Upbeat consumer mood gives durable industry a leg-up

Upbeat consumer mood gives durable industry a leg-up

Author | Source: The Economic Times | Thursday, Oct 19,2006 8:43 AM

Upbeat consumer mood gives durable industry a leg-up

Despite price hikes made to offset rising costs, an upbeat consumer mood has the enabled consumer durable industry to record a significant jump in the sale of high-value consumer durables across categories in '06.

Flat televisions which contribute about 52% to total television sales, grew by 47%; fully automatic washing machines which contribute 31% have grown by 13% and split air conditioners which contribute 45% of the pie grew by a whopping 97%.

In the frost-free refrigerator category, while the below 225 litres and 226-270 litre sizes are showing negative growth, the above 300 litres that is growing by 24% for the January to August 2006 period, according to ORG-GFK estimates. On the other hand, semi-automatic washing machines grew by a mere 6% while direct cool refrigerators declined by 18%.

Consumers in small towns (less than 1 lakh population) across the country seem to be contributing significantly to all high-end durable purchases like flat televisions, frost-free refrigerators and fully automatic washing machines.

Better finance packages, higher disposable incomes and a complete change in consumer attitudes have led to industry growth, say analysts. Growing consumer awareness about technology-led products have fuelled the demand for high-end products. "High-end categories have been performing well this year linked with factors like technology products that are driving aspirations not only in metros but also Tier II cities. Increasing affordability and the availability of easy finance options for consumers has also added to the growth," said Pradeep Tognatta, director of sales, Samsung India.

Industry sources said that some of the semi-urban and rural markets buy high-end products on cash purchases. Almost 70% of the growth is from smaller markets like Lucknow, Jalandhar, Nagpur, Mangalore, Kolhapur and Trichur. Saturation in urban markets is forcing manufacturers to seek growth in small towns.

Across key categories, price reductions of flat TV by 8-10% and LCDs 35% have shored up volumes. However, there have been price hikes in certain categories like refrigerators, washing machines and split air conditioners. Industry sources also attribute the pick-up in higher-end products as a result of marketers investing in distribution networks across geographies.

While North India remains the biggest contributor to the market, the upsurge in premium categories has led to higher growth for the West and South zones. The uptrend in high-end purchases is more evident in states like Maharashtra and Tamil Nadu, sources said.

The next few months are typically the most buoyant period for a consumer durable business. Incidentally, more than 60% of sales come from the hi-end models every festive season. "More manufacturers are being forced to launch higher end products faster," said CM Singh, vice-president(sales & marketing), TCL.

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