Low consumer sentiment drives durable companies to stall product launches

Written by Neha Pal | Neha Pal | New Delhi | Updated: Aug 19 2012, 09:08am hrs
As flagging consumers in the country tighten their belts, courtesy an economic slowdown, the consumer durables sector is exercising caution in introducing new products in the market. Many companies are treading the path judiciously, putting on hold the launch of new products, preferring the wait and watch policy; they are instead relying on their existing product ranges. Many fear that new launches can be risky as it would entail a 360-degree marketing exercise, pressure on their budget and an added danger of customers non-acceptance.

Says Pinakiranjan Mishra, partner and national leader, retail and consumer products, Ernst & Young, To develop a new technology, a company needs to spend heavily on their research and development, which can be a burden for the company, especially during a slowdown. The concept of old is gold has once again resurfaced for the consumer electronics industry as they dont want to take many chances. The cost and risk factor are the two important aspects on the mind of these companies.

Korean giant Samsung Electronics is going by the tried and tested policy, with a slight revamp of its existing models for this festival season. The company has recently launched products that are not just reasonably priced, but have an established presence in the market. Mahesh Krishnan, vice-president, home appliances, Samsung India, tells FE, Till last year, the trend was to introduce better technology products at an added cost but this year is different due to the slowdown.

Godrej Appliances, which clocked a turnover of R2,000 crore last year, has stalled the production of their televisions. Its executive vice-president (marketing and sales) Kamal Nandi had reportedly said the the company has put the manufacturing of televisions project on hold as it was not economically viable to sustain it as a result of the rupee devaluation.

With a drop in discretionary spends, companies have also improvised strategies to sell products. For instance, Godrej launched a new range of single door refrigerators as compared to double door. According to the company, 70% of consumers prefer single-door refrigerators as they are more energy efficient and come at an affordable range of R12,500-R18,200.

Another product which affirms the trend of consumers opting for old technology over new one is window ACs. Voltas has reported an increase in the sale of their window ACs. Says Pradeep Bakshi, COO, Unitary Products Business Group, Voltas Consumer Electronics, At a time when demand for window ACs should go down, our sales have actually gone up by almost 10% even though it is an old technology but very popular amongst small town consumers.

There is no doubt that smaller towns and villages are areas that offer huge potential market. And the consumer durables industry are developing strategies to penetrate this erstwhile unexplored market. Says Manish Sharma, managing director, Panasonic India, Emerging towns and rural areas are the markets where growth is coming from. Therefore, we are looking at better marketing of our low-cost products, which would help the company achieve its targets and higher penetration in these markets."