Mobiles overtake cycles in race for No 1 product

Mobiles overtake cycles in race for No 1 product

Author | Source: The Economic Times | Monday, May 15,2006 7:47 AM

Mobiles overtake cycles in race for No 1 product

For decades now the poor man's vehicle, the bicycle, had maintained its place as the largest selling consumer non-FMCG product ahead of items like CTVs, motorcycles, refrigerators etc. But last year finally the winds of change caught up with it.

Mobile handsets have overtaken bicycles as the number one consumer product across the country pushing bicycles to the number two spot.

The surge in demand for mobile telephony was specially pronounced last year as the net subscriber additions more than doubled compared to FY05.

The official figures relating to the total net addition to the mobile subscriber base during FY06, both GSM and CDMA, is estimated at about 39m. This is about three times the number of bicycles sold in the country last fiscal. The market for bicycles sold is estimated to be in the region of 12-15m units per year.

Even after taking into account the large chunk of second hand handset market at the entry level, the actual number of new handsets sold is estimated to be more than double the number of bicycles sold in India last year. The shift is also visible from the changing price matrix. While entry cost for mobile telephony with low-end bundled handsets is coming down over the years, in recent times the rise in price of raw materials such as primarily steel, has pushed up the price of bicycles.

“In last two years, the base price of bicycles has gone-up to Rs 1,700 per unit from Rs 1,200. This had a negative impact on bicycle demand. During the same period, cell phones have become cheaper,” says Manoj Gupta of Atlas Cycles.

Though purists would scoff at the idea of one-on-one comparison between mobile handsets and bicycles as a senior executive from one of the large mobile handset players in the country who didn't want to be quoted said, “Mobiles have not just become the top product in the urban consumer purchase preference chart.

Even in rural areas consumers are realising that mobile handsets can replace the need to travel to gather information.” Says Manoj Kohli, president, Bharti Airtel, “We are following the distribution model of 'fast moving consumer services'.

Beyond small towns where we want to be present in all shops selling a shampoo sachet further down in the village level we want to be present in all establishments which are selling a matchbox.” He added, even if one discounts 20-25% of new users who are entering the mobile telephony base by purchasing second hand phones, the market for new handsets is more than 33m sets per year even without adding the replacement market.which is a growing but a small proportion of the overall subscriber base as of now.

The winds of change as far as the bicycle versus mobile handset market is considered starting blowing from FY04. During FY04 and FY05 the market for mobile handsets was just pegged marginally higher than bicycles but last year the big push took it much higher making it the undisputed consumer non FMCG product for the Indian consumer.

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