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TRANSCRIPT
A
Research on
―Purchase Pattern of consumers for
Consumer Durables along with
Preference towards Organized &
Unorganized Retail Formats”
In Partial fulfillment of MBA Program of Gujarat University
(Batch: 2008-2010)
Submited By Submitted To
Priyam Mehta (08059) Prof. Praneti Shah
Umesh Lukhi (08052)
N R institute Of Business Management
2010
A
GRAND PROJECT REPORT ON
―Purchase Pattern of consumers for Consumer Durables
along with
Preference towards Organized & Unorganized Retail
Formats”
IN PARTIAL FULFILLMENT OF TWO YEARS MASTER OF
BUSINESS ADMINISTRATION PROGRAMME
PROJECT GUIDE PREPARED BY
Prof. Praneti Shah Mehta Priyam (08059)
Umesh Lukhi (08052)
BATCH: 2008-10
N.R. Institute of Business Management
I
Preface
Before the liberalization of the Indian economy, only a few companies like Kelvinator,
Godrej, Alwyn, and Voltas were the major players in the consumer durables market,
accounting for no less than 90% of the market. Then, after the liberalization, foreign players
like LG, Sony, Samsung, Whirlpool, Daewoo, and Aiwa came into the picture. Today, these
players control the major share of the consumer durables market. Consumer durables market
is expected to grow at 10-15% in 2007-2008. It is growing very fast because of rise in living
standards, easy access to consumer finance, and wide range of choice, as many foreign
players were entering in the market with the increase in income levels, easy availability of
finance, increase in consumer awareness, and introduction of new models, the demand for
consumer durables has increased significantly. Products like washing machines, air
conditioners, microwave ovens, color televisions (C-TV) were no longer considered luxury
items. However, there were still very few players in categories like vacuum cleaners, and
dishwashers Consumer durables sector is characterized by the emergence of MNCs, exchange
offers, discounts, and intense competition. The market share of MNCs in consumer durables
sector is 65%. MNC's major target is the growing middle class of India. MNCs offer superior
technology to the Consumers whereas the Indian companies compete on the basis of firm
grasp of the local market, their well acknowledged brands, and hold over wide distribution
network. However, the penetration Level of the consumer durables is still low in India. Indian
Consumer durables market used to be dominated by few domestic players like Godrej,
Voltas, Allwyn and Kelvinator. But post liberalization many foreign companies have entered
into Indian market dethroning the Indian players and dominating Indian market the major
categories being CTV, REFRIGRATOR, MICROWAVE OVEN and WASHING
MACHINES. India being the second largest growing economy with huge consumer class has
resulted in consumer durables as the fastest growing industries in India. LG, SAMSUNG the
two Korean companies have been maintaining the lead in the market with LG being leader in
almost all the categories. The rural market is growing faster than the urban market, although
the penetration level is much lower .The CTV segment is expected to the largest contributing
segment to the overall growth of the industry. The rising income levels double-income
families and consumer awareness were the main growth drivers of the industries.
II
ACKNOWLEDGEMENT
We express our sincere thanks to Prof. Praneti Shah, our Grand Project guide to have given
us the opportunity to work on such a challenging project. We also thank our institute N.R.
Institute of Business Management for providing us all the necessary resources required in our
study.
Again we would like to earnestly thank those all people who give us their valuable time for
us in questionnaire survey. All the interaction with them was really a good experience and
added some valuable knowledge and experience.
Last but not the least I would also like to thank our friends who took time off to share insights
about their experiences this helped us immensely to understand the psyche of the consumer.
We just hope that the recommendations and suggestions presented by us are considered
seriously.
On the onset, we would like to take this opportunity to express our gratitude to all those great
minds and hearts that have touched this project in the path of its success.
PRIYAM MEHTA
UMESH LUKHI
III
EXECUTIVE SUMMARY
The goal of marketing research is to provide the facts and direction that managers need to
make their more important marketing decisions. Marketing research covers a wider range of
activities. Marketing research is having following steps
Determine research design,
Identify data types and sources,
Design data collection forms and questionnaires,
Determine sample plan and size,
Collect the data,
Analyze and interpret the data,
Prepare the research report
In this report, we have done a market research on consumer durables, and come with some
suggestion, limitation, and conclusion on the basis of marketing research work
As far is summary part is concern, in research project we have selected market survey on
Consumer durables.
Consumer durable industry, we have to do market survey for electronic products preference
toward, so we were collected primary and secondary data for research methodology and
follow up with the analysis part.
TABLE OF CONTENT
Sr.No. CONTENT Page
no.
1 Preface I
2 Acknowledgement II
3 Executive Summary III
4 Chapter : 1 Literature Review & Research
Methodology 1-5
Literature Review 2
1.1 Research Objectives 4
1.2 Scope of the study 4
1.3 Literacy Survey 4
1.4 Research Design 4
1.5 Data Collection 5
1.6 Sampling Design 5
1.7 Tools & Techniques of data collection 5
1.8 Limitation of study 5
5 Chapter :2 Industry Profile 6-24
2.1 Introduction 10
2.2 Industry size & Growth Trends 11
2.3 Consumer Electronics 11
2.4 Evolution of organized retailing in the world 12
2.5 Organized vs. Unorganized Retail 13
2.6 Spread of modern Retail in Developing Countries 15
2.7 Globalization of Retail 16
2.8 Regulatory Framework 17
2.9 Future Trends 18
2.10 Indian Retail 18
2.11 Future Scenario In Retailing 20
2.12 Recent Developments 21
2.13 Key Consumer Durables & Growth Trends 22
6 Chapter :3 Changing Behavior Of Consumers 25-42
3.1 Consumer Classes 26
3.2 Factors Affecting To the Consumer Behavior 26
3.3 Consumer Buying Process 27
3.4 Industry Classification 27
3.5 The Key Players & their Products 28
3.6 Market Analysis 29
3.7 The Road Ahead 39
7 Chapter :4 Major Organized & Unorganized Players 43-62
4.1 Major Players 44
4.2 Sector Outlook 53
4.3 The Threat Of Retail 59
8 Chapter :5 Industry Analysis 63-72
5.1 PEST Analysis 64
5.2 SWOT Analysis 70
9 Chapter : 6 Micro Level Analysis 73-100
10 Chapter :7 Hypothesis Analysis 101-104
11 Chapter :8 Key Findings 105-107
12 Chapter:9 Recommendations & Suggestions 108-109
13 Chapter:10 Conclusion 110-111
14 Bibliography 112
15 Annexure 114-118
1
Chapter 1
Literature Review &
Research
Methodology
2
Literature review:
The Indian retail market, which is the fifth largest retail destination globally, has been ranked
as the most attractive emerging market for investment in the retail sector by AT Kearney's
eighth annual Global Retail Development Index (GRDI), in 2009. As per a study conducted
by the Indian Council for Research on International Economic Relations (ICRIER), the retail
sector is expected to contribute to 22 per cent of India's GDP by 2010.
With rising consumer demand and greater disposable income, the US$ 400 billion Indian
retail sector is clocking an annual growth rate of 30 per cent. It is projected to grow to US$
700 billion by 2010, according to a report by global consultancy Northbridge Capital. The
organized business is expected to be 20 per cent of the total market by then. In 2008, the
share of organized retail was 7.5 per cent or US$ 300 million of the total retail market.
A McKinsey report, 'The rise of Indian Consumer Market', estimates that the Indian
consumer market is likely to grow four times by 2025. Commercial real estate services
company, CB Richard Ellis' findings state that India's retail market has moved up to the 39th
most preferred retail destination in the world in 2009, up from 44 last year.
India continues to be among the most attractive countries for global retailers. Foreign direct
investment (FDI) inflows as on September 2009, in single-brand retail trading, stood at
approximately US$ 47.43 million, according to the Department of Industrial Policy and
Promotion (DIPP).
India's overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.3
trillion by 2018, at a compound annual growth rate (CAGR) of 10 per cent. As a democratic
country with high growth rates, consumer spending has risen sharply as the youth population
(more than 33 percent of the country is below the age of 15) has seen a significant increase in
its disposable income. Consumer spending rose an impressive 75 per cent in the past four
years alone. Also, organized retail, which is pegged at around US$ 8.14 billion, is expected to
grow at a CAGR of 40 per cent to touch US$ 107 billion by 2013.
The organized retail sector, which currently accounts for around 5 per cent of the Indian retail
market, is all set to witness maximum number of large format malls and branded retail stores
in South India, followed by North, West and the East in the next two years. Tier II cities like
3
Noida, Amritsar, Kochi and Gurgaon, are emerging as the favored destinations for the retail
sector with their huge growth potential.
Further, this sector is expected to invest around US$ 503.2 million in retail technology
service solutions in the current financial year. This could go further up to US$ 1.26 billion in
the next four to five years, at a CAGR of 40 per cent.
Moreover, many new apparel brands such as Zara, the fashion label owned by Inditex SA of
Spain, UK garment chain Topshop, the Marc Ecko clothing line promoted by the US
entrepreneur of the same name and the Japanese casual wear brand Uniqlo are preparing to
open outlets in India.
Buoyed by improved consumer spending, sales of listed retailers increased by 12 per cent in
the September 2009 quarter compared with the same period in 2008.
Australia's Retail Food Group is planning to enter the Indian market in 2010. It has
ambitious investment plans which aim to clock revenue of US$ 87 million from the
country within five years from start of operations.
British retail major Marks & Spencer (M&S) is looking at scaling up its India
operations and plans to open at least 50 more outlets in the country over the next few
years.
Koutons Retail India plans to open 200 stores in FY11 in addition to its existing
1,400. Of the 200 stores, 100 would be family concept stores, which would include
women and children's wear.
Reliance Footprint, part of Reliance Retail, plans to spend US$ 86.62 million to add
100 outlets across the country in two years to sell branded footwear. It currently has
16 outlets.
Retail chain Suvidhaa Infoserve plans to open 1,000-1,200 new outlets every month
across the country and is eyeing a 100,000 strong network in the next two to three
years. At present, the Mumbai-based firm has 18,000 convenient neighbourhood
stores called 'Suvidhaa Point' across the country in over 20 states and over 400 cities.
Lifestyle International, part of the Dubai-based US$ 1.5 billion Landmark Group,
plans to have over 50 stores across India by 2012–13. These will include 35 Lifestyle
stores for retailing apparel, cosmetics and footwear, besides 15 Home Centres that sell
home furnishing goods.
4
Wills Lifestyle plans to expand its operations by opening 100 new stores in the next
three years. It also plans to concentrate on online buyers.
Pantaloon Retail India (PRIL) is planning to invest US$ 77.88 million this fiscal to
add up to 2.4 million sq ft retail space at its existing operations. Pantaloon Retail is
also looking to hive off its value retail chain, Big Bazaar, into a separate subsidiary,
which may eventually go for an initial public offer (IPO). PRIL proposes to open 155
Big Bazaar stores by 2014, increasing its total network to 275 stores.
Source: IBEF.org
1.1 Objectives:
The research was aimed at studying the purchase pattern of consumers for consumer durable.
To study the factors affecting purchase of consumer durables
To study brand preference of consumers for consumer durable goods
To study brand preference of consumers towards organized & unorganized outlet for
the consumer durable goods.
1.2 Scope of the study:
The research is conducted in ahmedabad city to study purchase pattern of consumer durables
which includes major factors affecting the decision, brand preference and preference towards
organized and unorganized formats to purchase the same.
1. 3 Research design:
Research design is descriptive in nature. Preference of people is analyzed and quantified to
know the factors responsible for their preference. Further preference is quantified in terms of
organized and unorganized retail formats.
1.4 Data Collection Sources:
.Secondary Data:
Information regarding the project, secondary data was also required. These data were
collected from various past studies and other sources like magazines, newspapers, and
websites which qualified as reliable.
5
Primary Data:
These data was collected through survey of consumers with the help of questionnaire.
.Research instrument:
Structured questionnaire
1.5 Sampling plan:
Target population: Households of Ahmedabad
Sampling unit: households & People purchasing consumer durables from stores at the time of
research
Sampling method: convenience and Step out sampling
Sample size: 200
1.6 Analytical tools:
Graphical presentation
Hypothesis
Weighted average
1.7 Contribution of the study
The study reveals preferential criteria for the purchase of consumer durables. it also gives
insights into the preference towards organized and unorganized store along with reasons
which may become helpful to the marketers to redesign strategies
1.8 Limitation of the Study:
As the time given to complete the project is lesser than actual time required completing
similar studies, the quality of findings may get affected. The sample size s 200 (hundred),
thus the findings from the same may not be representative of the actual population.
6
Chapter 2
Industry Profile
7
Definition of the Consumer Durable Industry: Consumer goods like washing machines, motorcars, TV sets, audio-video systems etc, which
yield services or utility over time rather than being completely used up at the moment of
consumption can be termed as the consumer durables. Most consumer goods are durables to
some degree, and the term is often used in a more restricted sense to denote relatively
expensive, technologically sophisticated goods ‗consumer durables‘ such as the examples
given above which implies high involvement at the time of purchase.
The consumer durables segment can be segregated into consumer electronics (TVs,
VCRs/VCPs and audio systems) and consumer appliances (also known as white goods) like
refrigerators, washing machines, air conditioners (ACs), microwave ovens, vacuum cleaners
and dishwashers.
Over the years demand for consumer durables has increased with the rising level of incomes,
double income families, changing lifestyles, availability of credit, increasing consumer
awareness and the introduction of new models by the Indian as well as multinational
companies. Consumer durable industry was once considered to be luxury item with targeting
the upper-middle class for consumption. With increasing competition, price wars, branding
and promotional strategies, the concept has melted down to the masses and has become a part
of the household‘s necessities even in the lower-middle class and rural part of the countries.
Most of the segments in this sector are characterized by intense competition, emergence of
new companies (especially MNCs), and introduction of state-of-the-art models, price
discounts and exchange schemes. Despite of that MNCs are entering in to Indian market
because growing Indian middle class of around 250 millions. Also it is widely accepted that
consumer durable penetration increases rapidly after per capita income (PCI) crosses a
threshold limit of $2000. In India, the PCI is low at $370, though it is equivalent to $600 on
PPP (Purchasing Power Parity) basis and expected to see a consistent growth of over 6% over
the next years to come.
According to NCEAR survey estimates, the number of households in the higher and middle-
income categories will rise rapidly. There will also absolute reduction in the number of
households in the low incomes. This will lift large number of households to income levels at
8
which they can become purchasers of consumer durable products. Continuous economic
growth and higher income levels will drive growth in volumes, any reduction in the duties
will leads to lower down of the values and this will bring more customers for the durable
products.
The biggest attraction for MNCs is the growing Indian middle class (approx. 250 m). This
market is characterized with low penetration levels. MNCs hold an edge over their Indian
counterparts in terms of superior technology combined with a steady flow of capital, while
domestic companies compete on the basis of their well-acknowledged brands, an extensive
distribution network and an insight in local market conditions.
The Indian middle class market of 250 million is the biggest attraction for the MNCs along
with the level of the penetration of consumer durables in the India has more attracted
Multinationals to the India, in the case of consumer durables penetration levels of TV is
believed to the highest, and after that the penetration of the refrigerator comes.
