Consumer durable players see growth in rural market

Consumer durables companies like Samsung India expect the rural market to contribute 24-25% of their full year sales post Diwali. However, a majority of consumer durables companies in the metros are yet to tap the highly-lucrative rural market after enjoying superb sales during this festive season.

Most players like LG, Haier and Akai, believe that the rural markets have huge potential and they only see it growing from here onwards.

Shanta Roy Sanjeev, Head-Marketing, Haier Appliances India, reckons that they are working out strategies to tap the rural market but currently have no exposure to it. "The rural market remains untapped and we are working towards strategies which will cater to the specifications in this space," said Shanta. For LG, which occupies a majority of consumer durables market, has 5% rural penetration. However, it is going to see it increasing. "Rural market contributes to 15-20% of our total revenue. Currently, LG has 5% penetration in rural market and 34% penetration in urban areas and we plan to further increase its reach to 15% in rural and 40% in urban markets by 2015," said Moon B. Shin, Managing Director, LG India. According to Crisil, a credit rating agency, the consumer durables industry is Rs 25,000 crore in size and growing at 17-18% per annum. However, the rural sector's contribution to the industry could not be ascertained.

Akai India, relatively a new entrant, has a very negligible presence in the rural markets. However, it is also very confident about potential of the rural market. Pranay Dhabhai, Managing Director, Akai India, says, "Indian rural space still emphasises on buying new items during festivals which implies that the market has a lot of potential." He also adds that the over-all rural penetration has been pretty high for the entire consumer durables sector. "It normally changes from product to product. For example, CRT TVs have contributed about 80% of the total sales. And LEDs and LCDs contribute only 20%. Going forward, the rural market will grow for all products considering the market remains untapped." For an early entrant in the market like Samsung, which has been able to get more time to study the rural sector, has found the rural space contributing as much as 25% to their overall sales for the company. Ravinder Zutshi, Deputy Managing Director, Samsung India observes that the rural market seems positive on the growth front and "rural sales should contribute 24-25% of our full year sales in Consumer Electronics."

Shantanu Das Gupta, Vice President, Corporate Affairs and Strategy Asia South says that the rural market is hit by food inflation which has affected sales, "If we look at India as divided by income, and not urban and rural, then there are two distinct trends that we are witnessing over the last two or three months. Households with a limited budget have been impacted by food inflation and we are seeing a softening of growth in segments purchased by them, such as low capacity single door refrigerators and semi-automatic machines.

The other half, the relatively wealthier household, continue to buy as usual. Hence, we have seen a slowdown of growth in the mass segments - driven, we believe, by food inflation - while the premium segments continue to thrive."


21 November — The Sunday Guardian.