New Appliance Makers Forced To Take Online Route To Sales

The Indian consumer durables market may have turned attractive but is equally hard on new players looking for an entry. While being price-sensitive, customers prefer the physical review of products before a purchase. This creates a dilemma for smaller brands eyeing a presence. They either have to shell out extra bucks to break into the clique that manipulates local dealerships making their products uncompetitive or sell online, where customers are skeptical to buy.

In the consumer durables space, the ‘clique’ refers to a group of large multinational companies that dominate the offline market.

“These brands are popular among customers, but Indian buyers are price sensitive. If a cheaper brand hits the stores, it is a given that they will attract higher sales. However, we are unable to offer store space because of pressures,” said the Western zone manager of a large white goods retail firm.

Online versus offline

At present, the online market constitutes about 10 percent of the Rs 1 lakh crore consumer durables industry. These include more than 50 brands from across the world.

“We have been trying hard to get brand visibility in the offline retailers. However, it has been a tough task so we have stuck to the online retailers,” said the India head of an Asian home appliance company.

Price is the main differentiator online. Unlike offline stores where brand visibility and presence in stores play a key role in what sells, the top-selling consumer durables brands online are those that are the cheapest.

However, players are of the view that this platform is also fraught with challenges. Most of the sales happen based on the reviews which buyers leave on the website.

“Unlike the large brands which don’t depend on one channel for sales, smaller players face huge challenges. One we are not able to have physical service centres across the country due to cost pressures, and on the other any negative rating for the product online impacts sales,” said the regional head of a global television maker.

He added they are not contemplating setting up exclusive brand stores to sell their products. They are in talks with real estate developers to strike a deal to get commercial space.

Thin margins

Unlike the large multinational appliance companies, online players operate on a wafer-thin margin owing to the heavy discounts that they offer. Not only are the prices at least 10-15 percent lower than stores, but special cash backs/offers are also given on card payments. During flash sales that last only for a few hours online, the numbers take a further beating.

A new-age retailer that entered the market earlier this year is mulling a tie-up with banks so that customers buying a house could be offered home appliances at a cheaper rate. They are waiting for regulatory clarity on this matter.

Way forward

Customers in smaller towns are slowly turning tech-savvy and open to online purchases. So having an online presence could be a hidden boon for the younger appliance companies. While they have been impacted by the larger companies’ anti-competitive practices, for now, the focus of these firms is to ensure to maintain product quality and drive efficiency in service delivery.― Moneycontrol

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