The burgeoning middle class in urban areas and aspirational demand from rural India, coupled with government reforms in the form of GST, are making the home appliances industry look positively toward the next phase of exponential growth.
Home appliances in India increased at a steady pace, driven by both major appliances and small appliances; in 2018, major appliances saw slightly higher growth than small appliances. Most categories within home appliances saw both retail volume and current value growth in 2018. The growing economy and the evolving lifestyles of Indian consumers are leading to a rise in the number of working couples, nuclear families, and single-person households, along with the migrant working population. Consequently, these evolving households have an increasing need for convenience and are looking for products that offer convenience and significantly reduce the time and effort spent on household chores.
In its 2017 union budget, the Indian government announced its plan to electrify 100 percent of rural areas by 2018. In April 2018, the prime minister declared that every single village in India now has access to electricity. Manufacturers have been focusing on innovations and new product developments by introducing products suited for Indian households and the Indian climate.
Appliance specialist retailers remained the most popular distribution channel in 2018, as consumers prefer to shop at physical stores to be able to touch and try out the product before purchasing. When buying any product, but especially major appliances, people continue to see it as a significant investment, and want to study and see the product physically before purchasing.
Revenue in the Indian home appliances segment is expected to amount to USD 1678 million in 2019. It is expected to show an annual growth rate (CAGR 2019-2023) of 13.9 percent, resulting in a market volume of USD 2821 million by 2023. User penetration is 13.4 percent in 2019 and is expected to hit 21.8 percent by 2023. In the Household Appliances segment, the number of users is expected to amount to 311.0 million by 2023. The average revenue per user (ARPU) currently amounts to USD 9.18.
India is seeing major changes in its policies, especially those related to the regulatory and business environment. The appliances sector and the upcoming national policy for electronics (NPE) will further bring about major policy changes for the industry. The India growth story is set for a major push given the low penetration levels of consumer durables save for the television segment.
The global home appliances market is experiencing steady growth with the growing middle-class economy, improved disposable income levels in a number of countries, increase in labor costs, busier lifestyles, and the availability of a range of home appliances at competitive prices. The global home appliances market is forecasted to grow at a stable CAGR of around 7.5 percent during the period 2018 to 2026 and will reach around USD 1.75 trillion by 2026.
Manufacturers are integrating their products with the IoT to make customers lives comfortable and convenient. IoT is the interconnectivity of physical objects and devices that are integrated with sensors and software that allows them to exchange and collect data. Major technologies enabling smart home appliances include Wi-Fi, Bluetooth Low Energy, micro server, and micro-electromechanical systems. Furthermore, manufacturers are mainly focusing on development of self-directed, smart appliances with the integration of intelligent electronic control, sensors, and machine programming methods.
Governments across the globe have implemented various stringent rules and regulations in order to guarantee energy efficiency for household appliances. This factor is boosting the consumer’s purchasing power. The competition between the home appliance manufacturers is growing intense in the global home appliances market fueled by the growing advances in technology and evolving customer preferences. Some of the product innovations introduced by leading home appliance companies such as improved features, design, and performance are expected to augment the growth of the global household appliance market over the next few years.
APAC will drive the largest growth for the global household appliances market over the next 5 years. About 51 percent of the incremental growth in the market will be driven by APAC, with EMEA, and the Americas making similar contributions of around one-fourth of the market size. The highest growth rate is owing to the availability of wide range of appliances, growing awareness toward various smart appliances and large population base in the region. Continuously changing lifestyle and growing inclination towards low priced and eco-friendly appliances are playing the major roles in the growth of regional appliances market. However, the Americas will display a faster rate of growth than EMEA by the end of 2023, while APAC will continue being the dominant region in the global household appliances market.
Upsurge in demand for refrigerators
Refrigerator is one of the first appliances that are purchased once the household income reaches an adequate level. Rising disposable income, availability of smart and energy efficient refrigerator units and widening base of nuclear families are leading to upsurge in demand for refrigerators and freezers for household applications. Furthermore, rising electrification of rural areas is projected to work in favor of the Indian market.
