The buyers seem to be back. And with a bang. After a disastrous summer, TV, HA, and AC dealers are seeing a hustle and bustle in their showrooms, just like the pre-pandemic days. The industry is expecting festive season sales to exceed pre-pandemic levels. The ebbing of the second wave, a pickup in the vaccination drive, and increased footfalls in stores and malls is lending credence to this. Initially dismissed as release of pent-up demand, consumers’ buying pattern is now found to be more consistent. July and August both have been exceptionally good months.
There is an excitement in the air. With the Indian Premier League and the ICC T20 World Cup coinciding with the festive sales period, most brands have set targets to grow by over 15 percent this year. The second phase of IPL 2021 is being held in UAE and will begin on September 19 in Dubai. The ICC Men’s T20 World Cup 2021 in UAE and Oman will get underway from October 17, with the final to be played in Dubai on November 14.
Just ahead of the festive season, new products are being launched, as also new brands are making an entry. A case in point is Sony’s recent launch of two television sets, Bravia XR 77A80J OLED and 85X85J Google TV, and Acer’s announcement to enter the smart TV category in India. While Sony’s offer is for the high-end customers, Acer, catering affordable Taiwanese products in its computing product range, is most likely targeting the budget-conscious buyers. LG is ramping up its market presence with new branded outlets. Samsung India too is launching new product lines and offering loyalty programs to lure consumers. Manufacturers have tied up with consumer finance companies to come up with easy finance and combo offers.
The pandemic has acted as an accelerator for digital adoption, resulting in the universe of users growing in the last 16 months. Jehil Thakkar, partner, Deloitte India, reiterates similar sentiment, “The extent of use of digital services has doubled among existing users and new users have also begun using the medium.”
Consumers are shifting from offline to online shopping, and this factor is the key driving factor of consumer electronics e-commerce market. The global consumer electronics e-commerce market is expected to grow from USD 310.23 billion in 2020 to USD 343.34 billion in 2021 at a compound annual growth rate (CAGR) of 10.7 percent. The change in growth trend is mainly due to the companies stabilizing their output after catering to the demand that grew exponentially during the COVID-19 pandemic in 2020. The consumer electronics market is expected to reach USD 511.06 billion in 2025 at a CAGR of 10 percent.
Globally, nearly 53 percent of the global population (more than 4 billion people) is connected to the internet, and nearly all of them (92.6%) go online using their mobile devices. Internet connectivity has presented an opportunity of hassle-free shopping – anytime, anywhere. The internet accessibility, mobile technology, and digital innovations are changing consumer’s shopping experiences. With the building of customers’ trust in buying high-value products, including electronics on the Internet, the number of online shoppers is skyrocketing. Therefore, with the increased penetration of online shopping in consumers’ lives, the value of electronics e-commerce market is expected to only rise but not slowdown. Another significant indication is that consumers do not think they will go back to their old ways of shopping once the pandemic is over.
Another trend is a marked decline in brand loyalty. As the world navigates its way out of the pandemic, the way we all act as consumers has been changed fundamentally by Covid-19. This change is becoming permanent, leaving retailers and manufacturers with the challenge of attracting and retaining consumers in an omnichannel world, where customer loyalty is hard-won.
Consumer electronics and appliances industry had witnessed sharp contraction in demand in 1QFY21 due to the outbreak of Covid-19 and subsequent restrictions. However, demand has been improving from 2QFY21 due to ease in restrictions and is backed by pent-up demand. Further, festive season also supported the growth in the third quarter of the current financial year. This momentum continued in 4QFY21. In FY2022, production is expected to grow in the range of 5 percent to 8 percent. Work-from-home culture is expected to aid the growth in demand for goods that enhance personal convenience at home. Also, rural demand could outgrow the demand from urban markets on the back of rising rural incomes and government initiatives taken in relation to rural electrification. Long-term demand prospects for the industry remain positive, supported by growing working population, higher disposable income, easier access to credit, and improving standard of living.
Covid-19 has exposed the volatile nature of the supply chains. The more complex a supply chain is, the more susceptible it is to interruptions. Therefore, manufacturers are advised to look for suppliers adjacent to them to reduce the risk of costly delays in manufacturing lines and minimize lead times.
With the adoption of cutting-edge technologies, the demand for electronics will continue to increase. The recovering automobile industry, current consumer electronics markets, and cutting-edge technology rollouts have propelled new electronic production capacities to critical levels. Luckily, the semiconductor and PCB industries have rallied by improving existing manufacturing lines and investing in the accelerated creation of new facilities. However, it will take time for the production overload to level out.
Inventories have never been managed better and supply chains well-stocked. The shortage of components and adequate supplies is lurking over the horizon. While the cost of key components as chips, compressors, motors, chipsets, and panels is sky-rocketing, supply from China and Taiwan remains a major concern.
The unofficial ban on ships to China that have Indian sailors, delay in shipments due to shortage of cargo ships, the higher logistics charges to the tune of an additional USD 700 to USD 800 on top of the USD 3000 that is charged for a container shipped from China to India in some cases, disruption in supplies from some parts of China facing record rains, recent closure of factories in Zhengzhou, from where LED panels are sourced due to considerable flooding, have all added to the Indian manufacturers’ woes.
This has led to a 10–12 percent cost escalation, resulting in a 4–6 percent price hike across products and another 2–4 percent hike in October in the offing. Take the example of Blue Star. In January 2021, the company increased the prices of its air conditioners between 5 percent and 8 percent, then between 3 percent and 5 percent depending on the models in April, and is now planning another 3 percent hike from September.
As the threat of a possible third wave of coronavirus looms large, a committee set up by the Union Home Ministry expects the third wave to reach its peak around October. Earlier, a report prepared by SBI Research – COVID-19: The Race to the Finishing Line claimed that the third wave peak will arrive in the month of September 2021.
The uncertainty is keeping the industry and trade fraternity on their toes!