In the future, earnings will be driven by rising demand for consumer durables in general. As
per the National Sample Survey Organization report of "Use of durable goods by Indian
households", the per capita total expenditure on durable goods increased from Rs112.89 in
1987-88 to Rs148.02 in 1993-94. Similarly, NCAER estimates point to the fact that the
number of households with monthly incomes above Rs 10,000 in metros and Rs 5,000 in
non-metros is expected to rise from 22.7 million in 1995-96 to a huge 57.2 million in 2005-
06. This will mean that firstly, there will be a perceptible shift towards branded products and
secondly, the level of aspiration buying will increase.
Size of The Market:
The total Rs. 15500 crore consumer durables industry consists of Colour Televisions, Black
and White Televisions, Refrigerators, Washing Machines, Air-conditioners, Microwave
Ovens, Vacuum Cleaners, Audio Systems, Electronic Appliances and Water Purifiers. The
table below shows the ‗Estimated industry size‘ and the competition in the various segments.
9
Estimated industry size:
(Figures are in crore Rs.)
Segment
(E)
2000-01
2006-07
Color Television 6500 9100
B&W Television 1250 500
Refrigerators 3700 5460
Washing Machines 1500 3200
Air-Conditioners 1000 2100
Audio Systems 1000 2000
Microwave Ovens, Vacuum Cleaners, Electronic Appliances and
Water Purifiers 550 1000
(Source: BPL annual report 2000-01)
Now considering consumer durables industry in general, the drivers that will leads to the
growth of the industry in general will be:
The degree of distribution network in the market.
The advertising and marketing strategy adopted by the players in the industry.
The brand image of the product as perceived by the consumer.
The technology used by the company viz. state-of-the art technology or and older version.
The ability of the company to introduce newer products and newer product features.
The capability of the company to service its products.
The discount schemes and consumer finance facility available.
The market positioning of the product.
The cost competitiveness and pricing strategy of the company.
The financial strength of the players.
The competition in the industry has intensified after the liberalization and more and more
MNC are coming to India to target the huge middle class of the country. The competition is
dependent upon the brand strength and distribution network. In other words, the advertising
and marketing expenses play a vital role in competition. As a result of the increased
competitive activity, the advertising and marketing costs as a percentage of operating income
10
have increased over the years. This ratio for the industry has increased from 4.4 percent in
1993 to 6.7 percentage in 2000.
However, the export prospects are least or minimal because indigenous manufacturers do not
possess adequate brand equity or excellent product quality. There are even constraints like
transportation due to poor infrastructure and relatively under developed markets in the
neighboring countries.
Changes In The Strategies:
There is a shift in trend as the emphasis has moved from the manufacturing process to
marketing and advertising strategies. In other words, the marketing game has become a vital
factor for driving sales as against the manufacturing process of the products in the past.
Players are now concentrating on the creation of brand image in order to economize their
scale of operations and to increase their brand strength. The advertising expenses of the
companies operating in this segment are going high every year and the returns are
diminishing still the brand will play a major role in selling of the product.
Because of this, most of the manufacturers like, Videocon and Electrolux are acting as OEM
manufacturers for manufacturing refrigerators of Samsung and LG. Even, players have
increased the percentage of their advertising and marketing costs as a percentage to operating
income over the years; the ratio for the industry has increased from 4.6% in 1993 to around
7% in 2000. The brand building is very critical in the industry and constant advertising is
necessary.
2.1 Introduction:
The Consumer Durables industry consists of durable goods and appliances for domestic use
such as televisions, refrigerators, air conditioners and washing machines. Instruments such as
cell phones and kitchen appliances like microwave ovens were also included in this category.
11
The sector has been witnessing significant growth in recent years, helped by several drivers
such as the emerging retail boom, real estate and housing demand, greater disposable income
and an overall increase in the level of affluence of a significant section of the population. The
industry is represented by major international and local players such as BPL, Videocon,
Voltas, Blue Star, MIRC Electronics, Titan, Whirlpool, etc. The consumer durables industry
can be broadly classified into two segments: Consumer Electronics and Consumer
Appliances. Consumer Appliances can be further categorized into Brown Goods and White
Goods. The key product lines under each segment were as follows.
2.2 Industry Size, Growth, Trends:
The consumer durables market in India was estimated to be around US$ 5 billion in 2007-08.
More than 7 million units of consumer durable appliances have been sold in the year 2006-07
with colour televisions (CTV) forming the bulk of the sales with 30 percent share of volumes.
CTV, refrigerators and Air-conditioners together constitute more than 60 per cent of the sales
in terms of the number of units sold. In the refrigerators market, the frost-free category has
grown by 8.3 per cent while direct cool segment has grown by 9 per cent. Companies like
LG, Whirlpool and Samsung have registered double-digit growth in the direct cool
refrigerator market. In the case of washing machines, the semi-automatic category with a
higher base and fully-automatic categories have grown by 4 per cent to 526,000 units and by
8 per cent to 229,000 units, respectively. In the air-conditioners segment, the sales of window
ACs have grown by 32 per cent and that of split ACs by 97 per cent. Since the penetration in
the urban areas for these products is already quite high, the markets for both C-TV and
refrigerators were shifting to the semi-urban and rural areas. The growth across product
categories in different segments is assessed in the following sections.
2.3 Consumer Electronics:
The CTV production was 15.10 million units in 2007-08 and is expected to grow by at least
25 per cent. At the disaggregated level, conventional CTV volumes have been falling while
flat TVs have grown strongly. Market sources indicate that most CTV majors have phased
out conventional TVs and have been instead focusing more on flat TVs. The flat segment of
12
CTVs now account for over60 per cent of the total domestic TV production and is likely to be
around 65 per cent in 2007-08.High-end products such as liquid crystal display (LCD)and
plasma display CTV grew by 400 per cent and 150 percent respectively in 2009–10 following
a sharp decline in prices of these products and this trend is expected to continue. The
audio/video player market has seen significant growth rates in the domestic market as prices
have dropped. This trend is expected to continue through 2009- 2010, as competition is likely
to intensify to scale and capture the mass market.
2.4 Evolution of Organized retailing in world:
An important aspect of the current economic scenario in India is the emergence of Organized
retail. There has been considerable growth in organized retailing business in recent years and
it is poised for much faster growth in the future. Major industrial houses have entered this
area and have announced very ambitious future expansion Plans. Transnational corporations
are also seeking to come to India and set up retail chains in collaboration with big Indian
companies. However, opinions are divided on the impact of the growth of organized retail in
the country. Concerns have been raised that the growth of organized retailing may have an
adverse impact on retailers in the unorganized sector. It has also been argued that growth of
organized retailing will yield efficiencies in the supply chain, enabling better access to
markets to producers (including farmers and small producers) and enabling higher prices, on
the one hand and, lower prices to consumers, on the other. In the context of divergent views
on the impact of organized retail, it is essential that an in-depth analytical study on the
possible effects of organized retailing in India is conducted.
• Effect on small retailers and vendors in the unorganized sector keeping in
Mind the likely growth in the overall market.
• Effect on employment.
• Impact on consumers.
• Impact on farmers and manufacturers.
• Impact on prices.
• Overall impact on economic growth.
International Retail:
13
Global retail sales are estimated to cross US$12 trillion in 2007.1 Almost reflecting the
growth in the world economy, global retail sales grew strongly in the last five years (2001-
06) at an average nominal growth of about 8 per cent per annum in dollar Terms. This is in
contrast to near stagnant global retail sales during the Previous five years, 1996-01. Grocery
dominates retail sales with a share of approximately 40 per cent which varies from about 30
per cent in rich Japan to an Average of 60 per cent in poor Africa. Retail sales through
modern formats have been rising faster than total retail sales; the share of modern retail has
risen from about 45
Per cent in 1996 to over 52 per cent in 2006.
2.5 Organized vs. Unorganized Retail:
In the developed economies, organized retail is in the range of 75-80 per cent of total retail,
whereas in developing economies, the unorganized sector dominates the retail Business. The
share of organized retail varies widely from just one per cent in Pakistan and 4 per cent in
India to 36 per cent in Brazil and 55 per cent in Malaysia. Modern retail formats, such as
hypermarkets, superstores, supermarkets, discount and convenience stores are widely present
in the developed world, whereas such forms of retail outlets have only just begun to spread to
developing countries in Recent years. In developing countries, the retailing business
continues to be dominated By family-run neighborhood shops and open markets. As a
consequence, wholesalers And distributors who carry products from industrial suppliers and
agricultural producers to the independent family-owned shops and open markets remain a
critical part of the supply chain in these countries.
14
Organized Retail Sector Unorganized Retail Sector
Factor Organized Retail Sector Unorganized Retail Sector
Definition Modern form of retailing Traditional form of retailing
Examples Hypermarket, Retail chain
etc.
Mom n Pop stores, hand
cart, pavement vendors etc
Market Share 3% 97%
Market Growth 35% 6%
Challenges Poor supply chain
management, aggressive
expansion etc.
Use of labour intensive
technology, lack of
government support etc.
15
2.6 Spread of Modern Retail in Developing Countries:
The arrival of modern retail in developing countries occurred in three successive Waves
(Reardon and Hopkins, 2006; Reardon and Berdegue, 2007). The first wave took place in the
early to mid-1990s in South America (e.g., Argentina, Brazil, and Chile), East Asia outside
China (South Korea, Malaysia, Philippines, Thailand, and Taiwan), North-Central Europe
(e.g., Poland, Hungary, and Czech Republic) and South Africa. The second wave happened
during the mid to late 1990s in Mexico, Central America (e.g., Ecuador, Colombia, and
Guatemala), Southeast Asian Countries (e.g., Indonesia), Southern-Central Europe (e.g.,
Bulgaria). The third wave has just begun in the late 1990s and early 2000s in parts of Africa
(e.g., Kenya), some countries in Central and South America (e.g., Nicaragua, Peru, and
Bolivia), Southeast Asia (e.g., Vietnam), China, India, and Russia.
Thus, the third wave countries which include China, India and Russia are late comers in the
diffusion of modern retail. According to the authors, the main reason why they lagged behind
was the severe restrictions on foreign direct investment (FDI) in retailing in these countries.
The demand side features of these countries, such as income, size of the middle class,
urbanization, and the share of women in workforce, etc., have been similar to countries in the
second wave. In China and Russia these restrictions were progressively relaxed in the 1990s
and in India partially in the 2000s. In January 2006, India allowed foreign companies to own
up to 51 per cent in single brand retail joint ventures (JVs), but multiple-brand foreign firms
are still barred in Retail although they can set up wholesale operations.
16
Share of Organized Retail in Selected Countries, 2006
Source: Planet Retail and Technopak Advisers Pvt. Ltd.
2.7 Globalization of Retail:
There has been a creeping internationalization of retailing over the recent period. As home
markets have become crowded and with opportunities in emerging markets rising, modern
retailers from developed countries have been turning to new markets. On an average each of
the top 250 retailers in the world has operated on an average in 5.9 countries in 2005-06
(July-June) against five countries in 2000-01 (Deloitte- Stores Report, 2007). Foreign
business accounted for 14.4 per cent of retail sales of these companies in 2005-06 up from
12.6 per cent in 2000-01. The retail sales growth of companies which have ventured into
17
foreign markets has been faster than those that have confined themselves to home markets.
As far as the international expansion is concerned, West European and South African retail
companies are the most outward looking. The West European firms, among the top 250
retailers, expanded into an average of 9.9 countries in 2005-06 and generated 28.1 per cent of
their sales from foreign operations, largely in Central and Eastern Europe. The five South
African retailers in the top 250 list conducted business in an average of 8.8 countries
particularly in the African continent in 2005-06, generating on an average 13 per cent of these
companies‘ sales. The US retailers are mostly home-market based operating just in an
average of 3.7 countries outside US in 2005-06 up f rom three countries in 2000-01 and two
countries in 1996-97. The US retailer Wal-Mart, the world‘s biggest retailer, is a notable
exception operating in 14 countries in 2007. Most of the Japanese retailers are insular
operating only domestically.
2.8 Regulatory Framework:
It is interesting to note that regulatory restrictions on the growth in modern retail is more
stringent in developed rather than in developing countries. For example, in most West
European countries, setting up of hypermarkets has become very difficult since the late 1990s
and early 2000s as governments became alive to the demands of traditional small retailers
and non-mobile consumers in these countries. Merger and acquisition plans are now looked at
more critically by the national and European competition authorities. While in most countries
opening hours are liberalized including holiday trading, the very small number of countries
where opening on
Sundays are prohibited include developed countries such as Germany and Austria (Planet
Retail). As noted by Reardon and Hopkins (2006), there are four types of policy regulations
that can be seen in countries which have experienced advanced retail expansion. They are:
• Competition policy that limits concentration and collusion.
• Zoning and hours regulations to limit the diffusion, market penetration, and convenience of
organized retail.
• Pricing regulations that prevent modern retail companies from pricing below cost and
prompt-payment regulations to secure speedy payment to suppliers.
• Policies to strengthen traditional retailers and suppliers through technology and practice
upgrading, enhancing organizational capacity, and financial access. The above regulations
18
were put in place in different countries basically with a view to balance the conflicts of
interests between modern retail, on the one hand and the traditional retailers and suppliers to
the modern retail, on the other. Recently, countries in Southeast Asia (Malaysia, Indonesia,
and Thailand) imposed a number of restrictions on the growth of large retail companies
particularly the transnational companies in contrast to a fairly liberal approach to the retail
sector followed until the late 1990s. These restrictions involve the use of a combination of
competition laws, FDI regulation, land use restrictions (zoning laws), and limits on operating
hours (Mutebi, 2007).
2.9 Future Trends:
The Deloitte-Stores (2007) study held that the retail business would slow down definitely
over the next decade in developed countries, while it would grow strongly in developing
countries. This is based on a projection of three significant changes that will occur. First, the
population in the age-group 50-70 years and above in the developed world will explode,
shifting the share of consumer spending further away from goods towards services, such as
travel, healthcare and maintenance of the elderly. Second, the population growth in the age-
group 20-35 years in these
Countries will be relatively modest making the hiring of entry-level workers difficult, while
the population in the age-group 35-50 years will decline leading to acute shortage of middle
and upper management positions. Third, in developing countries, there will be plentiful
supply of workforce and consumers in the younger age groups. Besides, this demographic
shift will make the developing countries more dynamic and risk-taking enabling them to
grow much faster than the developed world. Driven by these trends, it is expected that
retailers in developed countries will increasingly move to the markets of developing countries
for growth.
2.10 Indian Retail:
The growth of the retail trade in India is associated with the growth in the Indian economy.
Gross domestic product (GDP) grew by an annual rate of 6.6 per cent during 1994-00 but the
growth slackened to 4.7 per cent per annum during the next three years before the growth
19
remarkably rose to 8.7 per cent per annum in the last four years (Table 2.3). This meant a
substantial rise in disposable income of Indian households since the mid-1990s. Based on the
Market Information Survey of Households (MISH) of the National Council of Applied
Economic Research (NCAER), the number of people in the income groups of ―aspirers‖ and
the middle class with annual income ranging from Rs. 90,000 to one million, more than
doubled from 157 million to 327 million during the last decade 1995-96 to 2005-06.3 The
data from the Central Statistical Organization (CSO) indicate that the growth of real private
final consumption expenditure, which dipped from an average of 5.7 per cent per annum
during 1994-00 to 4 per cent per annum during 2000-03, shot up to 6.7 per cent per annum
during 2003-07. Retail sales (in nominal terms) in the country also followed a similar pattern:
a high annual growth of 13.6 per cent during 1994-00, a low growth of 4.8 per cent during
2000-03 and a smart pick up in the last four years, 2003-07 at around 11 per cent.
