COVID Impact on Consumer Durable Industry
Outbreak of COVID-19 has impacted the Indian Consumer Durable Industry ( Manufacturers and Sellers both ) in a big way, which was already grappling with slower demand since last festival season .
There are two factors responsible for this . One is complete restrictions imposed on people movement & shutdown of economic activities since last week of March month . While the movement of people and resumption of economics activity has started since start of June nationally, still there is no visible respite for trading community . Second factor is supply constraint, due to over dependence over import; that too from a particular country at the cost of sacrificing the domestic industry growth. Domestic industry has potential to generate lakhs of employment opportunity in INDIA.
Last year Chinese companies registered sales of nearly Rs 1.4 lakh crore in the Indian electronics market with 39% share last year as they dominated the fast-growing categories of smartphones, televisions, laptops, and even smart bands and watches as per TOI .
This COVID-19 catastrophe has severed blows to Electronics Industry on two fronts-
Access Impact _ First half of Year
Like the diversity in culture ,language, food etc, Indian Sub-continent is multifaceted in climate as well. It is blessed with 3 weather patterns who behave in their extreme capacity and are always in race with each to create maximum havoc ! Accordingly home Appliances requirement is also very diverse, basis the topography climate etc .It starts with dehumidifier , Washer , Dryer , Coolers , AC , Fans , Room heaters etc.
Sourcing of the products is done 6 months in advance basis the sales plan .Like rest of the world our dependence also has been increasing year after year on our great neighbor , this is even after Govt Of India had launched a well polished & publicized drive called MAKE IN INDIA way back in 2014 !!
By Mid of January it was well known to everyone how severely COVID-19 has gripped china and consequently its factory output on various products . So apart from China everyone was more concerned to get their containers filled with finished products dispatched from Chinese ports while thinking so naively that this COVID-19 will not impact their countries . Till start of March month , all Home Appliances brands as well shopkeepers were in frenzy of producing / buying stock of summer products i.e. Air Conditioner, Cooler, Fan .
In their pursuit of perfect sales strategies, all shopkeepers stocked full supply of summer products in the very first lot .. instead of tested practice of buying in multiple lots retailers invested heavily in first lot buying with expectation of a bumper summer season.
And worst nightmare of any businessman came to reality with the Infamous 8 PM address to the nation by PM Modi on 24th March announcing nationwide complete lock down .. how effective was this lock-down ? Was the time premature ? Only greater scrutiny will tell ..
Ultimately it played as catalyst to doomsday prophecy for summer products with full season wiped out due to lock-down, fury of cyclone in eastern and western India, advanced Monsoon . Now warehouse of shopkeepers are stacked till roof top with unsold inventory !!
2nd season of the year is Monsoon. 1st June is official date when Monsoon reaches India's Southern states . With Monsoon two products are sold like hot cakes - Washing machine at Pan India level and Dryer at areas with high humidity in particular .
Business situation has become so unpredictable that next seasonal product of monsoon, which is washing machine is bearing the heat. There is serious stock crunch in this product category. With cargo movement are restricted till 12th Aug there is little chance that the ready stock can be brought in through import .
Since last 20 days, alternative option GOI( Government Of India) is advocating is a old wine MAKE IN INDIA in a new bottle ATMA NIRBHAR BHARAT & VOCAL FOR LOCAL .. But how this will be achieved is another puzzle. Components required to make even a basic Semi-automatic machine also have to be imported from China forget high-end products in same category ..
With half of the year gone by, what looks certain is seasonal products are giving the maximum damage to retailers in terms of unsold inventory of Summer and sale loss due to in-adequate stock of Monsoon .
The Balance half of the year is crowded with lot of festivity and Television is the preferred product which is high in inventory cost and a technologically driven category. With Top 3 brands namely Sony Lg Samsung struggling with stock and slower demand, pure play online brands majority of whom are from China will take advantage . This is essentially a loss to a very wide network of shopkeepers who are not in E commerce eco-system .
