The market is gradually shifting to the bottom of the pyramid. Economies of scale will come from this segment. But we will enter the smaller markets only after establishing a strong after-sales service network there
By Venkata Susmita Biswas
Homegrown electronics brand Onida has been jostling for space in the consumer durables market in India that is ruled by Chinese and Korean brands. Declining sales and the waning ‘Devil’ appeal notwithstanding, the company is now focussing on other product categories and newer markets to boost growth. Edited excerpts of Vijay Mansukhani’s conversation with Venkata Susmita Biswas:
Sales at Mirc Electronics have fallen by `83.66 crore in FY19, with losses of `4.4 crore. What led to this?
Negative market sentiments are to blame for this. In the run-up to the elections, there was apprehension about whether Prime Minister Narendra Modi will come back to power. This uncertainty led to people halting purchases. Before GST was implemented, companies indulged in sales tax avoidance by claiming to have manufactured products in India. Onida did not do that; so our brand equity suffered between 2013 and 2017. The introduction of GST created a level playing field, and things began to look up for Onida. But now, Korean and Chinese companies are manufacturing in Vietnam and Thailand, and bringing them back to India at zero percent duty because of the Free Trade Agreement (FTA), while Indian companies like ours are having to pay 10% duty.
How do you plan to tackle this situation?
We will request the government to reduce the custom duty on raw materials to zero, and increase the duty on finished goods. Indian manufacturers cannot fight Chinese and Korean companies under present conditions. FTA does not aid job creation in India, nor does it support the cause of Make in India. We feel FTA should be selective and not apply to product categories that can be made in India. Aside from this, we are hoping for a reduction in GST.
We will also have to start swimming downstream. We have always positioned ourselves as Neighbour’s Envy, Owner’s Pride, and have manufactured high quality products in India. But if needed, we will change our strategy very fast to keep up with competitors.
Onida has been a legacy TV set brand. But with so many formidable players in the market today, how do you stand out?
In the TV space, we have picked sound as the differentiator. The panels and microprocessors are commoditised, and all manufacturers need to buy them from three or four companies. Our top-of-the-line product has 3,500W speakers — comparable to music systems. We are also in talks with OTT players and device manufacturers like Amazon Fire Stick for strategic tie-ups in the TV space.
From washing machines to microwaves and ACs — which product segment are you betting on for growth?
We are betting on washing machines for now. We have introduced a brush to add another level of scrubbing that is necessary for Indian outdoor conditions. Even though washing machines currently contribute only 20% of our annual revenue, this is the segment that is growing the fastest.
India is a price-conscious market… there is no denying this. Additionally, the market is gradually shifting to the bottom of the pyramid. Economies of scale will come from this segment. But we will enter the smaller markets only after establishing a strong after-sales service network there.
Onida does not have a strong e-commerce presence. Why?
Online sales are negligible for Onida. The market operating price is very hard to control in the online space. Therefore, we are far more aggressive in the offline sales channel. We are present in 10,000 multi-brand retail outlets, and have a higher footprint in semi-urban areas because the cost of sales is low in those markets.
Onida has not launched any new ad campaign since IPL last year. Is advertising not a priority for you right now?
While we did bring the ‘Devil’ back last year, for the current year, our advertising efforts will be focussed on in-store display. Instead of spending more money on ATL activities, until such time that we do not achieve a critical mass, we will spend money on BTL activities to catch the attention of the customer when he actually comes in with the intent to buy.
The ‘Devil’, though widely popular in the ‘90s, does not resonate with young audiences today. How do you appeal to them?
It is for this purpose that we have invested in manufacturing products equipped with smart assistants. These products appeal to the millennial generation. We hope that new-age consumers will relate to these products. The value of these products will generate brand equity for Onida.