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Be it hybrid work culture, work from office or work from home, the consumer durables sector is steadily adapting to the market dynamics. Also, with the onset of the festive season which has accelerated demand, companies are gearing up to meet customer expectations.
“The overall market sentiment is looking good and we anticipate this year’s festive demand to be at par with the pre-pandemic season and will contribute significantly to the total volumes across cities. To capture the anticipated demand and encourage purchases, we are aiming to provide attractive consumer offers this festive season. Our products can be availed across our 25,000-plus consumer touchpoints to facilitate ease of purchase, including multiple experience zones and brand shops,” said Pradeep Bakshi, managing director and CEO, Voltas Ltd.
The festive season will witness a demand for the premium products as well. “Companies are geared up to attend to the rising demand of premium products and will likely introduce new products, offer attractive EMI schemes and product warranties. We could expect leading players to run offers of no-cost EMI, cashback and easy finance accessibility,” said Harsha Razdan, partner and head, consumer markets and internet business, KPMG India.
Ongoing demand trends
In the last few years, the government has introduced a variety of measures such as reduced corporate tax rates, introduction of production-linked incentive schemes targeted towards certain categories to provide impetus to the durables sector.
“However, the demand may continue to be affected due to higher GST rates on certain finished white goods. The outlook involves brands to start differentiating basis intangible assets such as goodwill, ethics, purpose and ESG rather than just basic benefits and features. The evolving localized product ecosystem is going to be a gamechanger for all durable players,” added Razdan of KPMG.
Consumers are increasingly inclined towards technologically advanced products for a seamless experience and have also shown affinity towards homegrown products. Companies are strategically responding to these anticipated demand trends. “With markets opening up and being stable for more than six months now, we foresee a healthy demand for kitchen as well as domestic appliances categories. With positive sentiments, improving economic conditions and supportive government policies, we are optimistic on good demands for consumer electronics across all the categories in the future,” said Ravindra Singh Negi, chief operating officer, consumer products, Bajaj Electricals Ltd.
The additional demand in the consumer durables sector has created a lot of pressure and major international and domestic players can consolidate their market position backed by aggressive growth strategies, innovation and penetration into tier-II and tier-III markets. “Apart from other factors, the revival of real estate would add strong tailwinds to the sector,” added Razdan.
Changing consumer behavior
The consumer durables giants are observing a rise in demand for value-added or premium products compared with entry level products. This shift can be attributed to growing customer willingness to pay more for products with unique features.
The wearables market has witnessed a record double-digit growth in the first quarter of 2022 with shipments crossing 13.9 million units. This growth can be attributed to focus on health aided by new feature rich launches, discounts across channels and aggressive marketing by brands.
“The demographic source for premium products are the younger generation with preference for mid to upper range products. A strong push from brands and channel partners are encouraging consumers to upgrade to new features and spend more on wearables. While demand has seen a healthy growth, supply remains a concern for the industry,” stated Razdan.
In the post COVID-19 era, LG Electronics India has witnessed a profound impact on consumer behavior. To keep up with the changing needs the company has come up with new products focused on health and hygiene. “Customers have become more health and hygiene cautious. They are also looking for simplified technology products and our new launches cater to their needs. Our new products have inbuilt features such as hygiene fresh in refrigerators, in-built heater in washing machines for allergen care, among others,” said Deepak Bansal, vice-president, LG Electronics India.
Apart from premium, health and hygiene-focused products, customers are also looking for products equipped with artificial intelligence (AI). AI is the next frontier in technology which aims to make machines intelligent, and adds comfort and convenience to consumer’s daily life. “We have a responsibility to make AI more approachable to consumers and less intimidating. Our latest AI-based products include Insta View Refrigerator, Wearable Air Purifier, AI DD Washing Machine and Dual Inverter Air Conditioner. These are equipped with AI facilities and are the perfect blend of great technology and stylish design,” added Bansal.
Supply chain disruption
The ongoing geopolitical situation has caused volatility in the supply chain. Domestic importers in the business are on edge as China, India’s largest raw material supplier, recently went under lockdown leading to hike in freight costs. An overreliance on imports for essential parts and semiconductors signifies production is easily impacted by hiccups in other countries and at times also impact launches of new products.
There is an increased investment in enhancing production capacities in India and adoption of technology in the logistics and supply chain processes are on the rise. “Geopolitical and trade tensions between the US and China have seen many US and European companies seeking India as an alternative location. These changes are not just focused on a short-term outcome but are gearing up to empower supply chains in the future,” said Razdan.
Sharing insights into its supply chain strategy, Bansal said, “LG Electronics is equipped with local manufacturing and it enables us to adjust production as per consumer demand. So, we are fully equipped to handle any increase in demand.”
Giving a similar opinion, Negi said, “At Bajaj Electricals our production planning is always completed well in advance and we have a strong and deep distribution network to make sure there is no shortage of products even when there is a surge in demand.”
However, volatility in oil prices fuels inflation resulting in rise of transportation and logistics costs. “The pressure of rising input costs and higher freight charges have been partially passed on to consumers and the prices of consumer durables have seen increases in the latest quarter. Profitability in the near term will continue to remain a concern,” said Razdan, adding that infrastructure gaps act as a challenge in penetration of consumer durables in the Indian market, especially in tier-II, tier-III cities and in the rural markets.