Supply Impact_ Second half of Year
The second half of the year which technically starts post Monsoon from August month onward looks to be grappling with major supply constraints both of Finished as well as of raw material .
Standoff with China on border issue has triggered the panic button. GOI has realized how dearly this Chinese dependence can cost us economically as well as strategically, considering the unfolding of events in recent days it has become suicidal to assume business as usual .
At one hand we do not have enough stock of raw material and finished products both to meet the local demand .
The leading consumer electronics and smartphone companies in India have announced a decrease in production and there is a high chance that the launch of new products will be delayed. China produces 75 per cent of the total value of the components used in TVs and almost 85 per cent, in the case of smartphones, claims the ET. In fact, the pivotal components such as mobile displays, open cell TV panels, printed circuit boards, capacitors, memory and LED chips, are all imported from China. The market lock-down has forced Chinese vendors to increase the cost of components by 2-3 per cent due to the shortage of supplies. This will ultimately increase the prices of Indian electronic products.
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| Source: Counterpoint .TOI |
To suffice the domestic demand for immediate period, alternate supply source needs to be scouted . Taiwan, Japan and South Korea are some of the option available but these countries think this demand to be a short term and fear India will go back to China once situation is normalized.
On the other hand all major global powers are experiencing Chinese policy of aggression and subsequent dominance . Which is feared can compromise their sovereignty in longer run and to balance their economic interest these nations think India could be the next global manufacturing & supply hub. Few of them have even started moving their production from China to India . But this route will take some good time to materialize as some teething issue which needs some fixing i.e. labor laws , land reforms , frequent policy changes etc . Some state governments have started moving in this directions and have taken few bold confidence building steps .. UP Govt is one good example in this area .
Opportunity
Curse is always a package deal , along with curse comes an opportunity as a boon .. I m classifying opportunity in two groups
PUD (Pent-Up Demand) Category-
Few product category in electronics has been witnessing very robust demand ,along with the gradual lift up of Lock-down . These products have started registering equivalent or few of them even higher than Pre-COVID period sale . Existing category which has seen tremendous demand in short terms & will taper once situation normalizes .With extended lock-down at home , we started relying on technology big time for entertainment and work place .
Leisure & Entertainment
In entertainment category Over-the-top(OTT) platforms are a big draw . Count of OTT platforms is increasing with each passing day .. Gone are day of Netflix only option. We have seen Voot , Zee5 , Discovery + , HBO , HotStar , ALT Balaji , Sony LIV going strong along with Amazon Prime Vidoe who co-incidentally has premiered first bollywood movie exclusively on OTT platform .
To enjoy this immersing experience of high quality 4K content strong demand for big screen smart TV is seen across geographies . LED television of 43 inch and above are the must have for any consumer who care for high quality content consumption .
"Urge to upgrade has been considerably strengthened in the last 46 days (Lockdown). This is the time for realization, when you need better visual experience through TV both in terms of picture and sound. Sales of Home theater would also increase," Sony India Managing Director Sunil Nayyar said.
Work Work Work
With initial 2 weeks rest working people stared to feel restless and wanted to get back to work voluntarily. Kids in our homes are the another set of victims in this pandemic . Where 8 hours of teaching was enforced over them by means of Online classes . For first 4-5 days it was voluntarily as it appeared cool for them to be found on zoom but after that it was nothing less than a torture .
This type of work created an urgent need for big screen laptop , web cam , headphone , earbuds ..
DIY (Do it Yourself) Category
Initial 2 weeks were a kind of fun for female members of house . Since ages they had always cribbed about male member i not give enough time at home .. and now out of the blues he is there for 24*7 since 15 days 🤩 and he was served the choicest of delicacies in all 3 meals of a day .. but this was shortly to go away ..as days dragged on by the end of 3rd week need to share the household chores was repeatedly brought in notice .. and to make his/her life comfortable Vacuum Cleaner and Dishwasher found place in dinning table discussion.. as people have realized its importance in the absence of their household help under the lockdown.
