This article aims at portraying the factors that are contributing to the growth of the consumer durable goods market, the production, penetration level of the consumer durables viz., Television, Refrigerators, Washing machine, and Air conditioners, their growth rate and market size and SWOC analysis of the industry.
INTERNATIONAL JOURNAL OF MANAGEMENT (IJM) ISSN 0976-6502 (Print) ISSN 0976-6510 (Online) Volume 7, Issue 2, February (2016), pp 449-453 http://www.iaeme.com/ijm/index.asp Journal Impact Factor (2016): 8.1920 (Calculated by GISI) www.jifactor.com IJM ©IAEME CONSUMER DURABLE INDUSTRY IN INDIA – PRESENT TREND, CHALLENGES AND FUTURE PROSPECTS Dr P Sugunalakshmi Associate professor, Seethalakshmi Ramaswami College, Trichy-2 A Rathina Maheswari Research scholar, Seethalakshmi Ramaswami College, Trichy-2 ABSTRACT Consumer durable is one of the fastest growing industry segments in India This industry has demand from both urban and rural markets Urban markets account for the major share i.e., 65% of total revenues in the Indian consumer durables sector In rural markets, durables such as refrigerators and consumer electronic goods are likely to witness growing demand in the coming years India is likely to emerge as the world’s largest middle class consumer market with an aggregated spend of nearly US$13 trillion by 2030 as per a report by Deloilte titted, “India matters, winning in growth markets” As against the Compound Annual Growth Rate (CAGR) of 13% in FY 13- FY 14, it is expected to expand at CAGR of 14.8% in FY 2015 India’s consumer durables industry accounts for more than 2/5th of end- consumer spending, and creates three indirect jobs for every direct job and contributes to more than 5.5% of the index of industrial production according to a Federation of Indian Chambers of Commerce and Industry- Ernst &Young Report This article aims at portraying the factors that are contributing to the growth of the consumer durable goods market, the production, penetration level of the consumer durables viz., Television, Refrigerators, Washing machine, and Air conditioners, their growth rate and market size and SWOC analysis of the industry Key words: SWOC analysis, Consumer Durable Goods in India, CAGR, Market penetration: India Cite this Article: Dr P Sugunalakshmi and A Rathina Maheswari Consumer Durable Industry in India – Present Trend, Challenges and Future Prospects International Journal of Management, 7(2), 2016, pp 449-453 http://www.iaeme.com/IJM/index.asp GROWTH DRIVERS With the continuous inflow of disposable income and the advancement of technology the need for the varied consumer durable goods are increasing The factors that contribute to the growth of this market segment are enlisted with statistical facts in the following paragraphs 449 Dr P Sugunalakshmi and A Rathina Maheswari “Consumer Durable Industry in India – Present Trend, Challenges and Future Prospects” - (ICAM 2016) International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 6510(Online), Volume 7, Issue 2, February (2016), pp 449-453 © IAEME Publication RISE IN DISPOSABLE INCOME Per capita income in India is expected to grow at a CAGR of approximately 6.6% to around US$2,200 in 2019 from ~US$1,500 in 2013 Increasing trend of working women population will drive demand for home appliances such as washing machines RISE IN ORGANIZED RETAIL Organized retailing will not only streamline the supply chain, but also facilitate increased demand, especially for high end and branded products Organized retail industry is expected to cover a market share of 15%–18% in2020, from around 3% at present GROWING DEMAND IN RURAL MARKETS India’s rural market, accounting for approximately 69% of India’s households, offers significant opportunities for the consumer durables industry Around 50% of the rural population owns TV, 8% owns refrigerators and around 1% owns washing machines Moreover, increasing electrification of rural areas would augment the demand URBANIZATION AND GREATER BRAND AWARENESS The Indian urban population is projected to increase from 31% in 2011 to 41% of the total population by 2030 Urban consumers have started to perceive consumer durables as lifestyle products and are open to pay increased prices for branded products PRODUCT INNOVATION AND AVAILABILITY OF NEWER VARIANTS OF PRODUCTS