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| 'Has the drought hit the rural market?' |
| Business Standard / New Delhi Sep 16, 2009, 00:39 IST |
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Low penetration levels for most products mean there is plenty of scope for growth and the September rains have mitigated the impact of the drought
 R Zutshi
Deputy MD Samsung India
The first quarter of the year was relatively slow for the consumer electronics sector due to global consumer sentiment and the impact of recession in India. All key consumer categories like colour televisions, refrigerators and washing machines showed low single-digit growth in the first quarter. Premium categories like LCD TVs, fully automatic washing machines and split air conditioners fared slightly better than the mass, volume-driven product segments like semi-automatic washing machines, window air conditioners etc.
The numbers looked better in the second quarter though the poor rains in July-August affected consumer sentiment, especially in Punjab and Uttar Pradesh in the north. Ironically, the delayed monsoons resulted in a spurt in air conditioner sales — the early rains in the north last year, in fact, lowered the growth in air conditioner sales! With poor rains in the second quarter, it would be fair to say that the quarter could have been far better than what it eventually has been — thanks to the fear of drought especially for consumers in non-metro and semi-urban/rural markets.
With rains in September, I think consumer sentiment is picking up and we are looking forward to high festival sales.
At Samsung, we have already announced attractive value added offers on our products for the festival period and are looking at sales of over Rs 1,700 crore from our consumer electronics business in the months of September and October.
In the year so far, we have seen a growth of over 25 per cent in terms of our consumer electronics business, with categories like colour TVs, LCD TVs and refrigerators leading the growth. The consumer electronics industry as a whole has shown growth in the year so far with premium categories like LCD TVs, fully automatic washing machines and split ACs continuing to grow in popularity.
New product/technology introduction and channel expansion by manufacturers have helped keep alive the momentum for these product categories. For example, the introduction of a new category of televisions in the Indian market in the form of LED TVs is creating excitement in the flat panel TV market.
Similarly, in the case of air conditioners, the star-rated, slim and stylish split ACs are catching the attention of more and more consumers. Star rating is increasingly becoming an important factor influencing consumer purchase, especially in products like air conditioners and refrigerators.
At Samsung, we have continued to introduce new, innovative products to create excitement in the market place and sustain growth. Thus, in the year so far, we have introduced over 150 models across our consumer electronics and mobile product categories. We have tried to reach out to consumers by expanding our channel, our own brand shop network as well as roadshows. We are carrying out Dream Home RoadShows — a four-days exhibition of Samsung consumer electronics products — in smaller markets to enhance the consumers’ awareness on our products.
Thus, on the whole, I see things looking up for the consumer electronics in the coming months and if Onam sales in Kerala are any indication, I think Diwali should definitely bring cheer to the industry.
 Jagdeep Kapoor
MD, Samsika Marketing Consultants Pvt Ltd
It is wrong, perceptually and actually, to say that the demand in rural markets has slowed due to poor rains. There may be a slowdown in the minds of marketers but there is no slowdown in the market place. To succeed in the rural markets, you need brains, and not just rains.
The Indian rural market is growing well and the consumption is robust across almost all categories.
One, due to the exposure of television, the electronic distribution of messages has reached deep down, and this has helped increase demand and hence consumption. You need to use brains to match the physical distribution. If the brands of products and services reach out physically — through electronic television messages, for example — growth rates are likely to rise.
Two, the rural consumer is a smart consumer. S/he has aspirations and demands that are same as that of the urban consumer. The continuing growth of the mobile phone category in the rural markets is a testimony to the fact that the rural consumer has a large appetite for consumption and that the market is growing.
Three, despite 100 years having gone by, the majority of India lives in the villages. In 1901, 89 per cent of Indians lived in rural areas. As many as 72 per cent of Indians still live in the rural areas today. Whether rural or urban, it is still a brand opportunity. India has now 68 per cent literacy with 83 per cent of urban people and 61 per cent of rural people being literate. This is quite an opportunity.
Four, the penetration among some categories is high, but in most categories, rural penetration is growing.
The penetration of product categories like bathing soaps/ liquid soaps is 95 per cent. The penetration of washing powders/liquids is 90 per cent and that of tea is 89 per cent. However, growth can be seen in categories like shampoo, with penetration of 74 per cent and toothpaste with a penetration of 56 per cent.
Interestingly, hygiene products are showing high growth — toilet cleaners and floor cleaners have a penetration of 14 per cent and 10 per cent respectively. Incidentally, in these categories, the penetration in urban areas is 31 per cent and 25 per cent respectively whereas it is only 6 per cent and 3 per cent in rural areas, .
In consumer durables, the demand for TVs continues to grow — TVs have a 76 per cent urban penetration and a 34 per cent rural penetration. Also, refrigerators are growing with urban penetration at 32 per cent and that of 5 per cent in rural areas. Washing machines have only 1 per cent penetration in rural areas and are growing. Computers have an urban penetration of 5.4 per cent while that in rural areas is less than 1 per cent. Air conditioners have an urban penetration of 3 per cent and a rural penetration of less than 1 per cent. Urban penetration of the moped/scooter/motorcycle category is 28 per cent and rural penetration is 10 per cent. This category is also growing.
Five, the transformation of rural consumers requires brands, and not just commodities to make the rural market grow in an uninterrupted manner. Consumers buy brands, not products or services. Therefore, we need to build brands to build businesses, to build profits. The move from ‘commodity’ to a ‘brand’ is a very big opportunity for marketers. Over the last few years, categories like salt, milk, atta and water have got successfully branded.
The rural market is growing, glowing and will continue to grow and glow.
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