'No product has a life cycle of more than 12 months'

CORPORATE VOICE

Excerpts:

A recent government data point towards a slowdown in the consumer electronics industry. Is growth an issue for the industry?

Not at all. Television sales have grown 21 per cent during January-June 2007. Industry figures show that the washing machines grew at 23.8 per cent in the January-May period, while refrigerators and air conditioners (ACs) grew by 15 and 51.2 per cent, respectively. And mind you, these are retail sale figures. As production is always higher than retail sales, it is safe to assume that those figures would be still better. With such growth in consumption and demand, I don't think growth is an issue for us any more. One reason why the government data do not capture this growth is that it does not cover all producers in the industry.

Has the rise in interest rates in the last few months not eaten into consumer electronics and appliance sales?

The rise in the price of consumer finance has not impacted the company as only about 20 per cent of purchases are on instalments.

Traditionally, the industry used to see a bundling of appliance sales around festivals and television sales around sporting events. Does the market still witness these spikes in sales?

The market is now witnessing regular growth throughout the year. Sales are no longer event-driven as they once were. Sales definitely show an increase during the festival season, but overall, the sales are steady for the whole year.

If there is a robust demand all through the year, why then do we see this regular drop in prices?

Prices of home appliances have been steady over the past six months. In segments, where prices have come down, volumes are making up for the price cut. The steep fall that we saw in the last few years has somewhat abated.

We have seen the Indian consumer moving up the value chain. But is this restricted to metros? How are tier-II markets responding to high-end products?

There is an unexpected rise in demand for high-end consumer electronics in non-metros and smaller towns and this market accounts for the current growth in volume. Cities such as Ahmedabad and Jalandhar have become attractive markets for LCD televisions now.

Companies now have to introduce new products regularly to keep the market buzzing. What is the life cycle of a consumer electronics product now?

The life cycle of any product is not more than 12 months now, after which new products or new features take over. Consumer electronics is one segment that needs constant innovation. The consumer has become more quality conscious and expects newer features in each purchase he makes. Even the basic models need value addition in order to retain their appeal to the consumer. We also keep in mind aesthetic innovations. Consumers are willing to change their appliances as soon as a newer and better option is available.

Is importing parts from China a viable option for Samsung?

We do not import from China as it is more profitable for us to manufacture at our factory in Noida. Our Noida facility is well equipped and almost hundred per cent of our manufacturing is from there. Some of the higher-end refrigerators are made in Korea. Panels for LCD TVs are from Korea. It would demand a very big investment to manufacture these here in India.

Our second manufacturing facility in the country in Sriperumbudur near Chennai will start functioning soon. The plant would have an annual production capacity of 1.5 million colour televisions and one million colour monitors in the first phase.

Samsung has dropped the celebrities it had signed up for brand endorsement. What has accounted for this change in advertising strategy?

Brand recall for Samsung is quite high now. We have done away with appointing brand ambassadors for our products. We believe that the consumer today is more brand-conscious than before. Hence our focus is on endorsing the product. The year 2006 saw the last of brand ambassadors for Samsung. In smaller towns and cities, our roadshows have proved instrumental.

More and more speciality stores and hyper markets are coming up in the country. What do they mean to you?

On the sales front, speciality stores make a big difference. With the ambience, comfort and service at a speciality store, the customer is bound to make a purchase. The sales from such stores do add up to our profits. High-end goods are doing well in speciality stores. I would not look at hyper markets as a growth area for our business as they also provide private labels that have lower pricing.

One product category where Samsung has failed to make a dent is audio systems. Why?

I agree that audio systems have been our weak area, but I believe that the audio systems business is in the doldrums as people are going in for newer technology.

Only the home theatre business, at 72 per cent growth, is faring well. This is because of competitive prices.