Home >News >India >White goods and appliances companies pin hopes on rural markets to lift sales
Standalone shops in rural markets are helping fulfill supplies of white goods at a time when wholesale markets in large cities continue to work under restrictions (Mint)
Standalone shops in rural markets are helping fulfill supplies of white goods at a time when wholesale markets in large cities continue to work under restrictions (Mint)

White goods and appliances companies pin hopes on rural markets to lift sales

  • A normal monsoon, coupled with enhanced government schemes, could help households in rural markets spend on low-ticket consumer electronics
  • Companies are also seeing need-based, low-value consumer products such as LED bulbs selling at a faster clip

Consumer durable companies, which rely largely on urban markets for sale of large appliances, said small-towns and parts of rural India could hold the key to reviving short-term demand. Forecast of a normal monsoon, coupled with enhanced government schemes, may help households in these markets spend on low-ticket consumer electronics.

With lower penetration of appliances and consumer durables in small-towns and villages, companies see larger potential to sell direct cool refrigerators, twin-tub washing machines, fans, coolers, and television sets in such places. Most companies that draw anywhere between 10 and 20% of their sales from smaller markets said they are expecting quicker recovery in rural markets as these have been outside containment zones, are less affected by the pandemic and have fewer restrictions.

Besides, forecast of a normal monsoon, additional government allocation towards the rural employment guarantee programme and reverse migration towards villages could aid the rural economy, too. However, analysts expect urban markets to slow down on account of job losses and salary cuts.

“In the current context, multiple factors are signalling faster revival of the rural markets," said Ajay Sharma, Senior VP, Usha International, which draws 15-20% business from rural markets. Sharma said a good monsoon, along with a good harvest of the primary staple crops in the country will boost rural incomes. As a result, "rural market will start reviving earlier compared with urban markets", he said.

The company is seeing demand from tier II, III, IV towns and rural markets, where it sells products such as fans, sewing machines, home and kitchen appliances, water solutions, and water pumps.

“If you look at the economic slump owing to the pandemic, rural markets will definitely see faster recovery in the short term owing to the direct impact of a good monsoon," said Manish Sharma, president and chief executive officer, at Panasonic India and South Asia.

This, Sharma said, “will give more money in the hands of the farmers". Panasonic expects a 15% year-on-year growth in rural markets, even as urban market will remain flat.

Panasonic expects to sell more twin-tub, semi-automatic washing machines and direct cool refrigerators in India's smaller cities. “Both rural markets and small-towns—tier 2 and tier 3 cities—are doing well as there are no containment challenges there unlike the metros," he said.

In the short term, even Havells India Ltd expects villages to do better, as big cities take time to deliver sales growth. “Hoping that the curve flattens, we believe urban markets will take around a couple of months at least to come back on track. However, rural markets are likely to perform much better than the urban centres in the immediate future as they are recovering faster," said Parag Bhatnagar, Senior Vice President, Havells India Ltd.

While demand trends are changing weekly, Bhatnagar said the company is seeing need-based, low-value consumer products such as LED bulbs selling at a faster clip.

“High-value products are governed by the trend of deferred purchase and more or less impulsive buying," he said. Stand-alone shops in these markets are helping fulfill supplies, as wholesale markets in large cities continue to work under restrictions.

India's lockdown battered sales of several categories across India, as shops and markets remained shuttered and consumers remained indoors. With restrictions being eased in May, some companies are reporting signs of a pent-up demand. In urban markets this was especially true for categories such as laptops, tablets, and cooling products as consumers spent more time indoors and worked from home. “April was a washout, but we witnessed an improvement in demand during May and June…Cooking appliances segment has seen significant growth in mass and mid segments," said Usha’s Sharma.

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