Small town India turns saviour for durables majors

Small town India turns saviour for durables majors

Most consumer durables majors claim that their sales are almost at pre-COVID levels, and they are hoping for a great festival season too. However, bulk of this consumer optimism is coming from the smaller markets

The consumer durables sector has been one of the fastest sectors to have bounced back in the new COVID normal. As people get used to restricted living and are spending more time indoors, there has been a clear trend of spending more on gadgets and appliances in order to make their life more comfortable. As most homes don't have domestic help, there is an increasing trend of investing in appliances such as dishwashers, washing machines and vacuum cleaners. Most consumer durables majors claim that their sales are almost at pre-COVID levels, and they are hoping for a great festival season too. However, bulk of this consumer optimism is coming from the smaller tier 2-3-4 markets. "Almost 40 per cent of our revenue already comes from tier 3-4, and it is going to get better as per capita income of consumers in these markets have gone up," says Pradeep Bakshi, MD, Voltas.

The consumer durables arm of the Tata Group has made a Rs 108 crore profit in the first quarter of FY21, and Bakshi says that the tier 3-4 markets have been a major contributor. Rural growth has been in excess of urban, agrees Saurabh Baisakhia, President (Appliances), Usha International. "Our sales in smaller markets are close to pre-COVID levels. The extent of revival has been much faster in these markets." Lower incidences of the COVID-19 pandemic, good monsoons and increased spends by the Government have improved the sentiments in the smaller markets.

ALSO READ: BT Buzz: How Amazon, BigBasket, Grofers are pushing private labels over popular brands

The likes of Panasonic India are investing heavily to ramp up their operations in small-town India. The Japanese durables major has launched a separate business function called Bharat Marketing to focus on smaller towns and rural markets. "Bharat Marketing will focus on gathering intel on real-time information on inventory, identify insights from these markets in order to create and execute an effective strategy. For instance, places where there are frequent power-cuts we offer our fixed-speed, window AC range that helps regulate the room temperature despite power cuts. Similarly, we have focussed products such as direct cool refrigerators, semi-automatic washing machines and TVs from the starting range that are in demand across tier 2-3-4 markets. Continuing with our innovation, we have identified the potential demand for 250 litres, frost-free refrigerators across rural markets. We are already in the process of developing this new range to best serve our rural consumers," explains Manish Sharma, President and CEO, Panasonic India. Sharma says that tier-2 markets registered a 13 per cent and 19 per cent growth during the months of June and July, respectively. "Owing to the pent-up demand, first-time buyers and other positive sentiments such as favourable monsoon, the rural contribution is on a rise. This was majorly driven by the accelerated demand for microwave oven, LED TVs, direct cool refrigerators and semi-automatic washing machines across the rural regions," he further adds.

Consumer durables retailer, Croma has seen two-time higher sales from its stores in tier 2-3 towns such as Vapi, Mandya, Bhavnagar and Bhuj, says Ritesh Ghosal, Chief Marketing Officer, Croma. "People in these markets are worried about safety, so they prefer shopping in large stores which have more spread-out aisles."

ALSO READ: Consumption sentiment revives, but consumers more cautious than ever post coronavirus

Not only has small-town India bought more washing machines, refrigerators, microwaves and OTGs, their appetite to shop online has gone up too. Godrej Appliances all through the lockdown has invested in training its dealers across the country to have a digital interface. Kamal Nandi, Business Head, Godrej Appliances, says out of its 26,000-strong dealership network, 15,000 have e-stores. "Smaller markets contribute 65 per cent of our business and the percentage of online and video-assisted sales have gone up in these markets. A bulk of the consumers are asking for online video demonstrations and they mostly visit the stores only to close the transaction."

Usha International, says, Baisakhia, has created an online-offline business model, wherein it is encouraging consumers to place orders on their website and the product is being delivered by the local dealers. "We are trying to digitalise the entire buying process," points out Baisakhia.

ALSO READ: BT BUZZ: How Indian consumers are going the extra mile to build immunity