Rate-hit consumer durable cos shift focus to rural mkt

Written by Neha Pal | Neha Pal | New Delhi | Updated: Sep 20 2011, 07:22am hrs
Dissuaded by rising rates and inflationary pressure, consumer durable makers are having a bearish phase not just in terms of their top lines but also in promotional schemes such as festive offers, replacements and consumer financing. Also, the replacement cycle of products, which is higher in urban areas, has got affected as consumers are delaying purchases.

The replacement market in the industry is growing at a rate of 13%. According to experts, technology and higher income levels are resulting in faster replacement cycles.

The replacement cycle for consumer electronics including LCDs, home theatre systems, laptops and PCs is usually five to six years and household appliances like refrigerators, washing machines, air conditioners microwave ovens, dishwashers is seven years but consumers tend to extend it by another two years because of liquidity crunch, said Manish Sharma, marketing director, Panasonic.

Dilip Modi, managing director, Spice Mobility said, Consumer durable companies are now trying their luck on the rural and semi-urban markets that contribute around 35% of the total sales of consumer durable items.

The consumer financing schemes which were a big lure for consumers a few years ago are also witnessing a down-trend as a result of the lessening popularity of such offers and non-experimental attitude of the big financial players.

Consumer finance schemes which used to contribute 15-20% to the overall revenue of the company now pass on only 5-7% to the total income. While companies are of the view that this is due to the high disposable income, experts view it as the absence of big financial players in the market.

According to experts, players like Citi Financials and ICICI were operating in this market but after their exit, the industry is left with a few of them. Mahesh Krishnan, VP, home appliances, Samsung India told FE, The percentage of consumer financing to the overall revenue of the company is only 8% against 15% about four years ago. This is because of increasing credit card schemes and higher purchasing power of the consumers which doesn't encourage them to go for such options.