LG Electronics India Pvt Ltd, a wholly owned subsidiary of LG Electronics, South Korea, expects microfinance to increasingly drive sales of products like colour televisions (CTV) in rural markets.
“In the urban market, consumers would rather upgrade, for example, from a 21-inch CTV to a 29-inch CTV, but in the rural market, 95 per cent of the consumers exchange a black & white TV for a CTV,” Girish V Rao, vice-president-sales, told Business Standard.
In the rural market, consumers were not supported by mainline financial institutions, but were short of cash.
Local dealers knew the consumer and sold product against payment collected on a daily or weekly basis. “Such deals are too risky for anybody else but the local dealer”, he added.
“This strategy has worked for us as the percentage of products sold through financing is much higher in the rural market than the urban market”, he said.
At present, around 48 per cent of LG sales was from financed products, but in urban areas, only 25 per cent of products were sold through financing.
The 48 per cent financing level was acheived because of the deep penetration of micro-finance and other financing intermediaries in the rural segment, said Rao.
Entry-level CTVs, semi-automatic washing machines, refrigerators, etc., sold most in the rural market, particularly in areas with power, said Rao.