GDP, Private Final Consumption Expenditure and Retail Sales
Growth, 1994-07 (Compound Annual Growth Rate)
20
Growth India Retail - Total vs Organized
2.11 Future Scenario in Retailing:
Introduction
The emergence of organized retail has been a recent phenomenon in the country, starting in
the late 1990s. Its growth till 2006-07 was reasonably fast, at nearly 20 per cent per annum
during the past three years. Unorganized retail also grew but at a slower pace of nearly 11 per
cent per annum. There are signs that the growth of organized retail has accelerated in 2007-08
and is expected to gather further momentum during the coming years. This chapter highlights
the following issues: (a) industrial estimate of future growth in total retail during the next five
years; (b) relative share of organized vs. unorganized sectors; (c) the amount of additional
investments that are envisaged in retail in the medium term; (d) estimates of employment
21
generation; (e) geographical penetration of organized retail; (f) Projection of real estate
availability; and (h) the concentration in retail industry.
Growth of Retail and its Distribution
The NCAER, based on its Market Information Survey of Households (MISH), has projected
that the consuming class consisting of the ―aspirers‖, the middle class and the rich with
annual household income of above Rs. 90,000 will rise from about 336 Million in 2005-06 to
505 million in 2009-10. This implies a huge growth potential of Retail in the country. The
sales of the Indian retail industry have been about US$ 322 billion (Rs. 14,574 billion) in
2006-07, amounting to about 35 per cent of India‘s GDP. It is the seventh largest retail
market in the world. Indian retail industry is projected to grow to about US$ 590 billion by
2011-12 and further to over US$ 1 Trillion by 2016-17.
2.12 Recent Developments:
Consumer Durables
IBEF: December 02, 2009
Several key factors are driving growth in the consumer durables sector: disposable income
levels are rising, consumer financing has become easier and urban and rural markets are
growing at the annual rates of 7 per cent to 10 per cent, and 25 per cent, respectively, with
organized retail expected to garner about 15 per cent share by 2015 from the current 5 per
cent. Consumer durables is one of the fastest growing industries in India. Industry sales were
estimated to be about US$ 5 billion in value in 2007–08, a growth of more than 25 percent
over 2006–07, and are expected to grow at 20 percent in 2008–09. Some of the prominent
global players in the consumer durables sector include Philips, Samsung, Sony and Nokia.
Overview:
With the increase in income levels, easy availability of finance, increase in consumer
awareness, and introduction of new models, the demand for consumer durables has increased
significantly. Products like washing machines, air conditioners, microwave ovens, color
22
televisions (CTVs) are no longer considered luxury items. However, there are still very few
players in categories like vacuum cleaners, and dishwashers.
Consumer durables sector is characterized by the emergence of MNCs, exchange offers,
discounts, and intense competition. The market share of MNCs in consumer durables sector
is 65%. MNC's major target is the growing middle class of India.
MNCs offer superior technology to Consumers whereas the Indian companies compete on the
basis of firm grasp of the local market, their well-acknowledged brands, and hold over wide
distribution network. However, the penetration level of the consumer durables is still low in
India. An important factor behind low penetration is poor government spending on
infrastructure. For example, the government spending is very less on electrification programs
in rural areas. This factor discourages the consumer durables companies to market their
products in rural areas.
2.13 KEY CONSUMER DURABLES, & GROWTH TRENDS:
The consumer durables market in India was estimated to be around US$ 4.5 billion in 2006-
07. More than 7millionunits of consumer durable appliances have been sold in the year 2006-
07 with color televisions (CTV) forming the bulk of the sales with 30 per cent share of
volumes. CTV, refrigerators and Air-conditioners together constitute more than 60 per cent of
the sales in terms of the number of units sold.
Key Consumer Durables - Share by Volume
Source: Cygnus Quarterly Report, Aug
2007.
23
Body of thesis:
Research Progress
The research has found significant factors which affects consumers purchase decisions, it has
been observed that the purchase decisions are affected by a combination of two or more
factors, the final part of the thesis will try to draw a clearer picture on these factors,& how do
they affect the purchase decisions. Many factors inside the factor of ―Family Influence ―are
also present, family members from time to time play many roles of
influencer,decider,gatekeeper etc.( These are explained in the annexure). It has also been
found that, a factor which is most common during purchase of CTV,the same factor may not
be having equal importance during the purchase of refrigerators, Computers etc. The
consumer durables industry in India is set for sustained growth over the long term, fuelled by
favourable consumer demographics, overall growth in services and industrial sectors and
infrastructure development in suburban and rural areas. Several Indian and MNC players are
looking to strengthen their presence in India to leverage this opportunity. Findings till date :
Product –wise Analysis CTV The CTV production was 15.10 million units in 2006-07 and is
expected to grow by at least 25 per cent. At the disaggregated level, conventional CTV
volumes have been falling while flat TVs have grown strongly. Market sources indicate that
most CTV majors have phased out conventional TVs and have been instead focusing more on
flat TVs. The flat segment of CTVs now accounts for over 60 per cent of the total domestic
TV production and is likely to be around 65 per cent in 2007-08. High-end products such as
liquid crystal display (LCD) and plasma display CTV grew by 400 per cent and 150 percent
respectively in 2006–07 following a sharp decline in prices of these products and this trend is
expected to continue. Refrigerators are one of the most sought after appliances in Indian
middle class homes. The refrigerator market has two segments: Direct Cool and the relatively
new Frost-Free type. The market for refrigerators in 2006-07 was about 6.5 million units. The
growth of refrigerator segment is projected to be between 18 to 22 per cent over the next5
years. A critical success factor for the refrigerator market, given its widespread use, is deeper
reach into the market and increased penetration. Recently, the market is getting reinforced by
the replacement segment as well.
24
Computers:
Purchase decisions for computers are largely affected by the factor of Assembled & Branded.
The topic of the study is not about finding the factor behind buying assembled or branded
PC/laptops. Thus the study is mainly focused on finding the major factors affecting
consumers Purchase decisions while buying branded computers. Brands account for 10 per
cent of the total consumer goods market in India, while organized retailing is around 2 per
cent of the total industry. Though branded computers are perceived to be costlier than non-
branded computers, the penetration of branded products is increasing. The relative shares of
branded computers at the organized sector indicate that a significant share of branded
products is being sold through unorganized channels. This highlights the need for a strong
distribution network to penetrate deeper into the potential market.
25
Chapter 3
Changing behavior of
consumers
26
3.1 Consumer classes:
For the purpose of study I am using the classification given by NCAER .According to the
National Council for Applied Economic Research (NCAER), India’s premier economic
research institution, based on consumption indicators, which is more relevant for
ascertaining consumption patterns of various classes of goods there are five classes of
consumer households, ranging from the destitute to the highly Affluent, which differ
considerably in their consumption behavior and ownership patterns across various
categories of goods. These classes exist in urban as well as rural households both, and
consumption trends may differ significantly between similar income households in
urban and rural areas.
Structure for Indian consumer market: Consumer classes Annual income
Structure for Indian consumer
market: Consumer classes
Annual income 1996 2001 2007 Change
The rich 215,000&more 1.20 2.00 6.20 4.16
The consuming class 45 – 215,000 32.50 54.60 90.00 1.79
The climbers 22 – 45,0000 54.10 71.60 74.10 0.37
The aspirants 16 – 22, 0000 44.00 28.10 15.30 0.65
The destitute Below Rs- 16,0000 33.20 3.40 12.80 0.61
Total 164.80 180.70 199.20 0.21
3.2 Factors affecting to the consumer behavior:
27
3.3 Consumer buying process:
3.4 Industry classification:
The consumer durables industry can be broadly classified as consumer electronics and
consumer appliances. The consumer appliances category can be further segmented as white
goods and brown goods.
28
3.5 The key players and their products:
29
3.6 Market analysis:
Industry sales were US$ 4.5 billion in value in 2006-07 and more than 7 million units in
volume terms.
Plasma display panels and liquid crystal display TVs have registered an average growth of
more than 250% 2006-07 and the trend is expected to continue.
Split ACs have been growing at a much faster rate than window ACs- growth of 97% in
the year 2006-07 and the trend is expected to continue.
Mobile phone production is expected to grow at a compound annual growth rate of 28.3%
from 31 million units in 2006 to 107 million units in 2001
The sectors which have recorded excellent growth rates of more than 20 per cent in
terms of quantity produced are Air Conditioners (25 per cent), Split Air Conditioners (42.6
per cent) Micro Wave Woven (27.3 per cent), DVDS (25 per cent) VCD/MP3 (20 per cent),
Color Picture Tube (23 per cent,).
The sectors which have recorded high growth rates between 10 and 20 per cent in
April-March 2004-05 over the corresponding previous period are Color Television (12%),
Window Air Conditioners (18.8 per cent), Washing Machines (18.1 per cent Watch (10%),
Frost Free Refrigerators (13.8%),
Some sectors which have recorded moderate growth of 0 to 10 per cent are refrigerators
(5 per cent),), clock (8 per cent), Direct Cool Refrigerator (2.8 per cent)
The sector recording negative growth is B&W TV (- 16.7%)
The Refrigeration Industry has reached 3.9 million units in 2004-05 from 3.7 million
units in the last year with a growth of 5 per cent.
The Air-Conditioners Industry has reached at 1.2 million units during 2004-05 with a
growth of 25 per cent from 9.8 lakh units in 2003-04.
Washing Machines is estimated to have grown by 18.1 per cent from 1.35 million units
in 2003-04 to 1.6 million units in 2004-05.
30
Microwave ovens has grown by 27.3 per cent growth with 3.5 lakh units compared to
2.75 lakh units in 2003-04.
The Indian Colour Television industry has grown by 12.1 per cent in 2004-05 by
reaching 9.25 million units in 2004-05 from 8.25 million units in 2003-04.
The B&W TV has recorded a negative growth of 16.7 per cent from 3 million units in
2003-04 to 2.5 million units in 2004-05.
Watch and clock have registered growth of 10 per cent and 8 per cent from 20.6 mn
units and 26.3 million units in 2003-04 to 22.6 mn units and 28.4 mn units in 2004-05.
The VCD/MP3 industry has registered 20% growth and has achieved production of 8.4
million units. The unorganized sector has occupied a major share in manufacturing and
supplying VCD/MP3.
DVD Players are estimated to have grown by 25 per cent in 2004-05 with the volume
estimated to be 625000 units.
The first half of the year and the first quarter of the financial year, 2005 has seen a little
setback for the domestic consumer electronics and durables industry with the two largest
segments of the industry - color televisions (CTV) and refrigerators facing decline in
production and sales during the period. But the Air conditioners and washing machines
market have grown at the rate of 20% .
The de-growth seen in the first quarter of the current fiscal has been mainly due to
the value added tax (VAT) regime introduced in April, 2005, as held by the industry
representative.
Overall, the refrigerator segment had achieved a negative growth of 4.3 per cent in volume
terms and two per cent in value terms during the period.
31
Production of consumer durables:
Production
item
unit 2003-2004 2004-2005 % growth
Consumer durables/white goods
Refrigerator Lakh units 37 38.85 5.0
Frost free Lakh units 7.33 8.34 13.8
Direct cool Lakh units 29.67 30.51 2.8
Air
conditioners
Lakh units 9.8 12.25 25
Window Lakh units 7.22 8.58 18.8
Split Lakh units 2.58 3.68 42.6
Washing
machines
Lakh units 13.55 16 18.1
Microwave
ovens
Lakh units 2.75 3.5 27.3
Consumer electronics
Value overall 14500 156600 8.0
Color television Lakh units 82.5 92.5 12.1
Color television Rs Crore 7000 7580 8.0
B&W TV Lakh units 30 25 -16.7
B&W TV Rs crore 482.55 361.5 -25.0
VCD MN units 7.2 8.4 16.7
DVD Nos 50,000 62500 25
Watch Lakh units 206 226 9.7
Clock Lakh units 263 284 8.0
Key growth drivers for consumer durables:
Rise in disposable income: The demand for consumer electronics has been rising with the
increase in disposable income coupled with more and more consumers falling under the
double income families. The growing Indian middle class is an attraction for companies who
are out there to woo them.
32
Availability of newer variants of a product: Consumers are spoilt for choice when it comes
to choosing products. Newer variants of a product will help a company in getting the
attention of consumers who look for innovation in products.
Product pricing: The consumer durables industry is highly price sensitive, making price the
determining factor in increasing volumes, at least for lower range consumers. For middle and
upper range consumers, it is the brand name, technology and product features that are
important.
Availability of financing schemes: Availability of credit and the structure of the loan
determine the affordability of the product. Sale of a particular product is determined by the
cost of credit as much as the flexibility of the scheme.
Rise in the share of organized retail: Rise in organized retail will set the growth pace of the
Indian consumer durables industry. According to a working paper released by the Indian
Council for Research on International Economic Relations (ICRIER), organized retail which
constituted a mere four percent of the retail sector in FY07 is likely to grow at 45-50% per
annum and quadruple its share in the total retail pie 16% by 2011-2012. The share will grow
with bigger players entering the market.
Innovative advertising and brand promotion: Sales promotion measures such as discounts,
free gifts and exchange offers help a company in distinguishing itself from others.
Festive season sales: Demand for color TVs usually pick up during the festive seasons. As a
result most companies come out with offers during this period to cash in on the festive mood.
This period will continue to be the growth driver for consumer durable companies.
Consumer Durables: Industry size, growth and trends:
During FY07, volume share of the single largest consumer durable was color TVs at 30%,
followed by refrigerators and air conditioners at 18% and 13% respectively. Washing
machines and other assorted consumer durables captured a share in the total volume by 5%
and 34% respectively.
33
Television Sets: Growth in sales:
FY07 witnessed the highest number of TV sets being sold when compared to the previous
two corresponding years. As per CMIE, growth in sale of TV sets was slower at 14.3%
during FY07 when compared to a 21% growth in the previous year. On the demand side,
domestic consumption of refrigerators declined by almost 4% between FY05 and FY08,
while imports climbed. The imposition of anti-dumping duties on import of colour picture
tubes will hit the manufacturing costs of CTVs produced in India. Further, the reduction in
the general rate of excise duty (CENVAT) from 16% to 14% as proposed in the Union
Budget for FY09 will not have any effect on the selling price of colour TVs. This is because
the combined effect of rising input costs and a higher interest burden will negate the effect of
such reduction.
34
35
Refrigerator: demand and supply side dynamics:
According to CMIE statistics, domestic consumption of refrigerators witnessed a decline between
FY05 and FY08, while exports grew. From 3% of the total consumption in FY05, exports grew
to7% of the total consumption in FY08. On the supply side, domestic production of refrigerators
in the total supply remained at the same levels in the past three years ended FY08. At 99% each
in FY06-08, the share of production reported a mere 100 basis point increase over FY05, as
imports slided. The refrigerator industry posted a sluggish performance since the beginning of
FY09 on the back of volatile steel prices. The first quarter saw a production growth of a mere 50
basis points to 2.18 mn units, as per CMIE.
Sales of Consumer Electronic Companies:
The consumer electronic goods industry underwent a slowdown during the last quarter of
FY08. According to CMIE, the industry witnessed a slower 10.5% growth in the Mar 08
quarter compared to a substantial 17.4% growth in the previous corresponding quarter.
Domestic consumer electronics companies together reported a subdued sales growth of
almost 17% in FY07, on the back of a robust 40.5% growth in FY06. While the larger
companies reported robust growth in sales, it was the smaller ones whose sales were
negatively affected that eventually brought down the industry sales growth.
