phones, DVD Players
Blue Star	Air Conditioner
Bajaj Electronics	Geyser, Electric Fan
Nokia	Mobile Phones

Chart 4: Market share of colour TV market

Chart 5 : Sales trend and future projection of consumer electronics segment

Source: Intelligence Unit, The Economist

KEY GROWTH DRIVERS FOR INDIAN 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.

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 colour 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.

MAJOR HURDLES AND CHALLENGES PLAGUING THE INDIAN CONSUMER:

DURABLES SECTOR:

Threat from new entrants, especially global companies: The domestic consumer durables sector faces threat from newer companies, especially from global ones who have technologically advanced products to offer.

Rivalry and competition: Presence of a large number of players in the domestic consumer durables industry leads to competition and rivalry among companies. Threat from rivalry and competition poses a threat to domestic companies.

Potential markets remaining yet untapped: A large segment of the domestic market, mostly the rural market is yet to be tapped. Tapping this yet untapped and unorganised market is a major challenge for the Indian consumer durables sector.

Threat from substitute products/services: The domestic consumer durables industry is plagued by threats from substitute products. Easy accessibility to theatres/multiplexes, especially in urban areas has turned off the viewership from TV to a large extent. With the advent of a horde of FM radio stations, radio sets have now substituted TVs.

Customer power with respect to availability of choice: The availability of a wide product line on account of most products being homogeneous, poses a threat for companies operating in the consumer durables sector. Customers have the choice of both domestically produced and imported goods, with similar features.

OPPORTUNITIES AND CHALLENGES:

THE CHALLENGES:

Heavy taxation in the country is one of the challenges for the players. At its present structure the 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 per cent. About 65 per cent of Indian population that lives in its villages still remains relevant for some consumer durables companies. This India, at least a large proportion of its constituents, still buys black and white TVs and doesn't know what flat screens are. Also, foraying into these 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, 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 the around 40,000 retail outlets (for consumer durables) in the country. 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.

THE OPPORTUNITIES:

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.

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 increasing popularity of easily available consumer loans and the expansion of hire purchase schemes will give a moral boost to the price-sensitive consumers. The attractive schemes of financial institutions and commercial banks are increasingly becoming suitable for the consumer. Consumer goods companies are themselves coming out with attractive financing schemes to consumers through their extensive dealer network. This has a direct bearing on future demand.

CONCLUSION:

Consumer durable industry grows leaps and bounds due to the significant growth of standard of life of people. As the obstacle of industrial licensing is removed there is a healthy competition for the production of durable goods which is turn improved the quality of consumer durable goods. Hence, Indian consumer durable industry produces goods which on par with foreign goods.

BIBLIOGRAPHY:

1. Kojinra makoto "A study of India's Industry" In Hideki Este, ed "Contemporary south asia 401.2 Filture of economic liberazation. Tokyo University of Tokyo Press 2002.

2. Ackerberg, Daniel A. (2003), "Advertising, Learning, and Consumer Choice in Experience Good Markets: An Empirical Examination", International Economic Review, 44:3, pp. 10007-1040.

3. Uemura, Tetsushi and Yoshihiko Iwadare "The India's electronics market" : Tokyo: Business research institute 2007.

4. Judith Chevalier and Austan Goolsbee, "Are durable goods consumers forward-looking?" The quarterly journal of economics vol. CXX Iv Nov. 2009 Issue 4.

5. Ohara Moriki and Koi chirop Kumara, "Compacting study on industrial development process in China and India', an interim report, Chiba : Institute of developing Economics 2009.

6. Gang Xiaofeing, "Bigger opportunities for Chinese electronic companies in India" in proceeding of the China-India Development forum in Buying, 2010.

7. Fix globel face 2 face "Electronic leading in India"; proceeding of the conference of electronic trading, Sep. 2008.

Received on 11.07.2010 Accepted on 15.11.2010

Asian J. Management 1(2): Oct. – Dec. 2010 page 61-64

White Goods	Brown Goods/Kitchen Appliances	Consumer electronics
Refrigerators	Mixer and Grinders	Mobile Phones
Washing Machine	Microwave Ovens, Cooking Range	Televisions
Air Conditioners	Iron	MP3 Players
Speakers and Audio Equipments	Electric Fans	DVD Players/VCD Players