The consumer durables market is now flooded with a plethora of products, each providing different features and technology, new options and added advantages and has evolved from a market with limited products and few features The replacement cycle has reduced from 9–10 years to 4–5 years for most of the goods in this sector NARROWED PRICE GAP AND INCREASED AFFORDABILITY OF PRODUCTS Growth in demand for products, once considered luxuries, such as air-conditioners, washing machines and high end colour TVs, is a reflection of narrowed price gap In the case of expensive consumer goods, retailers are providing easy financing options to consumers by collaborating with banks An analysis of the data contained in Table reveals clearly the growing demand for the consumer durable goods in India Table Production of Television, Refrigerator, Washing machine, Air conditioner from 2010-2014 Year Television Refrigerator Washing machine Air conditioner total % total % total % total % 2010 650 5.5 8001 19.2 3049 19.3 1458 15.7 2011 1170 9.9 8715 21.0 3080 19.6 2346 25.2 2012 1930 16.4 7738 18.6 2995 19.0 1666 17.9 2013 3090 26.3 8686 20.9 3225 20.4 1890 20.3 2014 4940 41.9 8421 20.3 3429 21.7 1948 20.9 Total 11780 100 41561 100 15778 100 9308 100 Source: Study on Indian Electronics and Consumer Durables Segment, 2015 450 Dr P Sugunalakshmi and A Rathina Maheswari “Consumer Durable Industry in India – Present Trend, Challenges and Future Prospects” - (ICAM 2016) International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 6510(Online), Volume 7, Issue 2, February (2016), pp 449-453 © IAEME Publication Table Market penetration: India vs Global Average Types of durables Market India Global Television 60% 89% Refrigerator 21% 85% Washing machine 8.8% 70% Air conditioner 3.0% 60% Source: Study on Indian Electronics and Consumer Durables Segment, 2015 The penetration rate of Air conditioner in India is the lowest one when compared with the global average rate of penetration Penetration rate of Television is the highest among the penetration rate of other durables in India and is reaching nearer the global average rate Table Name of the country Penetration level USA 856 Russia 865 China 772 Europe 751 Germany 676 Brazil 678 Mexico 475 India 179 Source: Consumer Electronics and Appliances Manufacturing Association, 2014 Russia stands first in the penetration level of T.V sets with 865 per 1000 population followed by USA with 856 India ranks last with 179 which point out the fact that india has got more untrapped population in its fold Table Household penetration of Air conditioner Country percentage Taiwan 89% Singapore 72% China 53% Korea 50% Indonesia 8% India 7% Source: Consumer Electronics and Appliances Manufacturing Association, 2014 Table 4, it is obvious that Taiwan leads in the household penetration of air conditioner Singapore stands second in the penetration level India is with the least percentage of as for as the penetration of air-conditioned is concerned 451 Dr P Sugunalakshmi and A Rathina Maheswari “Consumer Durable Industry in India – Present Trend, Challenges and Future Prospects” - (ICAM 2016) International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 6510(Online), Volume 7, Issue 2, February (2016), pp 449-453 © IAEME Publication Table Household penetration of Home appliances in India Home appliances percentage Television Refrigerator Washing machine Air conditioner 60 31 10 6.8 Source: Consumer Electronics and Appliances Manufacturing Association, 2014 Among the household appliances, the penetration level in India is the highest one for T.V sets with 60% Refrigerator stands second with 31% penetration Washing machines have penetrated into Indian market to the extent of 10% Air conditioner’s penetration level is the least with 6.8% Table Indian market size (in INR Billion) Year Television Refrigerator Washing machine Air conditioner Total 2011 329 57.1 58.5 444.6 2012 380 67.4 73.1 520.5 2013 435 74.2 87.4 77 673.6 2014 514 80.8 101.4 86 782.2 2015 618 87.3 122.2 96 923.5 Source: Consumer Electronics and Appliances Manufacturing Association, 2014 An Analysis of Table reveals the fact that Television contributes major share to the Indian market size expressed in billions of Rs In the year 2011 it contributed 74% and thereafter declined to 67% in 