36
Changing attitudes of Today’s customers:
Today customer likes to indulge in buying spree. No more the customers buy only to fulfill
their basic needs and emphasise on savings itself.
Indian consumers have become value sensitive and are not much price sensitive as was the
case earlier. If they feel that a particular product offers them more value and its price is high,
even then they are willing to buy the product.
The Indian consumers strictly follow their culture, tradition and values, as a result of which
foreign companies were forced to give an Indian touch to them in order to succeed in India.
McDonalds, MTV, Pepsi, Star TV, Coca Cola India and many more had to Indianise
themselves to flourish in India. Karva Chauth is celebrated with more zeal and enthusiasm
than the Valentine Day. The Indian consumer of today gives preference to features of a
product rather than its brand name. The trend that higher segment consumers only buy the top
brands has also come to an end.
Even after liberalization Indian companies and brands are doing very well. It is clearly
evident from the fact that despite many foreign brands being sold in India, Raymond is still
India‘s largest textile company and Haldiram is doing well despite the presence of
McDonalds and Pizza Hut. The consumers today are not confined to a single brand and prefer
change rather than sticking to the same brand. Not often do we see any home with cars of the
same brand or household products of the same brand. The use of credit card for shopping is a
new emerging trend in India. Also consumers are availing credit or loan from banks and other
financial institutions to fulfill their needs and wants.
37
The Indian consumers are spending thick and fast on premium and luxury products. The
Indian consumers have shown another major change in their buying behaviour. They just
don‘t want availability of products, they also want better experience, services and ambience.
This has led to the growth of shopping malls where shopping, entertainment and better
facilities are all available under one roof. To a great extent the presence of heavy weight such
as the pantaloons, big bazaar, croma , nilgiris etc has given a huge fillip to the growing
market by not only selling products but also the experience. The Indian consumer are much
more inclined to the organized sector.
The rural Indian consumers are also showing signs of change. They have all the modern
amenities at their home and their standard of living is fast improving. The rural households
have earned huge money due to price rise in real estate. They are also shifting towards
industrial and services sector, hence their purchasing power is increasing. It is reflected in
their living standard and possession of all electronic gadgets and luxury cars. There is a stiff
competition in the Indian market today and it has become a buyer‘s market from seller‘s
market. Customers are the ultimate beneficiary of the fierce competition in the market.
Competition has reduced prices to a great extent and has forced the manufacturer to maintain
product quality to sustain in the highly competitive market.
Though in a small way internet and and telemarketing have also caught the attention of the
Indian customers. Dell. Amazon .com, etc have carved a good niche for them in the sector.
The consumers today do not mind availing credit as when needed. So credit availability has
become a key factor for determination of a buying a good. Consumers are also availing the
information available on net through various forums and websites.
Marketers response to Consumer attitude:
With change in consumer buying behavior the companies also made necessary changes in
their marketing strategies. The changes include:
1) Launching of premium products by companies to fulfill requirements of high class
consumers.
38
2) Since purchasing power of rural India has increased, the companies have started shifting
their focus towards rural India to capture untapped rural market. This has reaped huge
benefits for companies like in cases of PepsiCo, Coca Cola India and other FMCG
companies.
3) Companies not only aim to sell their products but also aim to provide better after sales
services to its consumers. For example companies have provisions to send their technicians to
repair the cars struck at highways or other outer locations due to technical failure or in case of
a mishap. This improves the company‘s credibility and helps to build its customer base .
4) Companies design their products on the basis of market segmentation so that they have
products to suit every pocket and requirement.
5) Due to sharp growth in the communication sector, companies are providing many
schemes and plans to attract customers. For example mobile service providers provide
lifetime option and free calls to other mobile users under a specific plan of the company.
6) Due to fierce competition in the electronics market and people‘s willingness to purchase
hi-tech products the rates of LCD and plasma TVs have been slashed by 25%-30%. Through
this strategy electronic companies received very good response from the consumers in the
recent past and were able to build a considerable market for their
products.
7) Indian consumers have developed a liking for foreign tours and holidays. This has led to
development of many travel agencies that provide a planned foreign tour at a reasonable
price. What is even more interesting is that the customer does not have to pay the amount in
lump sum; instead, he has the facility to make the payment in monthly installments according
to his convenience.
8) Consumers of India have developed a tendency to save travel time. For such consumers
low fare or low cost carriers are available that provide air travel facility at a very affordable
price.
9) Consumers of India want better housing facilities. The construction companies are
fulfilling this requirement of consumers by providing them luxurious houses, exquisite
39
interiors, round the clock water and electricity supply, full time security, club house,
gymnasium, etc. within the premises.
10) Indian consumers are increasingly becoming aware of the importance of health and
hygiene. Hence companies are making products to suit their health like low calorie, low fat
food. As far as hygiene is concerned companies have fully mechanized their plants to
maintain hygiene and pack the food in such a way that it remains fresh for longer period of
time and does not lose its nutritive value before consumption.
11) The need for internet is fast growing. To fulfill this need of consumers, mobile
manufacturing companies are providing internet access facility on mobile phones. This has
revolutionized the communication sector and provided a means of communication that was
never ever in anybody‘s dreams till a few years back.
12) Indian consumer‘s liking for credit is also increasing rapidly. Hence many financial
institutions have come into existence in India and are flourishing. Banks have also become
liberal in their loan and credit policies.
3.7 The road ahead:
The rising rate of growth of GDP, rising purchasing power of people with higher propensity
to consume with preference for sophisticated brands would provide constant impetus to
growth of white goods industry segment.
Penetration of consumer durables would be deeper in rural India if banks and financial
institutions come out with liberal incentive schemes for the white goods industry segment,
growth in disposable income, improving lifestyles, power availability, low running cost, and
rise in temperatures.
While the consumer durables market is facing a slowdown due to saturation in the urban
market, rural consumers should be provided with easily payable consumer finance schemes
and basic services, after sales services to suit the infrastructure and the existing amenities like
electricity, voltage etc.
40
Currently, rural consumers purchase their durables from the nearest towns, leading to
increased expenses due to transportation. Purchase necessarily done only during the harvest,
festive and wedding seasons — April to June and October to November in North India and
October to February in the South, believed to be months `good for buying‘, should be
converted to routine regular feature from the seasonal character.
Rural India that accounts for nearly 70% of the total number of households, has a 2%
penetration in case of refrigerators and 0.5% for washing machines, offers plenty of
scope and opportunities for the white goods industry.
The urban consumer durable market for products including TV is growing annually by 7 to
10 % whereas the rural market is zooming ahead at around 25 % annually. According to
survey made by industry, the rural market is growing faster than the urban India now.
The urban market is a replacement and up gradation market now.
The other factor for surging demand for consumer goods is the phenomenal growth of media
in India. The flurry of television channels and the rising penetration of cinemas will continue
to spread awareness of products in the remotest of markets.
The vigorous marketing efforts being made by the domestic majors will help the industry.
The Internet being now used by the market functionaries that will lead to intelligence sales of
the products. It will help to sustain the demand boom witnessed recently in this sector.
The ability of imports to compete is set to rise. However, the effective duty protection is still
quite high at about 35-40 per cent. So, a flood of imports is unlikely and would be rather need
based.
Reduction in import duties may significantly lower prices of products such as microwave
ovens, whose market size is quite small in India. Otherwise, local manufacturing will
continue to stay competitive. At the same time, there will be some positive benefits in the
form of reduction in input costs. Washing machines and refrigerators will also benefit from
lower input costs.
41
According to a study by the McKinsey Global Institute (MGI), Indian incomes are likely to
grow three-fold over the next two decades and India will become the world's fifth-largest
consumer market by 2025. In the given scenario, urban markets will continue to fuel the
Indian economy for quite some time to come. Moreover, expenditure by the middle class
accounts for the bulk of India‘s urban consumer expenditure. About 61 per cent of total urban
income comes from households that can be classified as middle class—earning between US$
1,493 and US$ 9,955 a year.
Further, India is likely to see rapid urbanization, with around 45 per cent of Indians living in
urban areas by 2050, up from 30 per cent in 2007-08, according to a study co-authored by
National Council of Applied Economic Research's (NCAER) Rajesh Shukla and Future
Capital Research's Roopa Purushothaman.
According to a report by McKinsey, India's overall retail sector is likely to grow to US$
419.93 billion by 2015.
According to global real estate consultant, CB Richard Ellis, India has moved up to the 39th
most preferred retail destination in the world in 2009, up from 44 last year. The turnover of
the organized retail segment in India is pegged at around US$ 8.1 billion. It is expected to
reach US$ 51 billion by 2010.
Retail opportunity is slated to rise by about US$ 160 billion in India in five years. In urban
India, modern retail is likely to grow from the current 9.6 per cent of total retail to 26 per cent
in the next five years, as per Technopak Advisors
The Indian consumer durables market seems to be relatively untouched by the economic
slowdown. The consumer durable goods output witnessed a 2.5 per cent rise in durables
output in the first quarter of 2009, according to a report by the Development Bank of
Singapore (DBS). Colour televisions have seen an increase in sales, growing 2 per cent to
2.8 million units in January-March 2009, according to the figures released by ORG-GFK.
Whirlpool is on the expansion mode and is targeting a 22 per cent share of the US$ 423.28
million washing machine market in India by the end of 2009, and is launching a range of new
products with an investment of US$ 4 million for the same.
42
Moreover, a large number of hi-technology durables are expected to flood the US$ 4.03
billion Indian durables market in 2009. Samsung, LG, Haier and Videocon are among
companies planning new product launches in the coming months
43
Chapter 4
Major Organized &
Unorganized Players
44
4.1 Major players:
The major players in the consumer durables industry, operating in different sectors such as air
conditioners, washing machines, refrigerators & television include:
Competition analysis
COMPETITION OVERVIEW:
Samsung India (CURRENT MARKET SHARE-37%):
Initially the strategy of Samsung in India was to create premium image by emphasizing
global brand. After facing stiff competition from another Korean major- LG, Samsung also
started playing price game. In 2004 it reverted back to its premium positioning, although it
resulted in some loss of market share. In line with the Global Digital Initiative of the Parent
Company.
Samsung India:
Acquired digital leadership in India by introducing its digital ready televisions like the 40"
LCD Projection TV, 43"Projection TV and the Plano series of Flat Colour televisions.
LG India (CURRENT MARKET SHARE-23%):
LG Electronics rightly understood the consumer motivations to create magnetic products,
price them strategically, position them sharply and keep making the magnetism more potent.
Having understood the finer differences in consumer motivations, it opted for sharp-arrow
‗reasons-to buy‘ differentiation over the ‗blanket-all approach‘ taken by most of the other
players. It is an aggressive marketer. It focuses on low and medium price products.
45
Toshiba India:
Toshiba India Private Limited (TIPL) is the wholly owned subsidiary of Japanese Electronics
giant Toshiba Corporation and was incorporated in India on September 2001. Toshiba had a
presence in India since 1985 and was represented in India through their Liaison Office.
Sony India (CURRENT MARKET SHARE-21-22%):
Sony Corporation, Japan, established its India operations in November 1994. In India, Sony
has its distribution network comprising of over 7000 channel partners, 215 Sony World and
Sony Exclusive outlets and 21 direct branch locations. The company also has presence across
the country with 21 company owned and 172 authorized service centres.
Sharp India Ltd:
Sharp India ltd was incorporated in 1985 as Kalyani Telecommunications and Electronics Pvt
Ltd, the company was converted into a public limited company in the same year. The name
was changed to Kalyani Sharp India in 1986. The company was entered into a joint venture
with Sharp Corporation, Japan - a leading manufacturer of consumer electronic products to
manufacture VCRs/VCPs/VTDMs. The company manufactures consumer electronic goods
such as TVs, VCRs, VCPs and audio products. The products were sold under the Optonica
brand name. Sharp has a production base in 26 countries with 33 plants, and its products are
used in 133 countries. The company was accredited with the ISO-9001 certification in the
month of February, 2001.
Hitachi India:
Hitachi India Ltd (HIL) was established in June 1998 and engaged in marketing and sells a
wide range of products ranging from Power and Industrial Systems, Industrial \Components
& Equipment, Air Conditioning & Refrigeration Equipment to International Procurement of
software, materials and components. Some of HIL‘s product range includes Semiconductors
46
and Display Components. It also supports the sale of Plasma TVs, LCD TVs, LCD
Projectors, Smart Boards and DVD Camcorders.
Mirc Electronics (ONIDA):
The company commands strong brand equity among consumers largely owing to the success
of its Onida brand. High-quality designs have made the company a leading player in the
electronics and entertainment business. Its popular devil ad although had engendered a strong
emotional pull towards the brand, Technologically it represented no advancement. The
company plugged the gap by touting its digital technology. Like Videocon, it has also been
able to hold its market share. The world-class quality of Onida has enabled the company to
make a breakthrough on the export front. Onida is a leading brand in Gulf market and also
exports its models to Africa, Bangladesh, Sri Lanka and Nepal. It has technical tie-up with
the Japan Victor Company, better known as JVC. So focused is Onida on positioning itself on
the premium, high-tech plank that it is even planning to push its own envelope on
obsolescence, much like Intel has been doing in its own industry. The strategy is aimed at
further broad basing the product offering of the company, which has largely dominated the
top-end of the television market, across multiple market segments. Besides understanding the
strategy adopted by different players, several other factors- industry growth, concentration
and balance, corporate stakes, fixed cost, and product differences need to be analyzed to
determine the extent of rivalry between the existing players.
Videocon (CURRENT MARKET SHARE-12%):
It is the market leader in the consumer electronics and home appliances segments in India;
the company manufactures home appliances such as refrigerators, microwave ovens,
compressors, air conditioners and washing machines.
It has plans to acquire Daewoo‘s consumer electronics businesses worldwide to bring LCD
TVs, plasma TVs and components into its fold; the move would also help it acquire a
consuming partner for the recently-acquired Thomson‘s picture tube business. Videocon has
always been a price player and has an image of a low price brand. This entails providing
more features at a given price vis-à-vis competitors. It has taken over multinational brands to
47
cater to un served segments, like Sansui- to flank the flagship brand Videocon in the low to
mid priced segment, essentially to fight against brands like BPL, Philips, and Onida and
taken over Akai- tail end brand or brands like Aiwa. Videocon is one of the largest
manufacturers of television and its components in India and thus has advantages of
economies of scale and low cost due to indigenization. It has the widest distribution network
in India with more than 5000 dealers in the major cities .It also has a strong base in the semi-
urban and rural markets. Due to its multi-brand strategy, it has at present multiple brands at
the same price point. This has led to a state of diffused positioning for its brands. It has also
led to a cannibalization of sales among these brands. The flagship brand Videocon has lost
market share due to the presence of Sansui in the same segment. Because of reduction in
import duties on CPT the cost advantage of Videocon is also on the decline. Hence it is
facing rough weather and also trying to boost exports.
Panasonic India (CURRENT MARKET SHARE-6%):
Panasonic Corporation based in Osaka, Japan is a worldwide leader in the development and
Manufacture of electronic products for a wide range of consumer, business, and industrial
needs. Panasonic Electric Works Co., Ltd. traces its roots to the company started in 1918 by
Konosuke Matsushita. Panasonic India plans to invest USD 100 million in its new plasma TV
production facility in 2011.
