Durables cos join the country club

Durables cos join the country club

Author | Source: The Economic Times | Tuesday, Mar 21,2006 8:02 AM

Durables cos join the country club

You have heard about the call of the hinterland for consumer goods companies. Marketers have been rushing to rural India looking for growth as big cities are heading towards saturation. Now, a new trend is emerging where some brands in consumer electronics and mobile handsets, which are essentially late entrants or are being relaunched in India, are making small towns their first port of call. So brands like Kelvinator, BPL, TCL, Spice, Bird, etc are moving in the other direction. They are starting from the non-metros and then moving on to the more developed sub-markets.

Those who track the consumer goods industry in India say it has a perfect logic. In metros like Delhi, there is a clutter and a new brand has to bring an explosive differentiation to succeed. Secondly, the cost of launch or relaunch is much higher in big cities, which tends to extend the gestation period for returns. Add to it the distribution angle, where large brands dominate the shelf space of dealers in large cities.

According to Kunal Ahooja, CEO of Spice, a BK Modi Group venture targeting the upper end of the entry segment of mobile handsets under the Spice brand, “If we had started with a metro like Delhi, we would have to invest a lot as the city already has many big brands. It is only now that we are entering big cities.”

Added Anil Khera, COO of Sansui and Kelvinator, “At the time of launch, we took a strategic decision that we cannot ignore dealers in smaller towns who contribute 80% of our sales.”Kelvinator, among the most high profile brand relaunches in the Indian market in recent times, re-started from Varanasi and then moved on to Lucknow followed by Ghaziabad and Delhi.

It is following the same strategy in the eastern region by launching the brand in cities like Bhubaneshwar, Ranchi and Patna. In the case of BPL, its internal studies show that the consumer preference for the brand is stronger in non-metros. And even though it is re-launching simultaneously across both the markets, the company's focus in the future would be on non-metros. The basic rationale is to create a business in small towns where marketing costs are low and a new brand can hope to generate sizeable sales, which can also be used as a launching pad for expansion.

Chinese consumer electronics major TCL is also following a similar strategy. According to Chandramani Singh, vice-president (consumer electronics & mobile phones) at TCL India, “The cost of selling is lower in small towns and it is a deliberate move to focus their initially.”

So much so that by mid-'05, 90% of its sales were from small markets. Now it has moved towards a 70:30 ratio but is still in favour of C-class cities.The final report card on these brands are not out yet. But experts point towards the history of a number of brands across sectors including some multinational ones, which have just died down over time. These brands had followed the old strategy of starting with a big bang launch in the four metros.

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