Demand for consumer durables is trickling down to the small towns of rural India, even villages with a population of around 20,000, although the companies selling these products face several challenges in reaching these markets and establishing retail outlets there.
The market, however, exists, and according to The Invest India Incomes and Savings Survey 2007, conducted by IIMS Dataworks, a research firm, the rural market will account for 53 million “buys” of consumer durables in the next one year. The survey pertains to the 321 million paid workers in India between the ages of 18 and 59.
The survey predicts that sales in rural India are likely to be brisk in most categories of durables: colour televisions, air conditioners, DVD players, telephones and automobiles. “Around 8% of aggregate annual household savings (Rs2,24,463 crore) are in rural India. Also, average incomes in rural India among the working population have increased by 16% in the past three years; so aggregate disposable income has increased,” said Christopher Butel, chairman, IIMS Dataworks. Consumer electronics firms are quite eager to grab a share of this pie.
“Around 30% of our total sales comes from semi-urban markets, which also act as a feeder point to most consumers from villages. We certainly see a strong demand for our products in these markets with the growing affordability of products as well as general buoyancy in the economy. Given the smaller base in semi-urban markets, the growth in sheer numbers is higher,” said R. Zutshi, deputy managing director, Samsung India.
However, the companies say they need to rework their product and distribution strategies to succeed in semi-urban and rural markets. They add that basic and mid-priced models are more in demand in the rural markets since most of the consumers are buying durables for the first time. “Rural India is one of the growth drivers (for us) and is mainly driven by first-time acquisition of our products. High-end models and second-time purchase often happens in urban areas,” said Sandeep Tiwari, head of marketing, LG Electronics India (Pvt) Ltd.
Most companies in the consumer durables business are aware of the potential in rural markets. However, they have continued to focus largely on urban markets because they are not convinced about the viability of reaching out to rural areas. Some companies are now trying to understand specific needs of customers in rural areas in an effort to break into these markets.
“We are creating the channel (and) awareness for these products through local language advertising as well as other tools such as local exhibitions and mobile vans. We held 100 roadshows last year and now, we are planning to hold 220 such roadshows in towns to push awareness on our products,” said Zutshi.
LG says it would like to leverage its wide network of stores and strengthen distribution channels and service centres; rural customers do not like buying from temporary or mobile stores, it claims.
And power supply, erratic at best in rural India, continues to be a problem. “Amid the glorification of booming rural India, we need to understand that around 52% of the households in rural India are not even electrified. So, infrastructure will play an important role in the growth of consumer durables industry. All other things are secondary,” said LG’s Tiwari.