The company currently has five production units in the country, at Noida, Gurgaon,
Vadodara, Chennai and Delhi. It also launched the worlds slimmest, 1-inch plasma TV called
Vierra PDP Z1.According to Panasonic The market potential for plasma TV was much
greater in India than China, The demand for such high-end sets was increasing at a rate of 4-
10 per cent in the country. The company has priced its plasma TV between Rs 24,000 and Rs
30 lakh (for a 103-inch screen). It has already sold ten such units this month.
Agrawal Group - Manufactures consumer electronic products; radios, tape-recorders,
car stereos and CD systems. View profile.
48
Anchor - Manufactures electrical switches, accessories, lighting luminaries, and PVC
wires, domestic appliances like electrical irons, mixers, grinders, toasters and fans.
Bajaj International - Exporters of electrical fans, household appliances, lamps,
fluorescent tube lights, light fittings, hoists etc. Imports steel and engineering items.
BOSS Portable Blenders - Manufacturer and exporter of portable blender and
home appliances includes hand held mixers, juice makers, stainless steel blender and more.
E.P.C Industrial Fans & Motors - Manufacturers & Exporters of industrial
fans, domestic fans, instrument cooling fans, cabin fans, electric fans & electric motors.
Eureka Forbes - Details on consumer products include vacuum cleaners, floor care
equipment, high pressure water jet cleaners and electronic security systems.
Global Wonders - The fastest search engine, directory, map and web guide for
information on the most popular websites. Features list of wholesaler, retailer along with
products list, consumer durable and more.
Hot shine Appliances - U.P - Manufacturers of gas cookers & stoves & electrical
appliances, product range includes cooking ranges, steam irons, oven toaster and grillers.
Kelvin Systems - Dealers for Carrier Aircon Ltd (air-conditioning equipment), Honda
(Siel) Power Products Ltd (portable electric generators), and Eureka Forbes Ltd (vacuum
cleaners).
Mangal Singh & Sons - Dealers in home appliances, consumer goods and electrical
49
appliances, includes television, refrigerator, audio products, washing machines, vacuum
flask, cooking range, oven and dining sets.
Moniba - Manufactures chemical pump, air operated pump, water purifier, health care
product, and bacteria free water, home appliances and chemical plant machinery.
Nadi Industrial Fans - Manufacturers of fans; product range includes axial fans,
centrifugal fans and special fans.
Onida - Provide an online showroom to purchase the entire range of Onida products.
Offers free delivery.
Orient Fan - Specialized in manufacturing mini motors, deluxe decorative ceiling fans,
shaded pole motors, box fans, food blender, food mixer, fruit juicer, vacuum cleaner etc.
Padmini Appliances - Manufacturers of gas stoves, oven-toaster-griller, juicer-
mixer-grinder, electric hot plates, washing machines, ceiling fans, water heaters, irons etc.
Philips - Details for consumer electronics, lighting, domestic appliances, semi conductors,
components, enabling technologies, multi media projectors etc.
PICASSO Home Products - Manufacturer and Exporter of various home
appliances like roti maker, mixer grinder, sandwich maker, oven toaster griller, Non Stick
Appliances and more.
Salora - Manufactures black-and-white & color television sets, Panasonic fax machines,
printers, and digital cameras; color monitors and cordless phones.
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Sansui - India - Manufacturer of electronic products, audio systems, home theatres,
projection TVs, video CDs and home appliances.
Singer - Manufacturers of sewing machines, food processors, refrigerators, televisions,
oven, toasters, washing machines, electric irons etc.
Sony India - Details of product ranges from color TVs, hi-fi music systems, video CDs,
home theatre systems, DVDs, portable audio systems, digital cameras, RMEG products,
Wega T.V etc.
Sony World - Features wide ranges of products: car audios, handy cams, digital
cameras, VCD, LD, DVD players, cordless phones, walkman, and disc mans, and
Televisions.
Sumeet - Manufacturers of mixer-grinders. Offers details about the machines, recipes,
Sumeet outlets and more.
Sunflame Appliances - Manufacturers of kitchen appliances, home appliances and
electrical appliances in India.
Usha International - Manufacturer of sewing machines, fans, air conditioners, water
coolers, home appliances, agricultural and domestic pump sets, and auto products.
Usha Lexus - Makers of home appliances like sandwich toasters, juicer, mixer grinders,
ovens, ventilating fans, irons and room coolers.
Videocon - Suppliers of home appliances, TVs, refrigerators, ACs, air conditioners,
audios, tape recorder, colour monitors, digital organizers, Kenwood digital hi-fi systems,
television sets etc.
51
Vijay Sales - Dealers in consumer durables includes details for their product, customer
care, schemes, consumer finance, and more.
Voltas Limited - Makers of room air conditioners and refrigeration equipment, water
coolers, cranes, pumps and office furniture; includes machine tools, industrial chemicals etc.
L.G India - Details of product ranges from colour TVs, hi-fi music systems, video CDs,
home theatre systems, DVDs, portable audio systems, digital cameras, RMEG products, T.V
etc. Features wide ranges of products: car audios, handy cams, digital cameras, VCD, LD,
DVD players, Cdma mobiles, walkman, and disc mans, and Televisions.
Samsung Electronics India Ltd - Details of product ranges from colour TVs, hi-
fi music systems, video CDs, home theatre systems, DVDs, portable audio systems, digital
cameras, RMEG products, T.V etc. Features wide ranges of products: car audios, handy
cams, digital cameras, VCD, LD, DVD players, mobiles, walkman, and disc mans, and
Televisions. There has been strong competition between the major MNCs like Samsung, LG,
and Sony.
LG Electronics India Ltd has announced its extension plan in 2006. The company
is going to invest $250 million in India by 2011 and is planning to establish a manufacturing
facility in Pune.
TCL Corporation is also planning to establish a $22 million manufacturing facility in
India. The Indian companies like Videocon Industries and Onida are also
planning to expand. Videocon has acquired Electrolux brand in India. Also, with the
acquisition of Thomson Displays by Videocon in Poland, China, and Mexico, the company is
marking its international presence.
52
According to supply Corporation (Applied Market Intelligence), country's fiscal policy has
encouraged Indian consumer electronic industry. The reduction on import duty in the year
2005-06 has benefited many companies, such as Samsung, LG, and Sony. These companies
import their premium end products from manufacturing facilities that are located outside
India. Indian consumers are now replacing their existing appliances with frost-free
refrigerators, split air conditioners, fully automatic washing machines, and color televisions
(CTVs), which are boosting the sales in these categories.
Some companies like Samsung Electronics Co. Ltd. and LG Electronics India Ltd. are now
focusing on rural areas also. These companies are introducing gift schemes and providing
easy finance to capture the consumer base in rural areas.
Growth in 2005-06
Consumer Durables Growth
Air Conditioner 20-25%
Refrigerator 5-10%
Microwave Ovens 25%
Washing Machines 5-10%
Color Televisions (CTVs) 15-20%
Black & White Televisions -20%
Clock 10%
Watch 10%
VCDs 30%
Consumer Electronics (Overall) 9%
53
Some Facts:
1. Bargaining power of suppliers in consumer durables sector is limited due to threat of
imports and intense competition.
2. Some of the entry barriers in consumer durables sector are distribution network, capital,
and ability to hire purchases.
3. Demand is seasonal and cyclical.
4. Competition among players is on the basis of difference in prices and well-acknowledged
brands.
4.2 Sector Outlook:
Consumer durables Sector can be classified as follows:
1. Consumer Electronics includes VCD/DVD, home theatre, music players, color
televisions (CTVs), cameras, camcorders, portable audio, Hi-Fi, etc.
2. White Goods include dishwashers, air conditioners, water heaters, washing machines,
refrigerators, vacuum cleaners, kitchen appliances, non-kitchen appliances, microwaves,
built-in appliances, tumble dryer, personal care products, etc.
3. Molded Luggage includes plastics.
4. Clocks and Watches
5. Mobile Phones
Acc. Ac Nilsson Consumer Markets Last Updated: January 2010
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According to a study by the McKinsey Global Institute (MGI), 'Bird of Gold': The Rise of
India's Consumer Market, Indian incomes are likely to grow three-fold over the next two
decades and India will become the world's fifth largest consumer market by 2025, moving up
from its 2007 position as the world's 12th largest consumer market.
India ranks second in the Nielsen Global Consumer Confidence survey released on January 7,
2010—an indication that recovery from the economic downturn is faster in India with
consumers more willing to spend. The survey showed that in addition to the emerging
markets of Indonesia and India, eight of the top ten most confident markets in the fourth
quarter of 2009 came from the Asia Pacific region.
Retail
Estimates by the Retailers Association of India (RAI), the apex body of organized, modern
retailers, have shown that the country's US$ 21.05 billion organized retail segment has grown
20 per cent in the September quarter 2009-10.
Approximately 315 hypermarkets are expected to come into existence in tier-I and tier-II
cities across India by the end of 2011, says a joint study by consultancy firm KPMG and
industry body, Associated Chambers of Commerce and Industry of India (ASSOCHAM)
named `Reinventing India's Retail Sector'.
The country's largest retailers—Future Group, Spencer's Retail and Shoppers Stop—have
lined up investments of at least US$ 128.3 million for 2010.
Rural Consumers
As socio-economic changes sweep across India, the country is witnessing the creation of
many new markets and a further expansion of the existing ones. According to Pradeep
Kashyap, chief executive officer of MART Rural Solutions, speaking at the Calcutta
Management Association Rural Marketing Meet, over 300 million people would move up
from the category of rural poor to rural lower middle class between 2005 and 2025 and rural
consumption levels are expected to rise to current urban levels by 2017.
55
Mega retail chains are looking to build a high-quality supply chain—retailers such as Bharti-
Wal-Mart, Carrefour and Reliance are working to strengthen their supply chain formula by
roping in farmers as stakeholders. Despite being the biggest names in the trade, these retailers
are ploughing rural areas to teach innovative farming methods and find the best suppliers
among them.
FMCG
According to a FICCI-Technopak report, despite the economic slowdown, India's fast moving
consumer goods (FMCG) sector is poised to reach US$ 43 billion by 2013 and US$ 74 billion
by 2018. The report states that implementation of the proposed Goods and Services Tax
(GST) and the opening of Foreign Direct Investment (FDI) are expected to fuel growth
further and raise the industry's size to US$ 47 billion by 2013 and US$ 95 billion by 2018.
The Ministry of Food Processing Industries is also planning to double the market size of the
food processing industry to US$ 165.1 billion by 2009-10 and trebling it to US$ 271.8 billion
by 2014-15.
Demand for personal care products such as shampoos, toothpastes and hair-oils grew faster in
rural areas than urban areas during April-September 2009, a period that includes the peak
monsoon months, as per the numbers released by market researcher AC Nielsen.
Consumer Durables
A combination of changing lifestyles, higher disposable income, greater product awareness
and affordable pricing have been instrumental in changing the pattern and amount of
consumer expenditure leading to strong growth in the consumer durables industry.
Companies such as LG Electronics India Ltd (LGEIL), Samsung India and Whirlpool are
reporting strong sales figures. Samsung has posted a growth of nearly 80 per cent in its
refrigerator category. In 2009, overall industry sales of LCD televisions grew by 93-94 per
cent over the earlier year. Multimedia mobile phones have grown from 800,000 units in 2008
to 1.8 million in 2009.
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Japanese consumer durables company Panasonic expects to double its sales in India to US$
945.09 million in the 2010 fiscal and subsequently expects the contribution from the country
to its global business to increase by 10 per cent by 2014.
Consumer Durables
IBEF: December 02, 2009
Several key factors are driving growth in the consumer durables sector: disposable income
levels are rising, consumer financing has become easier and urban and rural markets are
growing at the annual rates of 7 per cent to 10 per cent, and 25 per cent, respectively, with
organized retail expected to garner about 15 per cent share by 2015 from the current 5 per
cent.
Consumer durable is one of the fastest growing industries in India. Industry sales were
estimated to be about US$ 5 billion in value in 2007–08, a growth of more than 25 percent
over 2006–07, and are expected to grow at 20 percent in 2008–09. Some of the prominent
global players in the consumer durables sector include Philips, Samsung, Sony and Nokia.
Vengabeats
August 14th, 2006, 01:01 AM
Korean firms LG and Samsung haven‘t won the battle for the consumer durables market.
Indian firms such as Onida, Videocon and BPL are making a comeback and retailers like
Future‘s Kishore Biyani are launching store-brands.
Just about when everybody thought that the war for durability in the Rs 25,000-crore
consumer electronics industry in India had been fought and won, the industry seems to be
gearing up for another battle. On the face of it, nothing seems to have changed, not the game,
nor the players and not even the prize. The industry continues to grow sluggishly, an 8
percent compounded average growth rate (CAGR) between 2000 and 2004 (China grew 14
percent CAGR during this period, LG and Samsung continue to rule the market, accounting
for around 50 percent of the total Rs 25,000-crore industry and the other Indian as well as
57
multinational players like Videocon, BPL, Mirc Electronics, Whirlpool, and Sony continue to
play catch-up. Under the surface though, things are stirring.
For one, the also rans are refusing to play their part and are making a strong comeback bid.
―It is not for nothing that the Devil (a character that represents brand Onida) is back,‖ gushes
Gulu Mirchandani, Chairman and Managing Director (MD), Mirc Electronics. ―He is here to
rule the market again‖. Apart from televisions, where it has historically held its own against
competition, Mirc is making an aggressive play in categories such as washing machines, air
conditioners, microwave ovens and DVDs. Then says Mirchandani, there are exports. He
claims to have sold between 100,000 and 150,000 color televisions each in Ukraine and
Russia last year, and hopes to translate this into a competitive advantage in the Indian market.
BPL Ltd, which ruled the CTV market in India till early 2000 and then slipped into heavy
losses (the net loss stood at Rs 214 crore in 2003 and Rs 214 crore in 2003 and Rs 74 crore in
2005) , has formed a 50:50 joint venture with Japans Sanyo Electric. The latter has
committed $100 million (Rs 450 crore) to its Indian operations. The JV has launched CTVs,
LCDs and plasma screens under the Sanyo and BPL brand names and is also foraying into
refrigerators, washing machines and DVDs. ― We intend to be a 2,000 crore venture by 2009
with a considerable market share in all segments, says Ajit Nambiar, Chairman and Chief
Executive Officer, Sanyo BPL.
Videocon Industries, another leading Indian player that go battered during the late 90s and
early 2000s, boasts revenues of Rs 4,500 crore today. The group‘s oil business contributes
significantly to this, but the consumer electronics business is thriving, too. Chairman
Venugopal Dhoot identified a different route to growth: Allwyn, Kelvinator, Hyundai,
Toshiba and Electrolux in the domestic market, and of manufacturing facilities such as
French Electronics major Thomson‘s color picture tube, globally. ―If there is one player that
will thrive in Indian market, besides the Korean majors, it is Videocon,‖ says Dhoot.
Whirlpool India is another company, which after a long cold winter, is getting back into
shape. The company, which recorded a net loss of Rs 38 crore in 2005-06, recently
announced a $20-million (Rs 90 crore) investment for 2006 and 2007 and launched several
new products. The company says Arvind Uppal, its Managing Director, is committed to
India. Then, there are others like Godrej Appliances, Sony, Haier, Sharp, Hitachi and various
other smaller companies that are aiming to corner some share in the industry.
