Aman Nanda, a young executive working with a multinational company, recently walked into a durables multi-brand store and decided to pick up an LG LED (light emitting diode) TV, a top-of the-line item instead of just another flat screen TV that he would probably have opted for last year when the economy had slowed down.
Unlike the past two years, many customers like Nanda are exhibiting a marked preference for high-end durables. In 2007, when the rush for premium durables had started, companies saw about 25-30 per cent of their sales coming from this segment. In 2008, though, this segment contributed to only about 15 per cent of the total sales. This year, however, volumes and sales appear to be picking up though they are yet to reach the 2007 levels.
Tata Enterprises-owned Voltas India, for instance, claims that 25 per cent of its turnover comes from the highest-end models of its ACs and floor-standing ACs. The company expects to sell around 120,000 split five-star AC units this year, compared with just 50,000 sold in 2009. “Also, with the growth and penetration levels growing in Tier-II and -III cities and towns, one can see a huge change in purchasing patterns. There is a demand for our high-end products from these smaller areas as well, which just adds to our turnover,” says Pradeep Bakshi, deputy chief operating officer of Voltas India.
Other big players like Samsung have noticed this trend in consumer behaviour as a reflection of the general economic atmosphere in the country. The company’s LEDs, LCDs and fully automatic washing machines have been the main revenue generators this season.
The company, though, has a different take on what has boosted this growth. “With the onset of summer, our cooling appliances are seeing a push across categories along with the high-end models. Also, with the IPL on, full HD televisions, which are the highest-priced, are in great demand,” notes Ravinder Zutshi, deputy managing director, Samsung India. The company says split AC models contribute to 70 per cent of its total AC range, which in volume terms is about 500,000 units and is expected to shoot up to 700,000 units this year.
Even the newer players in the category are bullish about the popularly called ‘luxury segment’ of their product categories. Haier India, which came to India just a few years ago, says its LCD range has been its highest-selling model, despite being priced at over Rs 1 lakh. Though the company has launched this category only this year, it expects to sell around 5,000 units.
Another premium product range, its side-by side refrigerators in 2009 had seen a volume push of about 1,000 units and this year is expected to go up to 5,000 units. “We see a lot of upgrading in the consumer today. If a family already has a television, you will not see them use another normal TV but an LCD or an LED. The Indian consumer is becoming more technologically conscious,” notes Eric Braganza, president, Haier India.
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Multi-brand retailers, on their part, say 12-15 per cent of their total sales comes from the high-end models across categories of various brands. “There has been a 12-15 per cent increase in demand for the luxury models of LCDs, refrigerators and ACs to name a few and we are expecting this demand to grow this year,” concurs Ajit Joshi, managing director, Croma.
Joshi adds that the maximum demand has come from the LED segment which is also the most expensive in the TV category. The category has made a sale of the maximum number of 40-inch LEDs in the last four months. Retailers note the average sales price (AVP) is about Rs 35-38,000 for computers, Rs 40,000 for TVs and about Rs 8,000 for mobile phones.
Companies attribute this increase in volumes to a steadily growing job market which has pushed young consumers, especially professionals, to purchase high-end products. “The reason is that these buyers are more in tune with the latest in technology and so they do spend generously on such products. And now with the job scenario improving, the increasing amount of disposable income enables the young buyer to indulge himself or herself,” says an industry expert.