Globally, manufacturers have been focusing on the development and innovation of smart technology, especially in major kitchen appliances. The introduction of smart technology in appliances establishes an internet-enabled ecosystem that benefits the lifestyles of households in the long run. Only a few vendors have paved their way into the smart connected refrigerator space, with product offerings largely targeted at the developed markets.
Energy star rated refrigerators are in high demand as they are installed with efficient compressors, insulation, and defrosting features that help improve their energy efficiency. Thus, manufacturers invest in R&D to innovate energy-efficient products owing to rise in demand for such appliances. Convertible freezers which allow the user to create extra space by giving the option of converting the freezer compartment into a fridge have gained popularity amongst Indian consumers.
The year 2018 witnessed the entry of new players in refrigeration appliances in the country. Micromax Infomatics and Liebherr Appliances India were two new players which launched such products in India.
Manufacturers are bullish on washing machines innovation
Washing machines are seen as crucial for households, next only to refrigerators. Sales of washing machines are closely linked with the monsoon rainfall in India. The demand for washing machines is generally higher during the peak months between June and August, when the monsoon rainfall is high and in line with forecasts.
The global residential washing machines market is projected to reach USD 53,193. The market in India is witnessing over 20 percent CAGR growth, catapulting the India market to touch USD 4 billion by 2020. The penetration rate for washings machine has increased from 4.9 percent to 11 percent since 2016 and is expected to reach the level of 20 percent by 2020. However, it would still be under-penetrated compared to the global average penetration level of more than 50 percent.
Manufacturers are continuing to aggressively reach out to consumers to increase the penetration of home laundry appliances, through new product launches and significant marketing campaigns. Consumers’ willingness to spend on appliances on the back of rising disposable incomes and easy financing options have led to shorter replacement cycles, whilst the rising influence of modern lifestyles has led products such washing machines to be perceived as necessities rather than luxuries. Manufacturers have realized that they must develop and introduce products that are pertinent to the demands of Indian consumers. Some manufacturers have therefore introduced top load and front load washing machines with many features, such as auto-start in the case of a power cut, smart inverter technology in areas of limited power supply or frequent power cuts.
Water heaters in a developing phase
While water heater technology has advanced, these systems have remained essentially the same in concept since they were first invented – heat a tank of water to the desired temperature, and then keep it hot, so it is available when it is needed, albeit there are newer, better, and far more efficient systems. The water heating sales industry has witnessed significant change over the last 5 years as renewed confidence in the house building and construction sector continues, and the focus shifts toward more eco-friendly and energy-efficient products.
Asia Pacific water heaters market size will surpass USD 9 billion by 2025. Increasing demand for reliable, eco-friendly, and cost-efficient technology for hot water preparation is driving the solar water heaters segment. Its ability to offer low running cost makes its adoption preferable over its other counterparts. Improving infrastructure and rising availability of piped water facility across the rural regions in India are expected to drive adoption of solar water heaters in the country over the next 5 years. Implementation of GST is expected to have a positive impact on the organized solar water players operating in the country. The country is also witnessing a strong demand for polymer-based storage tanks, which provide better insulation and high resistance to corrosion.
Water heaters are still undergoing many changes as a number of factors continue to shape storage-type and tankless water heaters design. This is leading the manufacturers to develop innovative products that consume less energy. With consumers moving toward adopting tankless and high-efficiency water heater technology, the manufacturers are focusing on redesigning their products to maintain their position in the water heaters market.
The burgeoning middle class in urban areas and aspirational demand from rural India, coupled with government reforms in the form of GST, are making the appliances industry look positively toward the next phase of exponential growth. Along with rising incomes, the technological advancements to create connected devices and the concept of smart homes are changing the way consumers and the industry look at the products.
Consumers are becoming more and more technology savvy and manufacturers have to be ready to offer the best of technological advancements to the users and thereby increase investment into their R&D.