58
These ambitions plans and strategies would not seem misplaced if the consumer electronics
industry were growing the way other industries are. Last year, when GDP grew by around 8.1
percent, the stock markets boomed and most industries, even those that had been in dire
straits, fast moving consumer goods, grew at between 15 and 30 per cent; consumer
electronics was one sector that grew only 5 percent. In terms of value, the biggest constituent
of the segment, CTVs, actually saw a decline. Nor are growth estimates for the future any
more sanguine. According to market research agency Data monitor, the industry is likely to
grow around 7.7 percent CAGR for five years ending 2009.
There are many reasons for sluggishness in the industry; some immediate and others,
historical. Most people attribute last year‘s slow growth to two factors-confusion regarding
value-added tax (VAT) and a surge in stock markets. ―Confusion regarding VAT in the first
quarter last year took a heavy toll on sales,‖ says K.R.Kim, intriguing correlation between
stock markets and consumer durables industry. ―It has been observed that whatever stock
markets or real estate sectors are booming, consumers tend to postpone their consumer
durable purchases and invest their money in these assets.‖ Says Bhuwan B. Singh, Director
(Client Service), ORG – Gfk
Then, there are historical reasons. When the government opened up the sector, recalls
Mirchandani, incumbent players ―were not ready for competition and most of them died or
are still bleeding.‖ Videocon‘s Dhoot holds heavy taxation responsible for industries‘ woes.
―Total tax incidence in India even now stands at around 25-30 per cent, whereas the
corresponding tariffs in other Asian countries are between 7 and 17 percent,‖ he says.
Poor infrastructure is another reason that seems to have held back the industry. ―Regular
power supply is imperative for any consumer electronics product. But that remains a major
hiccup in India,‖ says Ravinder Zutchi, Deputy Managing Director, Samsung.
Indeed, over 80 percent of the rural market in India remains irrelevant for the industry
because of these reasons. But the fact remains that these problems are not going to be
resolved in the near future. And the companies will have to factor them in when they draw
new growth plans. Which they have now done. Shorter replacement cycles, especially in
urban areas, also give companies cause for hope. Over the next few years, the topography of
59
the industry will likely change, with some companies gaining at the expense of others.
Eventually, however, the market itself will grow, as rural markets evolve and companies
create specific products for them.
4.3 The Threat of Retail:
There is another imminent threat for the industry, the emergence of organized retail. ―World
over consumer electronics is used as a loss-leader category to woo consumers,‖ says Ireena
Vittal, Principal, McKinsey. ―Retailers give consumers huge discounts on these products to
win over consumers, which, in turn, mean squeeze on margins.‖ Vittal points to another trend
that is sure to hit the players, that of organized retailers launching their store brands. That, in
fact, is already happening. Electronic bazaar has started importing air conditioners and
microwave ovens from China and is selling them, under the brand name Koryo, at prices that
are over 40 per cent cheaper than those of competing products. ―Initial response to these
products has been encouraging,‖ says MD Kishore Biyani. ―We intend to import other
products like TV and washing machines soon.‖
Mukesh Ambani‘s Reliance Retail is also said to be exploring such opportunities. In fact, the
group is said to be in talks with some companies that neither have any manufacturing facility
nor a strong distribution network in the country, but are keen on a presence here. ―There are
companies that can take advantage of the free trade agreement (FTA) route and import their
products to India and then, sell them through us without making any ground-level
investments,‖ says a senior executive at the Reliance Retail. To be sure, companies like
Hitachi, Sharp and TCL Holdings are already looking at exploiting the FTA route. ―We are
looking at increasing our market share in CTV, LCD and plasma screen business,‖ says
Prasun Banerjee, Vice President (Sales and Marketing) Sharp India. ―We would largely be
importing these products, making use of the FTA route.‖
It is not that the players are oblivious to these challenges; they have no opinion but to look at
the brighter side of the picture, which in India‘s case is its potential. ―The Indian market
remains heavily under-penetrated, which is a big opportunity for all players,‖ says Zutshi.
Then, foraying into rural markets has a considerable cost component attached to it.
Companies not only have to set up the basic infrastructure in terms of office space,
60
manpower, but also spend on transportation for moving inventory.
Even LG and Samsung, which are touted as having the largest distribution network in the
country , have a direct presence only in 15,000 to 18,000 of around 40,000 retail outlets (for
consumer durables) in the country.
Players admit that the increasing competition and new challenges will lead to another phase
of consolidation with some losing and others winning. Early indications of that are already
visible. The buzz in the market is that Samsung incurred losses (around Rs 80-100 crore) for
the first time in 2005. Zutshi, however, refutes to this. ―Our profits did take a hit last year, but
there were no losses.‖ Whirlpool India, Godrej appliances and BPL Ltd, companies making a
comeback, aren‘t out of woods yet. LG‘s Kim says that in the next two to three years ―half
the players will be pushed to fringes again.‖ Only two or three players will survive in each
category.‖
And who are the players who will survive? Only those who are resilient, committed to the
industry and Indian market and at the same time, are looking at being globally relevant, is the
chorus.
Source: Business Today
Marketing Strategies:
They studied closely and picked up the salient features of the Japanese manufacturing
and made themselves an expert in that.
Their planning is very meticulous on the execution of the job in hand.
The Koreans never shown any bias against India. The Americans and Japanese took
their brand equity for granted. The Koreans did not. As a result of this they didn‘t
make any value judgments of the Indian customers and introduced contemporary
products. This way they got their brand noticed.
Both L.G and Samsung have consistently launched contemporary models-be it fuzzi
logic washing machines, flat screen TVs or microwave ovens-in step with their launch
globally.
Further power was added to this strategy of dazzling Indians with global products was
their high advertising spends. L.G spent Rs 110 crores in advertising while Samsung
61
spent Rs 80 crore in 2001. In 2003 L.G spent Rs 225 crores and Samsung Rs 100
Crores. Such high voltage advertising has made the Koreans the biggest spenders in
their businesses, and they outspend competition by a factor of at least two. These
spends have placed the Koreans in the class of some of the highest spenders in India
such as Colgate, ITC, Dabur and Hindustan Lever.
They are huge buyers of advertising so they exude through a lot of visible brand
building.
The Koreans have also started making a name for their ability to understand what
customers want. They practice this shibboleth with unusual vigor.
They figure out quickly and very well what the consumer wants. But the important
part is they quickly adapt their strategies accordingly.
Unlike U.S companies following the office marketing strategy the Koreans follow the
principle of ‗Feet marketing‘. That means even the higher officials roam about the
market to give boost to dealers and also to gather the first hand information on the
current market conditions. This helps in knowing the ground realities better which
results in a better strategy.
The Koreans always think big and take risks. That‘s why they have infused so
investment, which is now bearing the fruits.
Players like Whirpool and Electrolux that made a foray into consumer electronics
around the same time that L.G and Samsung did. They hedged bets by buying existing
brands and capacities here (Kelvinator, Maharaja, Allwyn, and the like) while the
Koreans built capacity from scratch and gives them an edge over the competitors.
The Koreans want to outdo the Japanese. They don‘t start on a hunch. Their planning
is meticulous. When they take up a job they take it very seriously.
All Korean managers bring on board a monk like devotion to their task at hand. This
ensures quick execution of the work.
The Koreans believe that manufacturing is a key strength and that‘s why they eschew
contract manufacturing and invest in their own manufacturing facilities around the
globe.
They have culture sensitive workshops to ensure that the Koreans and Indians work
well together.
They bundle one product with another so as to promote the weaker one backed by the
established product.
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They have well-entrenched the consumers in India by sponsoring a number of premier
events like cricket matches and others with a high TRP ratings.
According to prof. R.R.Krishnan at center for East Asian Studies of Jawaharlal Nehru
University the insecurity element in the history of Korean comprising colonization,
acquisition of their country in the past tends them to form a marketing strategy that
requires best of them.
Though the Koreans are making huge profits in India they have not fully presented
themselves in India. Many business like chip manufacturing, humungous chemicals,
energy business etc. which they are operating in other countries has not found its way
to India. The reason being the instability and lack of infrastructure of India to support
these businesses. This shows their marketing tactics and their inclination towards the
prelaunch test that they conduct before induction of each product in India.
The Koreans always do a prelaunch market survey unlike its Japanese or U.S
counterparts who take their brand equity for granted. This research gives useful inputs
to the Korean players and also times to adapt them for the new situation.
BACKGROUND:
Prior to liberalization, the Consumer Durables sector in India was restricted to a handful of
domestic players like Godrej, Allwyn, Kelvinator and Voltas. Together, they controlled
nearly 90% of the market. They were first super ceded by players like BPL and Videocon in
the early 1990s, who invested in brand-building and in enhancing distribution and service
channels. Then, with liberalization came a spate of foreign players from LG Electronics to
Sony to Aiwa.
Both rising living standards, especially in urban India, and easy access to consumer finance
have fuelled the demand for consumer durables in the country. Also, the entry of a large
number of foreign players means the consumer is no longer starved for choice. But this has
also resulted in an over-supply situation in recent times as growth levels have tapered off.
63
Chapter 5
Industry Analysis
64
5.1 PEST Analysis
Political:
There was a strong hue & cry with entry of the big organized retail chains being owned by
the big corporate top guns like Reliance Retail & Aditya Birla group. Strong lobbying was
done to protect the interests of local sabjiwala, kirana stores with the intention to increase
their vote banks & to protect the interests of some high profile personalities as Reliance
announced its intentions of directly sourcing from farmers, thereby disinter mediating the
middleman who is accused of escalating costs1. The lobbying was so strong that the Reliance
fresh has to shut down their operations in almost every nook & corner of Uttar Pradesh. After
feeling the heat of the issue, the govt. commissioned the economic think tank, Icrier to study
the impact of the organized retail on the unorganized one. The finding of the Icrier came as a
big relief to all the people who is directly or indirectly concerned with the overall gamut of
the retail industry. The findings reveals due to supply crunch in the retail market, both the
organized & the unorganized players can comfortably exist & get their share of pie on the
basis of competitiveness & by improving customer service to the end customer. The
permissible entry of the FDI only in one branded outlet tries to limit the emergence of the
positive & healthy competition & growth in this sector. In the country of more than a billion
people, the Govt. is more concerned to restrict the entry of the new players than to provide
some incentives to the domestic kirana stores in the form of microcredit schemes & alike.
The govt. can insulate the unorganized players from the adverse impact organized sector by
providing institutional credit through banks. The low access to banking facilities has been a
cause of worry for the unorganized sector, which can be taken care of by the active
participation of the govt. & regulatory authorities. The unorganized sector can also take the
advantage of different retail formats by a little awareness & positive attitude towards the
newly emerging trends in the market. For example the local kiranawala can go for the ‗cash
& carry operations‘, where they can get a better deal & credit as compared to the direct
billing from the companies. Now the UPA govt., which has emerged with the clear majority
in the Lok Sabha, has express their intentions of big-ticket reforms to be taken in the near
future. Even the new ally, the Samajwadi party is also not very rigid on the economic
65
reforms, which are likely to take in the next few months2. FDI in the retail industry is limited
to the single brand outlet where the maximum cap is 51%. Multi brands retailers like Wal
mart & Carrefour are waiting for the green signal from the govt. to carry out their operations
at the earliest. They have strong financial muscles & even turnover of some retailers is
greater than the GDP of some countries. Once they entered they will infuse fresh capital to
the tune of billion dollars, which will help the govt. to sustain the economic growth rate of
9% in the near future.
Economic:
R.Subramanian, owner Subhiksha (modern retail format) predicts that the top three players in
the industry will end up sharing the bulk of the profits. On asking for the prospective exit,‖
Right now I don‘t see any reason to get out. On the contrary, it might be a good time to
acquire something because there may be some consolidation.‖
One main reason for the exponential growth in the retailing sector is due to the shift in the
consumption pattern of the U.S consumer. During the last decade, the ever-increasing growth
of consumer spending in the U.S was a driving force for the global economy & for the global
retailing industry in particular which was fuelled by the external debt & the cheap availability
of loans at very comfortable rates. But the bursting of the housing bubble & the depreciation
of the dollar altogether creates a new picture where the U.S growth will come from exports
rather than consumer spending. The personal saving rate in U.S is nearly zero & is likely to
rise in the near future, thus putting more pressure on the spending pattern.
The bottom line is that the geographic mix of consumer spending growth will shift away from
the U.S towards Asia which gives an ample opportunity to the big bosses of retail industry to
showcase their energy & charisma. Organized retail in the U.S market is becoming more
competitive due to the down turn in the consumption pattern, which is also forcing the big
retailers to seek opportunities abroad, particularly in Asia.
66
Moreover the business leaders of big conglomerate of Indian industry are getting the pulse of
the retail market& are ready to recycle their excess cash flow from engineering, telecoms &
manufacturing for a larger cash flow in retail in anticipation. Investment in Indian retail is a
worth taking gamble which will pay off in the near future. It is viewed as a long-term
proposition & the success for the first mover advantage will replicate in the retail industry
too.
Apart from these issues, the main threat which the retail industry as a whole is suffering from
the commoditization of the products & services. The rapid expansion of the different formats
in Indian retail industry has eventually put the customer in the perplexed state & he is not
able to differentiate between the lucrative deals offered by the different retail outlets.
Therefore the focus area for the retailers is to hunt for the customer, trap him & keep him for
the long lasting affair. The look, the feel, the window display the freshness & the novelty
factors are some parameters on which on player can outshine others in the same catchment
area. The study reveals that while stores do better in the first year, the second year witnesses
a drop, the main reason is the novelty factor- says, Hemant kalbag, consumer & retail
practice, AT Kearney. ―The initial excitement dies out as more players come into fray & then
growth steadies eventually. In a business like retailing where processes can be easily
replicated, one has to constantly move a notch higher above competition‖.-explains kalbag3.
Even the retailers now want to play the safe game & are not interested investing money in the
format which is not able to get enough footfalls & a stream of revenues. The rising cost of the
real estate coupled with low conversion ratio has put a hole in the pockets of the retailers. For
example the Hyper City retail, part of K Raheja, also owner of Shoppers stop has dropped the
launching of the convenience formats, express city. Reason the profits margins in
convenience type of format is quite low & it has to be set in the prime locations to target
consumers of mom & pop stores who believe in convenience, & quick deliveries. The current
convenience stores format like Subhiksha, Reliance fresh & Spencer‘s are struggling with
challenges of operating a convenience stores due to high operating costs & wafer thin
margins.
67
Social:
The consumer all over the world understands the importance of the term CSR i.e. corporate
social responsibility. They now feels the gravity of the situation & are ready to question the
companies for their contribution towards the society in terms of better environment friendly
products & processes, the conditions of the workers in the countries which manufactures &
supply products & the impact of the products on them. They want companies to look after the
well being of the society & contribute towards it as per their efforts. Even the consumer is
ready to shell extra money from his pocket for the safe & environmental friendly products.
Technological:
The KRA‘s for the retail industry is to enhance the customer experience & drive revenues by
managing costs & improving operational efficiency. To meet these challenges the retail
industry is heavily backing on I.T to streamline its operations & to improve its bottom line in
the low margin retail industry. Here is the opportunity for the retail industry to tie the knot
with I.T. Shortage of real time information exchange between the stakeholders of the retail
industry takes a toll on the quality of service, inventory, strategies & management decision
making.
Retailers have already increased their IT spending by almost 15% in 2006, allocating almost
half of this increase to application software with a particular focus on tools that facilitate
multi channel customer relationships, point of sales systems, strategic merchandising &
supply chain management. As consumers embrace modern retail formats, technology will
play an important role to enhance the experience of shoppers as well as retailers
The critical activities that can be handled by IT are finance, accounting, business intelligence,
vendor development & management, merchandising & inventory management, stores
management, customer relations management, branding, sales promotion, supply chain
management & others. In the last couple of years, the retailing industry is implementing
solutions ranging from F&B operations to discount clothing, implementing supply chain
management (SCM) solutions to core business such as global sourcing ,distribution, logistics,
68
innovations, transparency & visibility in financials & inventory, compliance & management
of point of sale(POS) data.
