With the electronics industry in focus post ‘Make in India’, vendors are looking at bulk sales through greater market penetration.
by Mitalee Kurdekar
“I tell the world, ‘Make in India’. Sell anywhere, but manufacture here. We have the skill and talent for it,” said Prime Minister Narendra Modi back in August 2014, when his Government launched the ambitious programme amid much fanfare. While there was much scepticism about how things would pan out, one thing is for certain. The focus has shifted back to manufacturing. And one of the areas that the Government has identified to be fast-tracked is the electronics industry, given its potential to grow.
And today, just a couple of years down the line, the confidence put in them has being vindicated by the consumer electronics & appliances industry, which has posted double digit growth figures in the last few years. They have capitalised on policy changes and incentives, to surge ahead. It may be early days, yet signs suggest that industry players are traversing the right path. Also, given the vastness and untapped potential of the Indian market, electronics goods and gadgets will only find more and more buyers as vendors look at penetrating semi-urban and rural markets, going forward.
Driving the Change
The industry has grabbed the Government’s offer to help, and is keen to expand the market while bringing in new products, technologies and value-added services for the benefit of its domestic consumers. As Sunil Vachani, executive chairman, Dixon Technologies, states, “The demand for consumer electronics and appliances is expected to spiral; policy initiatives are influencing a surge in the momentum in domestic manufacturing. Spearheading the policy initiatives is the Make in India campaign which emphasises on electronics as one of the focus sectors.”
He adds, “Electronics industry focused policy initiatives such as the Modified Special Incentive Package Scheme (MSIPS), Electronic Development Fund (EDF), Electronic Manufacturing Clusters (EMC), and Preferential Market Access scheme (PMA) have been initiated to encourage more domestic manufacturing by making available capital subsidies, funds for research, skill development support and demand creation.” Evidently, the gap between rural, semi-urban and urban India as far as consumer electronics is concerned is fast closing with the digital explosion of mass media through Internet applications.
Kamal Nandi, business head & EVP, Godrej Appliances, explains, “The increasing rate of urbanisation, rising income and consumer aspirations – owing to increasing Internet penetration leading to greater awareness among consumers – and improvement in infrastructure including the quality and quantity of electrification, transport & logistics are among the key drivers of demand.”
In fact, most new product introductions by manufacturers are now quickly launched on a pan-India level, something that didn’t happen a decade ago. A growing middle income group with significant disposable income and attractive financing schemes means a wider buyer-base. In addition, goods are delivered to the door steps of the average consumer, no matter where s/he is located in the country. Manish Sharma, president & CEO, Panasonic India & South Asia; VP, Appliances Company; and executive officer, Panasonic Corporation, agrees that, “The growing lifestyle shift and the increasing consumer buying propensities are some of the key demand drivers for electronics goods.”
The figures are equally encouraging. “The consumer electronics (CE) market revenues are expected to grow at a cumulative average growth rate (CAGR) of 17.2% from FY16 to FY21, while the appliances segment is expected to grow at a CAGR of 11.6% over the same period, resulting in a CAGR of 16.5% for the overall CEA market. In comparison to global growth averages, this is almost double that of other economies,” points out Vachani.
The opportunity for growth is remarkable. As Nandi professes, “The Indian electronics appliances industry is fairly under-penetrated. At present, the penetration for refrigerators is about 22%, washing machines is not more than 9%, air conditioners is merely 4%, and microwave ovens is just 2%. There is tremendous scope for growth, given that consumers even in small towns and cities are increasingly becoming aspirational because of media and internet influence, their disposable incomes are rising, and the government is making huge investments in bettering infrastructure, be it in terms of rural electrification or better roads, transport facilities and other logistics support.”
Maximising Market Access
It is a buyers’ market though, hence manufacturers and dealers in their distribution network would have to reach out to potential buyers. Fortunately, the Indian electronic appliances market is big enough, and given the under-penetration mentioned earlier, the potential for accessing newer regions is huge. Therefore, if one is keen to expand the size of the pie, all one needs is clear intent and a strategy to follow through. And industry players have been doing that rather well, over the past few years.
Manufacturers are devising unique market access strategies to attract new consumers and enhancing brand awareness amongst them. Nandi elaborates on Godrej’s take. “For a brand’s success, it is imperative that it differentiates itself by focusing on things that truly matter to the consumer. In the home appliances category, differentiation has historically come from just one thing – innovation. We realised that in a marketplace where brands have consistently been talking about innovation, our innovation needs to stand out by being in a far more relevant context,” he confesses.
Keeping different sections of consumers in mind, Godrej Appliances has launched several such relevant technological innovations. These include the music-enabled refrigerator – MuziPlay, the tilt drum and U-sonic washing technologies, steam microwave ovens, pizza & kebab makers in microwave ovens, the NXW refrigerators with Just The Right Temperature (JTRT) technology that enables the refrigerator to store different foods at different suitable temperatures, and the NXW Air Conditioner which is India’s most power saving green inverter AC.
Sharma speaks proudly about Panasonic’s understanding of the Indian market and its consumer behaviour. “It has been almost a decade since our return to the Indian market; we are now well poised to understand the psyche of Indian consumers and their behaviour pattern,” he proclaims, adding that the emergence of ‘Arbo’ Panasonic smartphone’s AI (Artificial Intelligence) assistant is a testament to their understanding of global trends.
Creating Value through Upgrades
Of course, market penetration is not easy unless one undertakes sustainable efforts to create value for consumers. Industry players and vendors are, therefore, constantly researching and developing value-added features to their products and appliances. As a vendor, Dixon follows a customer-first approach by providing value through innovation and excellence. Vachani offers, “Inadequacy in the ecosystem for components is a persisting challenge to the local production of certain consumer electronics products, especially the more sophisticated products such as digital cameras, camcorders, and high-end FPD TVs, which are completely imported. We have invested in backward integration with our in-house production of plastic moulded components, sheet metal parts and wound components.”
Suggesting that scale and volume helps in this industry, he adds, “With an increase in the scale of our operations over the years, we have access to and have established continuous relationships with domestic suppliers and gained expertise in the procurement of components, which meet strict quality standards and adhere to the time schedules laid down by our customers, at competitive rates.”
Nandi outlines Godrej’s R&D initiatives that are helping them bring in new technology and products to the Indian market. “Alongside our regular R&D efforts, we have identified the strategy of ‘Collaborate and Develop’ as key in bringing advanced technology available globally to Indian consumers. We have been partnering with brands such as Bosch and Siemens for refrigerators, for quite some time now, and recently we have also partnered with the Sure Chill company of UK for a specialised range of medical refrigerators,” he states.
Godrej also has an after-sales service programme. He says, “In addition to relevant technology, our after-sales service promise helps us gain an edge over competition. Godrej Smartcare offers the widest service network, Smartbuddy technicians, 24×7 call centre in 10 regional languages, Smartmobile vans for enhanced reach and faster service and CSN (Complete Satisfaction Number) which enables the customer to rate the service offered through a unique code.”
Overall, the domestic market for electronic goods and appliances in India continues to remain very attractive and trends suggest a high growth potential for the sector in the coming years. If the Make in India campaign becomes successful, the industry could embark upon global supplies, and may turn out to be an excellent money spinner with exports. From here on, it’s all about amping up the volumes.