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Buyer aspirations drive consumer durables sales

Monday, October 25, 2010

The demand for consumer durables in India has always depended on two things – the aspiration felt for certain products, and the affordability of such products for the targeted population.

Over the past several years, the disposable income of Indian consumers has grown significantly. In the meanwhile the prices of most consumer durables have fallen substantially. As a result, affordability is not an issue for a large number of Indian consumers.

On the other hand, the aspiration to move on to modern technology has been kindled across product categories. In the television segment the aspiration is driven by LCD/LED TVs, in washing machines it is driven by fully automatic and front loading washing machines, in kitchen appliances it is driven by microwave ovens, side-by-side refrigerators and induction cookers, in IT products it is driven by laptops and netbooks. Therefore, across the consumer durables spectrum, there is no dearth of aspiration for high-end products that are priced at a premium to average products in the category.

In rural India, the improved disposable incomes arising out of Employment Guarantee Schemes as well as the improving access to credit is already resulting in strong demand for entry-level products in each category, whether it is 14” TVs, 165-litre direct-cool refrigerators, basic washers, or mobile phones. Thus, rural demand is another major engine of growth for the consumer durables industry.

This fundamental combination of a dramatic improvement in affordability and an explosion of aspiration for high-end and entry-level products will ensure that the durables market in India grows handsomely for the next five to six years.

In this play between aspiration and affordability, the festival season brings two key factors. On the demand side, employees getting festival bonuses during Diwali season mean better cash availability for big-ticket purchases. Another segment of consumers are not really constrained by cash, but are waiting for “the right time to buy” when the offers are most attractive.

On the supply side, marketers also tend to put their best foot forward during the festival season, launching their latest products as well as spending more on advertising and promotions. Therefore the season marks a happy coming together of supply push and demand pull, leading to a spike in the sale of durable products.

One trend that is felt by several durables marketers over the years is the lower importance of the festival season among urban Indian consumers, for whom affordability is not an issue, and best-offers are available round-the-year. These buyers don’t wait for festivals to buy a gadget they need.

Another trend over the years is the shrinking timeframes for festival buying. Nowadays the entire impact of festival buying just gets over in a couple of weekends. This shrinking of buying window puts a lot of logistic pressures on the supply chains of retailers as well as manufacturers. Those who are ‘quick’ to respond to demand get the results and their brands do not suffer.

This season is widely expected to be a good one for consumer durable brands, as the monsoon has been good (critical for rural demand), and economic growth and market liquidity have also been very good.

Sriram Krishnamurthy can be contacted at
 

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