Retailers are experimenting with blue- casting, self-service kiosks, SMS based interactions,
digital signage & self-checkout counters. Thus the IT organization has to be agile enough to
address the rising expectations, & move on the adoption curve. The future needs are
converging as Indians retailers too are striving to create technology led supply chain
efficiencies, optimizing revenue opportunities & customer intimacy. It is assumed that
merchandise systems & point of sale (POS) will trigger off the operations.
Depending on the size of the warehouse & the no. of SKUs (stock keeping units), a good
supply chain system & replenishment model will start driving basic operational activities.
The efficiencies are created with POS to warehouse to supplier integration with dynamic &
replenishment of stock based on sale data.
The life cycle of the retail industry seems to be squeezing as the big retail juggernauts are
laying off of their employees & surprisingly enough this time the axe falls on the middle &
top level executive. The management has justified the stand by calling it by another
management jargon called ‗staff rationalization‘. With the focus shifting from driving top line
growth to protecting the quickly depleting margins, the retailers are giving pink slips to their
top level non performers‘ executives. They have started pruning manpower from the top to
sustain their margins where they have been confronted by escalating real estate costs, strong
competition, changing consumer behavior patterns, novelty factor & commodization of
products & services.
Overall the picture of the retail is not looking very rosy in India as the increasing real estate
costs, changing consumer‘s attitudes & increasing competition has forced the retailers to
think & act rationally.
―At today‘s prices of real estate, retail isn‘t a viable business. Today most retailers are
working on a net margin of 3 percent. But thanks to spiraling real estate costs, occupation
costs are double that figure.‖
-Kishore Biyani, Group CEO, Future Group.
69
India‘s largest retail conglomerate Reliance Retail has initiated the ‗austerity drive‘. The
company is going for some cost cutting measures including a check on unnecessary travel,
mode of travel, courier dispatches, use of stationery office, use of cabs & the type of
accommodation while on tour& the no. of times employees can have coffee or tea. Even the
top managers are asked to use AC Indica cars instead of luxury sedans on outstations tours.
The company which promises to invest Rs.26000 crores in its new retail venture & hired
thousand of people with some astronomical salaries has now asked its format head to justify
their respective employee strength & the role each employee has in the retail venture.
Finally the billion-dollar question is that can it is possible for all of them to co-exist in the
retail ecosystem by nurturing & supporting each other to overcome difficulties &
uncertainties & come up with flying colors. The answer lies in the vision, commitment &
trust to think positively & act positively.
70
5.2 SWOT Analysis:
71
Strengths:
• Recognition as an industry.
• India tops the annual list of most attractive countries for international retail expansion
• Growing disposable income of the urban Indian consumer.
• Availability of manpower.
• Technology-intensive industry.
• Least saturated of all global markets studied.
Weakness:
• Fast changing needs of consumer
• FDI norms
• LAND & PROPERTY
Gap between supply and demand Only Indians can own property in India High stamp
duty on property Lease alone costs 6%-10% of sales
LABOUR LAWS
72
Restricted working hour Hiring part-time workers difficult
TAXES
High corporation tax
Opportunities:
• India is amongst the least saturated of all major global markets in terms of penetration
of modern retailing formats
• Players emerging across formats and product categories
• Rapid Expansion for all players
• The Shopping Mall formats are fast evolving
• Partnering among Brands, retailers, franchisees, investors and malls
Threats:
• Barriers to FDI which limits entry of global players and limits exposure to best
international practices
• Poor Infrastructure which restricts retail growth, creates supply chain bottlenecks
and increases wastage of farm produce
• 2008‘s economic crisis create some bad effect on sector.
73
Chapter 6
Micro Level Analysis
74
Here, in survey the 69% are male respondents & rest of the respondents are female.
Male are more concerned about the consumer durables & also more attracted towards these
electronics.
75
Age of R espondents
18-3029%
31-5054%
Above 5017%
The age of the respondents can be seen that the most of the respondents are from the age of
31-50. As it can be seen that the 17% of the respondents are coming in the age of 50. & the
rest of the candidates are having age of 18-30. As generally the 31-50 age respondents are
more settled down in their life so they are highly preferred the consumer durables.
76
As it can be seen that most of the respondents are responded which are in the category of the
graduate. It can be said that the respondents who have replied kindly are having at least the
knowledge of the industry. Area of living is considered because as the customers are
preferable for any one buying area or not that is seen. Generally, the Satellite & ambavadi
area are more preferable for the consumer durables. Also the respondents are generally
belongs to these particular areas from Ahmedabad.
77
Most of the Respondents were salaried, the students & the self-employed. Because of that the
consumer durable survey can be mass segmented. As it can be seen that the 57 no. of the
respondents are salaried respondents. While very less are the retired respondents.
As here it is to be seen that not more of the female & the retired persons are interested in
purchasing consumer durables.
78
According to respondents, definition of organized and unorganized retail outlet is:
Organized outlet Unorganized outlet Avaibility of all brands at same place Single owner
Manage by professional Only famous brand available
Presence at many places Not all brands at same time
Large investment Small investment
Very good infrastructure Extra benefits to loyal customer
Running by Employees Payment flexibility
While purchasing consumer durables, which characteristics of following do
you consider? (Rank appropriate, as 1 for the Highest & 5 for the Lowest.)
LCD
Rank
Characteristics 1 2 3 4 5
Durability 21 20 26 68 65 200
Price 41 86 59 11 3 200
Scheme 77 48 35 35 5 200
Technology 42 31 39 39 49 200
Service 19 15 41 47 78 200
200 200 200 200 200
No
. of
resp
on
den
ts
Rank
LCD
Service
Technology
Scheme
Price
Durability
79
Characteristics Weighted
Mean Rank
Durability 2.32 4
Price 3.755 2
Scheme 3.785 1
Technology 2.89 3
Service 2.25 5
Here, it can be seen that the most of the respondents have given preference to the scheme.
And it is because of promotional scheme given by organized outlet. Frequency of scheme is
more in organized compare to unorganized.
Refrigerators
Rank
Characteristics 1 2 3 4 5
Durability 97 56 26 19 2 200
Price 47 38 47 39 29 200
Scheme 31 64 67 27 11 200
Technology 21 28 33 59 59 200
Service 4 14 27 56 99 200
200 200 200 200 200
No
. of
resp
on
de
nts
Rank
Refrigerator
Service
Technology
Scheme
Price
Durability
80
Characteristics Weighted
mean Rank
Durability 4.135 1
Price 3.175 3
Scheme 3.385 2
Technology 2.465 4
Service 1.84 5
Here, it can be seen that the most of the respondents have given the preference to the
durability while purchasing the refrigerator. Sceme is given the 2nd
most preferable while
purchasing the refrigerator. Then the 3rd
,4th
,5th
preferable are the price, technology &
service.
Washing Machine
Rank
Characteristics 1 2 3 4 5
Durability 27 18 22 54 79 200
Price 41 39 67 27 26 200
Scheme 72 77 21 19 11 200
Technology 23 45 53 67 12 200
Service 37 21 37 33 72 200
200 200 200 200 200
81
Characteristics Weighted mean Rank
Durability 2.3 5
Price 3.21 2
Scheme 3.9 1
Technology 3 3
Service 2.59 4
While purchasing the washing machine it can be seen that the promotional schemes are given
most importance by the respondents. Price is to be given the 2nd
most preferable than the
3rd
,4th
& 5th
are the technology,services& durability.
Microwave Own
Rank
Characteristics 1 2 3 4 5
Durability 27 5 43 60 65 200
Price 73 57 27 17 26 200
Scheme 43 62 19 37 39 200
Technology 45 67 61 23 4 200
Service 12 9 50 63 66 200
200 200 200 200 200
No
. of
Re
spo
nd
ents
Rank
Washing Machine
Service
Technology
Scheme
Price
Durability
82
Characteristics Weighted
mean Rank
Durability 2.345 4
Price 3.67 1
Scheme 3.165 3
Technology 3.63 2
Service 2.19 5
Price is given to the most important factor to be considered while purchasing the microwave
oven. Technology is to be given the 2nd
most preferable Characteristic for purchasing the
microwave oven. & service is generally given the less preference while purchasing the
microave oven.
Laptop/Desktop Computers
Rank
Characteristics 1 2 3 4 5
Durability 21 12 63 67 37 200
Price 32 51 67 29 21 200
Scheme 17 37 49 26 71 200
Technology 94 62 13 17 14 200
Service 36 38 8 61 57 200
200 200 200 200 200
No
. of
Re
spo
nd
en
ts
Rank
Microwave own
Service
Technology
Scheme
Price
Durability
83
Characteristics Weighted
mean Rank
Durability 2.565 4
Price 3.22 2
Scheme 2.515 5
Technology 4.025 1
Service 2.675 3
Technology is the most important criteria while purchasing any laptop or any desktop. Then
the price is given the 2nd
most prefered & People do not give much importance to scheme and
durability while purchasing compuers.
Mobiles
Rank
Characteristics 1 2 3 4 5
Durability 19 11 37 61 72 200
Price 45 91 42 18 4 200
Scheme 42 39 62 24 33 200
Technology 67 33 17 19 64 200
Service 27 26 42 78 27 200
200 200 200 200 200
No
. of
Res
po
nd
ents
Rank
Laptop/Desktop
Service
Technology
Scheme
Price
Durability
84
Characteristics Weighted
mean Rank
Durability 2.22 5
Price 3.775 1
Scheme 3.165 2
Technology 3.1 3
Service 2.74 4
While purchasing mobiles, the most important characteristic is the price that is to be preferred
first. Then the least preferred is the durability while purchasing the mobiles.
Music Systems
Rank
Characteristics 1 2 3 4 5
Durability 36 16 29 50 69 200
Price 72 47 41 23 17 200
Scheme 21 32 37 47 63 200
Technology 59 88 26 14 13 200
Service 12 17 67 66 38 200
200 200 200 200 200
No
. of
Re
spo
nd
ents
Rank
Mobiles
Service
Technology
Scheme
Price
Durability
85
Characteristics Weighted
mean Rank
Durability 2.5 4
Price 3.67 2
Scheme 2.505 3
Technology 3.83 1
Service 2.495 5
While purchasing the music system, respondents are giving preference to the technology. &
the least preference is to be given the services.
Air Conditioners
Rank
Characteristics 1 2 3 4 5
Durability 23 22 24 53 78 200
Price 36 23 58 64 19 200
Scheme 28 19 22 74 57 200
Technology 44 79 44 3 30 200
Service 69 57 52 6 16 200
200 200 200 200 200
No
. of
Re
spo
nd
ents
Rank
Music Systems
Service
Technology
Scheme
Price
Durability
86
Characteristics Weighted
mean Rank
Durability 2.295 5
Price 2.965 3
Scheme 2.435 4
Technology 3.52 2
Service 3.785 1
Services are given to the most preferred out of all the characteristic while purchasing the
airconditioners. & the durability is the least prefered while purchasing A.C.
Camcorder/Digital Camera
Rank
Characteristics 1 2 3 4 5
Durability 18 17 29 67 69 200
Price 41 29 53 34 43 200
Scheme 33 52 37 40 38 200
Technology 82 66 32 11 9 200
Service 26 36 49 48 41 200
No
. of
Re
spo
nd
en
ts
Rank
Air Conditioner
Service
Technology
Scheme
Price
Durability
87
Characteristics Weighted
mean Rank
Durability 2.24 5
Price 2.955 3
Scheme 3.01 2
Technology 4.005 1
Service 2.79 4
The respondents are preferred the technology 1st while purchasing the digital camera.While
the least prefer is durability as per the research.
No
. of
Re
spo
nd
en
ts
Rank
Camera
Service
Technology
Scheme
Price
Durability
88
How frequently you change your consumer durables?
Time Duration
Less
than a
year
1-3
years
3-5 years 5-10
years
More than
10 years
CTV/LCD/PLASMA 9 94 72 14 11 200
Refrigerator 3 23 36 96 42 200
Washing Machine 12 59 37 72 20 200
Microwave Oven 17 38 112 33 0 200
Laptop/Desktop
computer 9 49 107 28 7 200
Mobiles 16 112 53 19 0 200
Music system 29 82 59 27 3 200
Air conditioner 32 41 103 23 1 200
Camcorder/Digital
camera 10 32 91 67 0 200
Here, it is seen that the consumers generally their digital camera, aircaonditioners, laptop,
oven in the time span of the 3-5 years.mobiles and television they replace within three years.
No
. of
Res
po
nd
ents
Product Catagory
Less than a year
- years
- years
- years
More than years
89
From where do you prefer to buy consumer durables?
Always Organized Retail Always Unorganized Retail
Both
As in the survey of the 200 respondents we found that there are 32% of the respondents who
are always purchasing from the organized sector. It is also found that there are also the
respondents who are purchasing from unorganized sector which are 12% . There are 56% that
is majority of the respondents who are purchasing from both the organized as well as the
unorganized sector.
90
What is your preference for the following : (Rank from 1 to 5, as
rank 1 is for highest)
CATEGORY
Organized Outlet Unorganized
(give name) Purchasing
area Sales
India
Croma NEXT X-cite e-zone
CTV/LCD/PLASMA
Refrigerator
Washing Machine
Microwave Oven
Laptop/Desktop computer
Mobiles
Music system
Air conditioner
Camcorder/Digital camera
0
20
40
60
80
100
120
No
. of
resp
on
den
ts
product category
Sales India
Croma
NEXT
X-cite
e-zone
91
Preference towards Organized & Unorganized
Product category Organized Unorganized
CTV/LCD/PLASMA 164 34
Refrigerator 173 27
Washing Machine 176 24
Microwave Oven 182 18
Laptop/Desktop computer 143 57
Mobiles 114 86
Music system 167 33
Air conditioner 171 29
Camcorder/Digital camera 157 43
no
. of
Res
po
nd
ents
Product category
organized
Unorganized
92
Most of the respondents perchase consumer durables from organized outlets. In the category
of mobiles and computer, people also purchase from unorganized because of price and
service.
Rank the given reason behind purchasing from the organized
retail? (From 1 to 10, as 1 to be highest & 10 to be lowest)
Preference of people for purchasing in organized retail
Rank
Reasons 1 2 3 4 5 6 7 8 9 10 Weighted Total
Prefer ence
Availability of all brands 390 306 208 133 100 135 36 63 8 1 1380 1
After sales services 310 216 248 224 85 80 72 36 26 6 1303 2
Promotional Schemes 270 297 272 105 125 110 36 51 18 9 1293 3
Display 260 225 176 119 210 145 68 57 4 1 1265 4
Financial Schemes 210 225 144 266 105 60 92 60 6 19 1187 5
Status 100 171 184 245 120 170 68 84 6 7 1155 6
Sales person’s interaction 190 99 128 91 140 65 136 24 64 26 963 7
Replacement time 130 117 56 119 40 45 48 78 74 58 765 8
Proximity 60 27 72 56 40 105 180 105 98 16 759 9
Home delivery 80 117 112 42 35 85 64 42 96 57 730 10
10 9 8 7 6 5 4 3 2 1
Weight
93
Here, it can be seen that 1st rank given to the avaibility of all brands in the all the categories.
