The future of consumer appliances in India looks bright in the coming years, with an increase in the penetration of appliances expected.
The home appliances market is passing through a very interesting stage in India. It is one of the fastest growing categories in India, and experienced healthy growth in 2017. The market will foresee double-digit growth reinforced by surging rural consumption, reducing replacement cycles, increasing penetration of lifestyle appliances, and availability of multiple brands at various price points.
The Indian home appliances market is expected to reach `140,000 crore (USD 20.6 billion) by 2020. The market will grow due to easy availability of finance due to increased rivalry. The major driver of this industry is the rise in per capita income, which has led to increased consumer spending. Increasing urbanization, rising working class population (particularly women), and new product development are also contributing to increased demand. With busy lifestyles, convenience is set to be the key area of focus. Need for convenience drives embracing of new, evolving products like front load/semiautomatic washing machines and microwave ovens. However, a major constraint is the cost of the appliances; manufacturing these products requires specialized technological equipment, which comes at a great cost. Competition is very high as the five largest manufacturers of appliances in the world account for almost half of global sales.
The refrigerators market is expected to grow with a CAGR of more than 5 percent over the next 4 years. Direct cool refrigerators dominate the Indian market whereas frost-free refrigerators are fast becoming popular among urban households. The washing machines category is still some distance away from the inflexion point, unlike refrigerators. However, players are trying to influence penetration for the category with many new launches and heavy marketing campaigns. Fully automatic machines have surpassed the sales of semi-automatic ones in the last 2 years, which indicates that there is a trend of premiumization in the market. The Northern parts of India churn the majority of revenue in the market whereas the East is the lowest penetrated region. The overall demand for microwave ovens could increase due to the elevating inclination of consumers toward a high outlay on first-rate kitchen appliances. The demand for water heaters has been increasing over the last few years on account of growth in the construction sector and increasing disposable incomes and is expected to reach `2880 crore by 2022, which translates to an annual increase of 12 percent.
Urban versus rural India. The Indian home appliances market is a mix of high-volume, low-value models that have different levels of adoption across the country. Urban markets account for the major share (65 percent) of total revenues in the appliances sector in India. With 35 percent annual growth, rural India exhibits a lot of scope for growth. Consumption is expected to grow in these areas as penetration of brands increases. Rapidly shrinking replacement cycles for appliances sustain demand in urban India while existing low penetration rates and increasing usage of consumer durables have catapulted rural India to a high-demand generating segment.
Increasing demand for premium appliances. The growing importance of home appliances is encouraging the demand for unique and premium models.. With the increasing number of high-net-worth-individuals (HNWIs), the demand for luxury appliances is growing , fuelling this market’s growth.
Online versus offline retail. Sales of consumer appliances through online channels saw the fastest growth in 2017, but there is a long way to go to catch up with offline stores. India’s overall retail opportunity is substantial, and coupled with the demographic dividend and rising Internet penetration, there is a strong growth in the e-commerce market. The Indian government’s Digital India project is expected to boost the adoption of e-commerce in remote corners of the country. Higher financial inclusion through mobile and increasing connectivity in rural India will also lead to an increase in trade and efficient warehousing, thereby presenting a potentially large market for home appliances. In order to tap into the potential of India’s hinterland, Internet retailers are looking to further streamline their logistics and improve turnaround time to effectively cater to the growing consumer demand.
Rising changes in the design of home architecture. Over the last 8–10 years, consumer preferences toward home architecture have undergone a considerable shift. Consumers demand more built-in appliances to save floor space. This is an important factor driving the growth of the home appliances market like built-in microwave ovens, refrigerators, cooker hoods, dishwashers, cooking products, and others. They are heavily investing in kitchen designs that are sophisticated yet easy to maintain. These changing preferences among consumers are encouraging the key competitors to add new streamlined appliances to their portfolio.
Smart appliances paving the way. Revenue in the Indian smart homes market is expected to amount to `58,300 crore (USD 870 million) in 2018 with CAGR of 59 percent during 2018–2022, resulting in a market volume of `3,72,450 crore (USD 5559 million) in 2022. Household penetration of smart home appliances is expected to hit 7.2 percent by 2022. The average revenue per installed smart home currently amounts to `6583.58 crore (USD 97.59 million).
Support from the Government
Business-friendly policies of the Government of India, stable political leadership, and turmoil in certain economies around the globe have together created a conducive investment climate in India, further boosting the domestic manufacturing. The Government of India has allowed 100 percent foreign direct investment (FDI) in the consumer electronics and home appliances manufacturing sector through the automatic route and 51 percent of FDI in multibrand retail. This has become a key attraction for foreign investors. Moreover, the National Policy on Electronics (NPE) that was drafted in 2011 to boost the Electronic System Design and Manufacturing (ESDM) industry plays a vital role in the growth and upscaling of the home appliances market in India. Moreover, Make in India drive is paving the way for India to become a hi-tech manufacturing hub. In addition, the Indian government has initiated plans to electrify 100 percent of the country by the end of 2019, thus, increasing the demand for home appliances.
The future of consumer appliances in India looks bright in the coming years, with an increase in the penetration of appliances expected. Growing Gen Y population will dictate consumer dynamics and purchasing behavior. Price consciousness will remain a key factor among the middle class population. Ease of operation and demand for comfort will continue to steer lifestyle and evolution trends. Demand for appliances like refrigerators is likely to witness growing demand in the rural markets as the government plans to invest significantly in rural electrification. Technology will play a vital role in product penetration, adoption, and differentiation. With the industry showing a higher preference for technology, companies will focus more on revamping their product portfolios and marketing strategies.