Desi brands have edged out foreign makes from the Rs 2,500-crore Indian small appliances market. Better consumer understanding and affordable products have helped Indian brands like Phillips, Kenstar, Bajaj emerge as preferred brands in the market to push premium-priced foreign makes like Tefal, Black & Decker and Braun out of the market.
Senior industry officials said Indian consumers were clearly unwilling to pay a premium of 20-25% for products which did not fall into the regular or everyday use category. It is common knowledge that every small appliance marketed in India is now sourced from China.
“While it is true that China is the common sourcing market for all the players, what is not known is that there are various grades of manufacturers in that country who can be classified into the A, B and C category. Those who played the costing game by sourcing cheaply and selling at a premium to cash in on their brand obviously lost out in the game,” said RB Garg, vice-president (marketing) of Kenstar.
With a better understanding of the market and consumer tastes, Indian brands also launched competitively priced no-frills, basic models complete with product guarantees and warranties targeting first-time users.
Through segmentation, launching several price points and offering after-sales service, the branded majors seem to be regaining consumers who had earlier moved to the cheaper Chinese makes.
Companies like Bajaj, Sumeet, Kenstar, Crompton Greaves, Philips and others have put out affordable products to win back the consumers. Price cuts apart, assurance of a branded quality product - which have now become affordable - has caught consumers' attention.
“After the initial onslaught, Chinese players are now content to be purely suppliers. They are unwilling to make the huge investments required for brand building and after-sales service in India. Distribution, quality control or after-sales service are certainly not what they bargained for,” a senior industry official said.
Affordable products in non-metros like lightings, fans and home appliances and factors like better prices and a general feel-good factor are helping shore up volumes. In turn, helping the industry record an average growth of 10-12%. It may be recalled that the industry had recorded a 40% drop in volumes last year.
Currently, the organised sector contributes roughly Rs 1,200 crore to the Rs 2,500-crore industry. Chinese, along with unorganised brands, make up another Rs 1,200 crore, while Rs 100 crore is accounted for by premium imported brands.
“After the initial scare, they have now literally fled the scene. Dealing with the value-conscious Indian consumer is another ball game altogether. Nobody's going to allow cheap products at the cost of quality,” sources said.
Sourcing from the Chinese makers and getting fitter in terms of operations have enabled Indian players not only to reduce operating costs but also to pass on price corrections and still maintain reasonable profitability.
Chinese makes were fast-movers in categories like steam irons, pop-up toasters, table fans, hair dryers and shavers. Indian manufacturers are still trying to maintain their forte in dry irons, ceiling fans, mixer grinders and so on, where Indian-made products are seen as more reliable.
The Chinese work on a clear, “big volumes-low margins” logic, sources said. “We sent our employees to China to gauge their strategies and become more cost-effective. While we slashed prices, our strategy of launching sub-economy models has proved to be a good one,” Mr Bajaj said.
Earlier, companies tried to scrape minimum volumes in the market through discounts, bargains, freebies and exchange offers. Dealers say these companies have high fixed overheads, hence they cannot reduce prices in the market.
Currently, most of these Chinese products are routed through grey market channels like Crawford Market in Mumbai and other wholesale markets in Delhi and other areas. Chinese products are priced more competitively because of the extremely low production costs and backward integration in the country.
“Except for mixer grinders and food processors, which require heavy Indian machinery, all other smaller appliances are not made in India. Since we are in the higher end of the market with our washing machines, coolers and ACs, we have been able to ride out the tough times in the lower end,” a leading player said.
Industry majors say volumes have picked up in the past few months with the rural market recording a sharper growth rate. Earlier, the industry proffered the same theory suggested by FMCG majors to justify poor growth: consumers are spending more on high-value goods, tha-nks to financing options.
Consequently, they are scrimping on smaller needs like mixers, toasters, grinders, irons and cookers. But having got their strategies right and back on track, the trends too appear to be buoyant.