& home delivery is not given by the organized outlet so that the least prefered.
Preference of people for purchasing in Unorganized retail
Rank
1 2 3 4 5 6 7 Weighted
Total
Weighted
mean Preference
Home delivery of all products 371 258 110 104 48 48 16 955 4.775 1
Availability of financial services 154 306 160 192 54 24 17 907 4.535 2
After sales services 266 138 75 76 123 78 25 781 3.905 3
Convenience 217 102 170 108 81 42 43 763 3.815 4
Promotions 147 156 165 124 87 42 39 760 3.8 5
Trusted brands (by providers) 168 102 145 88 126 76 28 733 3.665 6
Trustworthiness in owner 77 138 175 108 81 90 32 701 3.505 7
7 6 5 4 3 2 1
Weight
per
cen
tage
of
resp
on
den
ts
rank preference
Replacement time
proximity
After sales services
Home delivery
Sales person’s interaction
Financial Schemes
Promotional Schemes
Status
Availability of all brands
Display
94
Here the home delivery of the product the most important factor while purchasing form the
unorganized retail outlet. Trustworthiness in owner is the main reason behind not purchasing
from the unorganized outlet.
No
. of
resp
on
den
ts
Rank preference
After sales services
Availability of financial services
Promotions
Home delivery of all products
Trustworthiness in owner
Trusted brands (by providers)
Convenience
95
Do you prefer financial schemes to purchase consumer
durables?
Yes No
There are generally the 138 respondents who are positive towards the financial schemes like
to take a loan & buy in the installments it means 31% of the respondents are not interested to
take a loan.
Preference for financial schemes
Yes No
96
Would you wait for available discounts for purchase consumer
durables?
Yes No
Approximately the 176 respondents are positive towards the discounts. While the rest of the
respondents are not preferring the discount schemes.
Discount Preference
Yes NO
97
0102030405060708090
100
CT
V/L
CD
/P
LA
SM
A
Re
frig
era
to
r
Wa
sh
ing
Ma
ch
ine
Mic
ro
wa
ve
Ov
en
La
pto
p/D
esk
to
p …
Mo
bil
es
Mu
sic
sy
ste
m
Air
co
nd
itio
ne
r
Ca
mc
ord
er/D
igit
al …
At Ocassions
At Festivals
during financial scheme
During promotional scheme
Others
Generally people buy the mobiles & laptops when the promotional schemes are frequently
available. LCD & music system & the oven are generally preferred from the festivals.
Refrigerator & the washing machine buy during the financial schemes available. Digital
camera is purchased during the occasions.
98
Do promotion schemes change your brand preferences?
Yes No
As in the question of the promotional schemes change the brand preferences or not, in that
64% are brand loyal customers.
While the 72 customers are loyal to the promotional schemes & they are more attracted to the
promotional schemes.
Yes No
99
If yes, which brand you prefer for all consumer durables?
Category
LG VIDEOCON SAMSUNG BPL ONIDA VOLTAS GODREJ OTHERS
CTV/LCD/
PLASMA
Refrigerator
Washing
Machine
Microwave
Oven
Laptop/Desktop
computer
Mobiles
Music system
Air conditioner
Camcorder/
Digital camera
100
CTV/
LCD/
PLAS
MA
Refri
gera
tor
Was
hing
Mac
hine
Micr
owav
e Ove
n
Lapt
op/D
eskt
op co
mpu
ter
Mob
iles
Mus
ic sy
stem
Air c
ondi
tione
r
Cam
cord
er/D
igita
l cam
era
No. o
f res
pond
ents
Product category
OTHERS
GODREJ
VOLTAS
ONIDA
BPL
SAMSUNG
VIDEOCON
LG
Digital camera is generally preferred by the consumers company called Sony & canon. Voltas
& Samsung air conditioners are preferred by the consumer durables. Laptop is preferred of
the sony & dell etc. while the oven, music system is preferred of the Bajaj, IFB. & the
Philips.
101
Chapter 7
Hypothesis Analysis
102
Hypothesis: 1
H0: There is no significant relation between occupation and preference towards financial
scheme.
H1: There is significant relation between occupation and preference towards financial
scheme.
Occupation
Preference of financial scheme
Total YES NO
1
23
34
57
2
15
31
46
3
7
16
23
4
8
20
28
5
23
23
46
6
0
0
0
76
124
200
fe = RT x CT
n
103
fe = expected frequency in a given cell,
RT = row total for the row containing that cell,
CT = column total for the row containing that cell,
n = total number of observations
X2 = Σ[(fo – fe)
2 / fe]
Degrees of freedom in a chi-square test of independence
= (r – 1) (c – 1)
= (no. of rows – 1) (no. of columns – 1)
= (6 -1) (2 -1)
= 5
fo
fe
(fo – fe)2 / fe
23
21.66
0.083
34
35.34
0.051
15
17.48
0.0352
31
28.52
0.0216
7
8.74
0.346
104
Degree of freedom =
5 @ 95% confidence level
Answer:
Here, X2cal < X
2tab
So, H0 is accepted.
Result:
There is no significant dependence between occupation and
preference towards financial scheme.
20 17.36 0.401
23
17.48
1.743
23
28.52
1.068
0
0
0
0
0
0
5.127
X2cal = 12.1656
X2tab = 11.071
105
Chapter 8
KEY FINDINGS
106
1 Organized consumer durable outlet means the large investment, availability of all
brands at one place, their presence in major cities of India, professionalism etc.
2 Unorganized consumer durable outlet is defined by the respondents by the
unavailability of the all brands or the specific brands only available, special schemes
are there, financial schemes are generally preferred way.
3 While purchasing LCD & washing machine, generally most of the respondents are
preferred the promotional schemes to purchase it.
4 Refrigerator is preferred by durability characteristic.
5 Price is most important while purchasing the music system & the microwave oven.
6 Technology is more important & preferred while purchasing the mobile,
laptop/desktop & Digital camera.
7 While purchasing the air conditioners the services are the most important criteria.
8 Generally the consumers change their microwave oven, laptop/desktop, air
conditioners,& camera in 3-5 years.
9 Consumers are generally changes their mobiles within one year.
10 LCD are generally changed in every 1-3 years of time span.
11 Refrigerators are generally changed in 5-10 years because of their durability.
12 Consumers are generally preferred the both organized & unorganized stores.
13 In ahmedabad city, the organized stores like sales India & croma are the most
preferred to purchase their consumer durables.
14 While purchasing from organized outlet, consumers prefer availability of all brands,
after sales service, & display.
15 While purchasing from unorganized outlet, consumers prefer trustworthiness of
owners & availability of financial services.
16 After sales services & employees interaction should be improved here. & the lack of
knowledge of the employees should not be there in organized retail outlet.
107
17 Availability of all brands at a time should be there in unorganized retail outlet.
18 More than 60% of the respondents are preferred financial schemes to purchase the
consumer durables.
19 Approximately 80% of the respondents purchases consumer durables while discounts
are available during festivals & promotional schemes.
20 Approximately 35% are respondents which are not the brand specific if they get the
promotional schemes.
21 Most of the Respondents are generally not preferred the exclusive showrooms.
22 Sales India & Croma are the most relevant & preferred brand stores according to the
consumers.
23 Sales India & croma is also the retail outlet which is very famous & brand recall is
there in the mind of the consumers.
24 Generally consumers are not preferred much of the retail outlets for the mobile & all
little accessories purchase.
25 Consumers who are brand conscious, they are generally not switch over the brand for
the any type of financial or the promotional schemes.
26 Next retail outlet is generally not preferred by the consumers or it is less preferred
also the x-cite is less preferred brand outlet for consumers.
27 The reasons behind the les preferred brand outlets are only the marketing & the
advertisements are not done by planning.
28 E-zone which is sub brand of big bazaar is the attractive one due to the less prices &
discounts are there.
29 Unorganized outlets like the Vijay sales & all that are generally not preferred here in
Ahmedabad due to the lack of awareness & trustworthiness.
30 All the types of products in which all of the brands can available, this type of store is
of croma.
31 No one is providing all types of facilities like the organized outlet is generally giving
except the sales India.
108
Chapter 9
SUGGESTIONS
109
1. Organized outlet should improve it‘s after sales service because its hits
badly to the company‘s market share.
2. More detailed customized services should be provided.
3. The training to in shop demonstration should be given at frequent time
interval and feed back should be considered positively.
4. The companies have to look into the matter of person hiring for in shop
demonstration. A big showroom should have at least 2 such kind of
person.
5. Organized retail outlet should try new dealer who have the potential. So
they can target more market.
6. As there is a bottle neck competition between Organized &
Unorganized, it is necessary to take measure steps to overcome the area
of downfall in Unorganized with respect to Organized.
7. Customer considers quality as their first preference, so the Outlet
should give more stress on this.
8. The switching of customer from one brand to other brand is due to the
bed after sell service in shop.
9. The product is well aware and it is on top of mind of customer. So
organized as well as unorganized retail should always improve services
and update their technology.
110
Chapter 10
Conclusion
111
In this study, we found that the Organized & Unorganized retail outlet both are preferable.
But generally consumers see the preference of the product & as per the product & the
schemes, it differs. Purchase pattern of the consumers are differ from the product to product
& store to store. Generally sales India & croma is the most preferable organized outlet.
The study for the how frequently the consumers buy the products, which are generally less
than a year, or more than that. So generally, by product wise it differs. The availability of all
the products is the main criteria behind purchasing from the organized outlet. While the last
reason for purchasing from the organized outlet is only the display of all the products.
Home delivery of all the products is the main & important criteria behind purchasing the
unorganized outlet. Convenience is the last reason behind purchasing the unorganized outlet.
Financial schemes are generally preferred for the purchasing consumer durables. Promotional
schemes are also preferred for the consumer durables by consumers. Normally, the discount
schemes are also preferred by the consumers.
Some consumers are also brand specific for the some of the products. Like the laptop is
preferred only of sony vaio by the most of the consumers. While some of the consumers have
dream for that sony vaio laptop. Generally exclusive showrooms are not so much preferred
for the consumer durable electronics.
112
Bibliography
1) Books
Consumer Behavior published by ICFAI Publications
Integrated marketing Communications published by ICFAI Publications
Consumer Behavior , Text and Cases.by Satish Batra and S.H.H.Kazmi
―It happened in India‖ by Biyani; Kishore
Kotler Philip,‖ Marketing Management‖, New Delhi, Pearson Education Inc,
2006.
Kothari,C.R,Research Methodology methods and techniques ,New Delhi, New
Age International (p) Ltd,1990.
MARKETING RESEARCH- AN APPLIED ORIENTATION
By- Naresh K. Malhotra.
BUSINESS RESEARCH METHOD – By-COOPER & SCHINDLER 10TH
ED., TATA McGRAWHILL,2008
Consumer Behaviour published by ICFAI Publications
Integrated marketing Communications published by ICFAI Publications
Consumer Behavior , Text and Cases.by Satish Batra and S.H.H.Kazmi
―It happened in India‖ by Biyani; Kishore
2) Newspapers
The Economic Times/Brand Equity
The Telegraph/Metro
The Business line / Brand line
113
3) Magazines
The Business line
Retail Biz
Business Standard
4) Websites
http://www.cci.in/pdf/surveys_reports/consumer-durables-sector.pdf
www.ibef.org/economy/consumermarket.aspx
www.cci.in/pdf/surveys_reports/consumer-durables-sector.pdf
www.thehindubusinessline.com/2010/02/.../2010021650300400.htm
www.indiaonestop.com/consumermarkets.htm
www.ncaer.org/downloads/PPT/TheGreatIndianMarket.pdf
114
Annexure
Dear Sir/Madam,
We are the students of GLS NRIBM, MBA CAMPUS, AHMEDABAD and
presently doing a project on ―Comparative analysis of consumer behavior at
organized and unorganized retail with special focus on consumer durables‖ We
request you to kindly fill the questionnaire below and assure you that the data
generated shall be kept confidential.
1. According to you what is organized outlet for consumer durables?
________________________________________________________________________
___________________________________________________________________________
_____________________________________________________________________
2. According to you what is unorganized outlet for consumer durables?
___________________________________________________________________________
___________________________________________________________________________
__________________________________________________________________
Gender : M F
Age :
Educational Qualification : 10th
or below 10+2 or below
Graduate Post Graduate and above
Others(please specify)
Area :
Occupation : Salaried Self Employed
Retired Housewife
Student NRI
115
3. While purchasing consumer durables, which characteristics of following do you consider?
(Rank appropriate, as 1 for the Highest & 5 for the Lowest.)
CATEGORY
Characteristics
Durability Price Schemes Technology Service
CTV/LCD/PLASMA
Refrigerator
Washing Machine
Microwave Oven
Laptop/Desktop computer
Mobiles
Music system
Air conditioner
Camcorder/Digital camera
Others
4. How frequently you change your consumer durables?
CATEGORY
Less than
a year
1-3
years
3-5
years
5-10
years
More than 10
years
CTV/LCD/PLASMA
Refrigerator
Washing Machine
Microwave Oven
Laptop/Desktop computer
Mobiles
Music system
Air conditioner
Camcorder/Digital camera
Others
5. From where do you prefer to buy consumer durables?
Always Organized Retail Always Unorganized Retail Both
116
6. What is your preference for the following : (Rank from 1 to 5, as rank 1 is for highest)
CATEGORY
Organized Outlet Unorganized
(give name) Purchasing
area Sales
India
Croma NEXT X-cite e-zone
CTV/LCD/PLASMA
Refrigerator
Washing Machine
Microwave Oven
Laptop/Desktop computer
Mobiles
Music system
Air conditioner
Camcorder/Digital camera
7. Rank the given reason behind purchasing from the organized retail? (from 1 to 10, as 1 to
be highest & 10 to be lowest)
Organized Unorganized
Reasons Rank Reasons Rank
Display Proximity/Convenience
Availability of all
brands
Trusted brands (by
providers)
Status Trustworthiness in
owner
Promotional Schemes Home delivery of all
products
Financial Schemes Promotions
Sales person‘s
interaction
Availability of
financial services
Home delivery After sales services
After sales services
Proximity/convenience
Replacement time
117
8. As per your opinion what is to be provided for better services in organized retail?
1 _________________________________________________________________
2 _________________________________________________________________
3 _________________________________________________________________
9. As per your opinion what is to be provided for better services in unorganized retail?
1 _________________________________________________________________
2 _________________________________________________________________
3 _________________________________________________________________
10. Do you prefer financial schemes to purchase consumer durables?
Yes No
11. Would you wait for available discounts for purchase consumer durables?
Yes No
If yes, then give details about when you generally go for a purchase.
CATEGORY
At
Occasions
At
Festivals
During
Financial
Schemes
During
Promotional
Schemes
Others
CTV/LCD/PLASMA
Refrigerator
Washing Machine
Microwave Oven
Laptop/Desktop computer
Mobiles
Music system
Air conditioner
Camcorder/Digital camera
12. Do promotion schemes change your brand preferences?
Yes No
118
If yes, then which brand you prefer for all consumer durables?
Category
LG VIDEOCON SAMSUNG BPL ONIDA VOLTAS GODREJ OTHERS
CTV/LCD/
PLASMA
Refrigerator
Washing
Machine
Microwave
Oven
Laptop/Desktop
computer
Mobiles
Music system
Air conditioner
Camcorder/
Digital camera
13. Do you prefer the Exclusive showroom of a particular company for the brands you
purchase consumer durables?
Yes No