Finance, power glitches 'may curb rapid rural rise of durables'

Absence of consumer finance options at low rates of interest and in an organised manner have meant that consumption in rural areas continues to remain linked with good harvests and subsequent availability of cash.

According to a recent study conducted by Chennai-based market research firm Francis Kanoi, the percentage of total sales accounted for by the rural buyers is 26 per cent for colour televisions and 22 per cent for refrigerators.

The sales that materialise through rural outlets, however, are only 4.4 per cent and 3.6 per cent for these two product categories illustrating a distribution problem. "Financial institutions are either unwilling to finance consumer durables or offer interest rates in the range of 15-17 per cent," industry sources say.

Companies however, have adopted diverse startegies to tap these markets that are expected to account for seven per cent of the 10 per cent growth projected for the consumer electronics sector this financial year.

Oscar International Ltd, which derives 40 per cent of its sales from the semi-urban and rural sectors, has launched a battery operated television model in the 14" segment to cater to parts of Eastern UP and Bihar. This has boosted the company's sales by 5-7 per cent. It is planning to come out with a similar 21" model this month.

LG Electronics, market leader in the colour television segment, has concentrated on decentralising its operations to increase its rural penetration this year. The company has increased its 'remote area offices', which function at district levels, from 27 earlier to 62 this year.

"We have put in place a 'different-model different-channel' strategy to offer models best suited to particular regions apart from increasing decentralisation of decision making in our operations," says Anil Arora, head (marketing) of LG Electronics Indian Pvt Ltd.