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The economy faces slowdown blues but premium consumer durables - flat panel TVs, refrigerators, split air conditioners, smartphones - have bucked the trend. Their sales volume and value sales has been growing faster in the first half of this year, compared to the not so good year before.
Says Atul Jain, senior vice-president, consumer electronics, Samsung Electronics India, which sells the entire range of these products: "The category growths seen this year in the first half have been led by premium categories like panel TVs, frost-free refrigerators and split ACs."
Panel TV sales - LCDs, LEDs and plasma sets - already constitute 45-50 per cent of total colour TV sales. And, despite a slowdown, consumers are trading up from flat TVs to LCDs, and LCD owners are moving very quickly to LEDs, which is showing the highest growth in sales.
The reason is that the price differential between LCDs and LEDs and that of flat TVs has shrunk dramatically. That apart, prices of LEDs have been falling by four to five per cent annually. New technology is also making it possible to introduce smaller LED TVs at an even lower entry price.
C M Singh, chief operating officer, Videocon Industries, says: "The price of an entry-level 22-inch LED TV is Rs 11,000-12,000; a colour TV set is available for Rs 7,000. This is making it attractive for consumers to upgrade to these models."
A Samsung Electronics India spokesperson says the company, for instance, has launched a 19-inch LED TV for only Rs 11,000. Earlier, the minimum size was 23 inches and this helped make the product affordable. Adds Y V Verma, chief executive officer, MIRC Electronics, which sells TVs under the Onida brand: "Today, first-time buyers are buying LEDs instead of LCDs. LEDs are already 80 per cent of the flat panel TV market; in a couple of years, LCD will also vanish".
Clearly, with consumers trading upwards, premium products would grow at the expense of others.
Air Conditioners
The shrinking differential in price between an older technology product and that of a premium product is helping push split AC sales.
Saurabh Baishakhia, business head, air conditioners, LG Electronics India, says: "One reason is that the price differential has substantially come down in the last few years between splits and windows. If it was 20-25 per cent about two to three years ago, now it is down to 10-15 per cent."
Second, Baishakia says there is no provision for putting window ACs in new houses today, so that market is shrinking. Windows now constitute 20 per cent of the overall AC market; the rest is split ACs. Third, consumers aren't only looking at upfront costs but also cost of ownership in totality. He says that increasingly, consumers are ready to pay a slight premium to go in for more energy-efficient ACs, as this would save on electricity cost.
Financing
Of course, a large part of the demand is also because companies have been offering attractive discounts, as well as monthly instalments (EMIs) to woo customers for premium products. For instance, as much as 25% of LG’s sales of home appliances are now though the EMI scheme. Consumer goods companies estimate that two years earlier, only five% of the sales of consumer goods products were through EMI; that is now 20%.
Says George Menezes, chief operating officer of Godrej Appliances: “Dealers in small towns and cities are increasingly tying up with non-banking companies. This is one way to lure consumers to buy premium products, by making these affordable.”
Mobiles
Smartphones are also selling very well, though prices have gone up. They already constitute 29% of the total market for mobiles. S N Rai, chairman of Lava Mobiles, a leading Indian manufacturer of mobile handsets, says third-generation (3G) services have spread from 37-38 cities last year to 148 cities and this is pushing data usage. “Second, about 5.8 million feature phone users who used Chinese products are now upgrading to smartphones at the lower end of the market, as they now want to download applications. That business is coming to Indian mobile players,” he says.
Avers Rahul Sharma, co-founder of Micromax, the largest Indian maker of mobiles: “We are capitalising on the rising migration of the user base from feature phones to smartphones”.
At the upper end of the market, however, most mobile companies have pushed their inventory through attractive exchange offers, which include Apple, Samsung and Nokia. Admits a senior executive of one of the multinational corporations which sell premium smartphones: “With large global inventory, many of us have with dealers worked out very attractive packages to push volumes. And, that has worked.”
The key question is whether this trend will continue during the festival season, which constitutes about 30% of the year’s consumer goods sales.
