At the turn of the century, Indian electronics shops were dominated by LG and Samsung. For about a decade, the Korean brands seemed to have edged out Japanese ones such as Panasonic, Sony and Sharp. And then, just when everyone had written off Japanese brands in India, they struck back.
Part of the reason for the long lull was that Japanese companies were focused on China. But as Japan's relationship with China grew strained, it turned to India. "There was some disillusionment towards China because of political and economic skirmishes, so for Japan, it is about rediscovering India," says Arvind Singhal, Chairman of advisory firm Technopak.
Panasonic, came to India in 1972, had all but vanished in recent years. In 2007, its revenue had shrunk to Rs 300 crore. It had stopped selling most of its products, including mobile phones, which were a big hit in 2001 and 2002. "India was a big gap, and we were sleeping from 2002 to 2008," says Manish Sharma, Managing Director, Panasonic India.
Panasonic Thailand CEO Daizo Ito moved to India in 2008. Panasonic India drew up a four-year strategy and set up a lifestyle research centre to design products for the Indian market. The first product, a 32" flat television, was priced 20 per cent below Panasonic's global products, and was loud, in keeping with Indian preferences. In 2010, the company launched the Cube, a split air-conditioner that was about 15 per cent cheaper than others in the market. In five years, Panasonic India's revenue grew more than 12 times, reaching Rs 3,700 crore in 2012/13.
Other Japanese brands - Daikin, Sony, Toshiba, Hitachi and Sharp - also started snapping at the heels of the Korean duo, which had about half of the market around 2006/07. Consumer durables (excluding mobiles), according to the India Brand Equity Foundation, were estimated at $7.3 billion in 2012. Technopak puts the consumer durables and IT market at $29.4 billion in 2013, and expects it to reach $52 billion in the next 10 years.
Japanese companies have been investing heavily in India. AC maker Daikin has invested Rs 1,064 crore. Sony has invested Rs 650 crore in the current financial year, about half of it in smartphones. A couple of years ago, Panasonic announced it would invest $300 million - then equivalent to around Rs 1,700 crore - over three years in India. It started making LED TVs, washing machines and refrigerators in the country. "Some more new manufacturing lines are coming up," says Sharma.
Daikin, which for a long time imported ACs into India, started making them here a couple of years ago. It also slashed prices by 40 per cent to fight competition. "Here the opportunity is immense," says Kanwal Jeet Jawa, Managing Director, Daikin India. "In Japan, the AC market is almost saturated, and here it has only three per cent penetration." By contrast, the figure is 80 per cent for the US and 35 per cent for China. Jawa says Daikin is already the second largest AC maker in India by revenue, and will soon become the largest, overtaking Voltas.
For some companies, India has become so important that their other global subsidiaries are taking their cues from it. For instance, Sony Europe's President, Masaru Tamagawa, said in January 2013 that that he wanted to replicate the Indian working style, product strategy and distribution model elsewhere. Globally, Japanese brands, including Sony, are struggling to get the volume game right. "India is a volume market," says Raghu Viswanath, Founder and Managing Director of advisory firm Vertebrand. "To keep the fortunes of the business alive, they have to keep the volumes up."
Sony India grew 30 per cent in 2012/13. It expects the same growth rate this financial year, and revenues Rs 10,400 crore. The success of its Xperia smartphones has helped growth, as have flat TVs, cameras and other products.
Sony's growth was slow around 2005/06, says Sony India marketing head Tadato Kimura. So it decided to focus on the middle-income segment, which it had ignored earlier, fearing dilution of its premium appeal. "In 2010, Sony decided to go after the new segment," says Kimura. It launched smaller flat TVs and youth-oriented smartphones. Small-screen TVs account for about half of Sony's flat TV sales, and smartphones for 30 per cent of overall revenue.
Launching new models and increasing categories is the new normal for Japanese brands in India. Toshiba, which once sold only IT products such as laptops, started selling flat TVs. In 2011, it combined its TV and computer businesses to make the most of its distribution and marketing networks.
"Pooling resources, introducing locally fit products and aggressive marketing campaigns helped us reach significant market share," says Sanjay Warke, Country Head of Toshiba India's digital and services division.
Japanese brands have always enjoyed a reputation for good technology. But they are going beyond it to pitch to Indians. Korean rivals rose in the early 2000s thanks mainly to affordable prices. Customers are willing to pay a bit more for Japanese brands, but more realistic prices have helped Japanese companies in India. Many have roped in celebrity endorsements - Toshiba has signed up cricket legend Sachin Tendulkar, Panasonic has Ranbir Kapoor and Katrina Kaif, and Kareena Kapoor endorses Sony. Japanese companies have also focused on increasing their touch points in recent years.
Sony now has 18,000 and Panasonic has 1,400. All brands are also opening their own exclusive stores.
The consumer durable market saw a big change in the late 1990s, when Korean rivals zoomed past Japanese companies. Now the Japanese are back - and stronger than before.