2015, though in actual value it has increased to 618 billion This decline in percentage share to total market size is due to the share captured by Air conditioner market Next to Television, Washing Machine contributes 14% to the total market share This is followed by Refrigerator with 13% approximately in the first two years and thereafter third place is secured by Air conditioner in the last three years SWOC ANALYSIS 8.1 Strength Presence of established distribution networks in both urban and rural areas Presence of well-known brand In recent years, organized sector has increased its share in the market Vis a Vis the unorganized sector Easy availability of finance 8.2 Weakness Demand is seasonal and high during festive season Demand is dependent on good monsoons Poor Government spending on infrastructure Low purchasing power of consumers 8.3 Opportunities In India, penetration level of white goods is lower as compared to other developing countries Unexploited rural market Rapid urbanization and greater brand awareness Increase in Income levels, i.e., increase in purchasing power of consumers 452 Dr P Sugunalakshmi and A Rathina Maheswari “Consumer Durable Industry in India – Present Trend, Challenges and Future Prospects” - (ICAM 2016) International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 6510(Online), Volume 7, Issue 2, February (2016), pp 449-453 © IAEME Publication 8.4 Challenges High import duties on raw materials Cheap imports from ASEAN at 0% or concessional import duty and import from China Poor infrastructure; non availability of regular power supply, which is imperative for consumer electronics product Income tax, excise and customs duty are set by the Central Government, States and Municipalities also levy their own taxes Limited scale and quality from domestic suppliers Capital intensive nature of business Ease of setting up and running businesses Insufficient and under- developed local suppliers base CONCLUSION India is expected to become the fifth largest consumer durables market in the world by 2025 The consumer electronics market is expected to increase to US$ 400 billion by 2020 The production is expected to reach US$ 104 billion by 2016 The sector is expected to double at 14.7 per cent compound annual growth rate (CAGR) to US$ 12.5 billion in FY15 from US$ 6.3 billion in FY10 Urban markets account for the major share (65 per cent) of total revenues in the consumer durables sector in the country Demand in urban markets is expected to increase for non-essential products such as LED TVs, laptops, split ACs and, beauty and wellness products In rural markets, durables like refrigerators as well as consumer electronic goods are likely to witness growing demand in the coming years as the government plans to invest significantly in rural electrification The Government of India has increased liberalization which has favoured foreign direct investments (FDI) Also, policies such as National Electronics Mission and digitization of television and setting up of Electronic Hardware Technology Parks (EHTPs) are expected to boost the growth of this sector The consumer durables market is anticipated to expand at a CAGR of 14.8 per cent to US$ 12.5 billion in FY15 Also, the demand from rural and semi-urban areas is projected to expand at a CAGR of 25 per cent to US$ 6.4 billion in FY15, with rural and semi-urban markets likely contributing majorly to consumer durables sales REFERENCES [1] www.ey.com [2] www.wefonline.org [3] www.ceama.in [4] www.adlittle.com [5] www.freedoniagroup.com [6] www.cci.in 453 Dr P Sugunalakshmi and A Rathina Maheswari “Consumer Durable Industry in India – Present Trend, Challenges and Future Prospects” - (ICAM 2016) ... Study on Indian Electronics and Consumer Durables Segment, 2015 450 Dr P Sugunalakshmi and A Rathina Maheswari ? ?Consumer Durable Industry in India – Present Trend, Challenges and Future Prospects? ??... i.e., increase in purchasing power of consumers 452 Dr P Sugunalakshmi and A Rathina Maheswari ? ?Consumer Durable Industry in India – Present Trend, Challenges and Future Prospects? ?? - (ICAM 2016) International... www.freedoniagroup.com [6] www.cci .in 453 Dr P Sugunalakshmi and A Rathina Maheswari ? ?Consumer Durable Industry in India – Present Trend, Challenges and Future Prospects? ?? - (ICAM 2016)