The share of online sales in the home appliance segment is expected to rise to 10 percent in 2019. According to a report by Elara Capital, in this segment, the online channel share is expected to jump two-fold to 7-8 percent in 2018 versus 3 percent in 2017.
“The share is expected to rise to 12 percent by 2020,” said the report. At present, the online channel constitutes 30 percent of the total mobile phone market and the report expects its share to touch 40 percent by 2020.
“Implementation of goods and services tax (GST) has led to better warehouse facilities, pick up in volume, cost efficiency and improvement in overall supply chain along with the removal of price differences across states,” the report added.
What is driving the demand?
Rising spending habits, improved electricity availability, technology advancement and evolving lifestyles are driving demand for consumer appliances in India. The report said exposure to global technologies and lifestyle has created a shift in perception, with consumer durables no longer just viewed as utility products. Indians today are seeking better-designed products for comfort and convenience.
Blissful 2019 for the consumer appliances industry?
The year 2018 was a washout year for the consumer appliances industry, owing to unseasonal rains, a weak festival season (Onam and Diwali) and floods in South India. The rise in customs duty and currency depreciation further dampened overall market sentiments.
“Looking at the trends of the past seven years suggests every bad year is followed by a good year. If this trend were to continue, which is believed by industry participants, 2019 would be a blissful year,” the report said.
The consumer electronics and household appliances market size currently stands at Rs 90,000 crore according to Indian Brand Equity Foundation (IBEF) and is expected to post a compounded annual growth rate of 8 percent to Rs 2 lakh crore by 2030.
Shortening of replacement market cycle
The replacement cycle of consumer appliances market is shortening, which could drive growth in some product segments. According to the report, this is expected to bolster volume growth over the medium term. The replacement cycle has reduced over the past decade with televisions at five years, washing machine at 8-10 years and mobile phones at two to three years.
Lights up on volume but down on prices
India’s lighting industry is expected to grow by 15-20 percent, according to Electric Lamp and Component Manufacturers Association (ELCOMA), driven by strong volume growth due to a shift to LED lighting from CFL & incandescent bulbs. However, the report said increased competition, low barriers of entry, and fall in raw materials prices are leading to a decline in product prices.
Although prices have hit bottom in LED bulbs, there is still a room to reduce prices in other LED luminaries by 10-20 percent due to change in design. In the long run, Elara Capital said only 6-7 firms will remain in the lighting industry, just as in the CFL industry.― Moneycontrol