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Rs 2,600 crore air coolers industry sees degrowth of 25%; extended summer to revive demand

The organised air cooler industry is estimated to be approximately Rs 2,600 crore in terms of value and it was estimated to have sold close to 3 million units last year, believe industry experts

twitter-logoNidhi Singal | June 4, 2020 | Updated 14:41 IST
Rs 2,600 crore air coolers industry sees degrowth of 25%; extended summer to revive demand
As most of the warehouses were non-operational due to complete lockdown, it also impacted the supply chain

Nationwide lockdown to curb the outbreak of COVID-19 in late March has resulted in loss of sales of air coolers. The lockdown coincided with the beginning of the summer season, which happens to be the largest contributing months for the business. Anuj Poddar, Executive Director, Bajaj Electricals Limited, says, "We are expecting a 50 per cent decline in overall sales figures for the industry, which is quite massive considering the category is strictly seasonal. Close to 85 per cent of the total air cooler business gets generated during the first six months of the calendar year i.e., from January to June every year. However, this year due to the pandemic and the subsequent lockdown we could not capitalise on the summer season."

The organised air cooler industry is estimated to be approximately Rs 2,600 crore in terms of value and it was estimated to have sold close to 3 million units last year, believe industry experts. Ravindra Singh Negi, President - Electrical Consumer Durables, Havells India, adds, "industry has witnessed an estimated degrowth of 20-25 per cent in quarter fourth of the financial year 2019-20. However, on an annualised basis, the market has remained flat for the financial year 2019-20."

Challenges

Due to the outbreak of COVID-19 and subsequent lockdown, there have been a lot many challenges. As most of the warehouses were non-operational due to complete lockdown, it also impacted the supply chain. On the other hand, while consumers want to buy appliances to beat the summer heat, social distancing norms and overall pandemic fear is keeping people away from the stores for some time. Owing to the current crisis, consumers are also changing their investment priorities, and deferring purchases, which has also resulted in a drop in the consumption in the market. Some of the major pain points also include the irregular days of operation for standalone stores (odd/even), stricter consumer financing for customers, shorter operating hours of stores, shut-down of major retail chains in malls. Almost 20-21 per cent of India is still in the red zone, making it difficult to operate in those areas.

"We are in peak summer season and demand for cooling products including air coolers are usually high during this period than normal times. The demand has plummeted due to the COVID-19 crisis and has greatly impacted the overall consumer sentiment. While we are expecting the lockdown to end soon, however, it will be lifted in a phased manner with social distancing and other precautions in place. Hence, we expect that sales will not pick up immediately, which means that the entire summer sales will undergo a steep drop," explains  Amit Jain, Product Group Head - Air Coolers, Godrej Appliances.

Godrej Appliances ventured into the air cooler market (premium desert cooler segment) right before the industry was hit by COVID-19 pandemic.

Reviving sales

With the ease of lockdown and unlock 1.0 and supply chains getting streamlined, there has been some traction in terms of sales. "The north zone including Uttar Pradesh, Punjab, Haryana, Chandigarh, among others are experiencing heatwaves and above-average temperatures. With markets opening gradually and given the heatwave, a short spurt in demand in immediate future is anticipated," adds Jain.

Normally summer sales start in the south & west and culminate in north & east. But due to delayed summers, companies are witnessing demand across all geographies. There was a spike in the demand from north and east due to the ongoing heatwave. Companies are hopeful that the delayed summers - June and July - will also help in the sales of air-coolers. But with the monsoon expected to approach on time, the demand for coolers might decline further. The new lifestyle of stay at home, which includes work from home, education at home and even entertainment at home, is likely to beef up the demand a little. "We also see a trend that digital and home comfort will thrive since most people will be working from home or staying at home and therefore appliances that will ease the brutal summers or bring comfort to consumers will sell more. It is a possibility that we will be able to even out business growth in the next two-three quarters, considering there is no second wave of the pandemic. There is a pent up demand from all demographics," says Saurabh Baishakhia, President Appliances, Usha International.

For Crompton Greaves, things seem to be moving in a positive direction. Sachin Phartiyal, Vice President, Appliance Business - Crompton Greaves Consumer Electricals Ltd., says, "The lockdown had temporarily impacted sales but with the curb being pulled off in a few regions, the category is bouncing back. Air cooler is a product that is plug and play, therefore, it works efficiently with open doors and windows. We registered a growth of around 50 per cent in this category. E-commerce and trade have helped in achieving this growth." Crompton Greaves claims to have a strong foothold in Bihar, Andhra Pradesh, Punjab, Delhi, Uttar Pradesh and Rajasthan.

"What seemingly appeared to be a great start for the season in early March 2020 came to a halt with the lockdown. Having said that, the industry growth will depend on how summer pans out. We are already seeing a revival in the demand on the back of rising temperatures across several states in north India. An extended summer will help the air cooler industry to get back to its feet," says Salil Kappoor, Business Head, Home Appliances, Orient Electric Limited.

Connecting with customers

All this while, companies have been working at the back-end for streamlining the operations in-line with the government directives, and at the same time keeping the customer concerns in mind. With consumers reluctant to visit stores, companies are coming up with innovative ways for the consumer to experience and shop air coolers.

Usha International has created a booking platform for air-coolers and is home delivering goods in permissible zones with contact-less deliveries in sanitised boxes. The customers can also visit the website and seek assistance in choosing the right kind of air-coolers in accordance with the size of their room/homes and usage.

Godrej Appliances has introduced video-assisted remote selling initiative, where customers are provided with the option of a scheduled live demo via video call with the brand's store-based advisors followed by flexible payment options. Many stores/retail chains are extending discounts on the sales to liquidate their stocks before the season ends. These discounts are at the seller's discretion.

Even Bajaj Electricals is offering a 10 per cent discount on its website. There are several affordable financing options that a customer can opt for to easily purchase a cooler of his choice. Companies are ensuring that the air coolers are available in all possible channels - offline trade as well as e-commerce platforms - giving consumers the convenience to buy the product form their preferred channel.

Also read: 'Coronavirus lockdown draconian; India flattened the wrong curve of GDP': Rajiv Bajaj tells Rahul Gandhi

Also read: Moody's says India's retail, SME loan quality may deteriorate as well

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