By the 2nd extension of lock-down which is April-end these 2 products were most discussed not only within houses but also in various whatsApp group platforms of society , family and extended family ..It is widely speculated that very soon these 2 terms were ranked higher than ANVESHI JAIN in Google Search engine !!
Sale of these 2 products have skyrocketed since then . Situation is such that demand has outstripped supply. Dishwasher is not even available on display across any electronics shops in Delhi NCR market, as customers bought display units also without seeking any bargain...which is unlike to typical behavior of this market
Paritosh a Gurugram resident working for an IT multinational who recently purchased a dishwasher, says the decision to buy the appliance now was prompted by the unavailability of domestic help and too many household chores piling up. Paritosh notes that just like air conditioners, dishwashers are also becoming common these days and everybody is starting to buy them.
Bosch-Siemens (BSH), one of the premier dishwasher brands, says that since the lock-down they have witnessed a surge in the demand for dishwashers and expect to continue seeing this surge. Speaking to TNM, Neeraj Bahl, MD & CEO, BSH Home Appliances says, “In fact, we have already started receiving a lot of inquiries and booking for dishwashers, we met our monthly sales targets in a week’s time. We are looking forward to fulfilling these orders as soon the lock-down lifts or eases in respective regions.
Major brands in this product LG, Bosch, IFB , KORYO are completely exhausted with their stock . Even now there are pending orders which are expected to be catered in next 2 months .Online portal of Amazon, Flipkart are not taking any new orders due to no stock visibility from the brands in near future !!
Way ahead
Now we are at entrance of a tunnel which appears dark and confusing to begin with but if travelled with sincerity and patience will lead to a very promising space where our dependence on external factors will be to export of our produce rather than import unlike current situation !
India economy is traditionally reliant on domestic demand unlike China which is extremely focused on international markets. Various agencies tracking India growth story has predicted Indian Economy to contract by 1.5 percent this year . In my opinion majority of this will be due to subdued demand in global markets where Indian export will suffer . Software industry which is the one of the largest generator of employment and foreign currency will be hard hit .
India has a robust banking sector and it is expected that various MSME s will find it easy to borrow money, which they will infuse in market to produce more goods and consequently more jobs .
fastest-growing digital markets in the world
India is the second-largest internet subscriptions market in the world.
Fastest growing smartphone market in Asia Pacific.
Electronics market in India was projected to reach US$228 bn by 2020 from over $ 100 bn in 2016-17
The electronics products segment contributed 82% to the overall market in 2015, while the rest comprised electronic components.
The Electronic Products industry in India was valued at $ 61.8 bn in 2015, which is further segmented as follows:
- Mobile devices (27%)
- Consumer electronics (18%)
- Industrial Electronics (15%)
- IT/Office automation (10%)
- Automotive electronics (8%)
- Telecom (8%)
- Strategic (Aerospace and Defence) (7%)
- Medical devices (4%)
- Others (3%)
The government has placed electronics manufacturing on high priority with a major focus on initiatives such as Digital India, Make in India and supportive FDI policies to bolster electronic manufacturing. As a result, domestic production is expected to grow at a CAGR of 27% during 2016-2020 to reach $ 104 billion in 2020, as compared to the CAGR of 9.6% during 2010-2016.
Three things that are in India's favor and have capacity to bring greener postures of economic prosperity in contrast to current gloomy economical horizon .
1- Global apprehension on rising Chinese supremacy & dominance . To balance this they consider India as the best contender due to skilled young manpower , vibrant democracy & current strong leadership . India is the second-largest mobile manufacturing country in the world just behind China and aiming to lead the category globally .
2-Huge domestic market fueled by very young rising middle class with appetite for best in class products due to rising disposal income .
3- Strong Anti China sentiments with GOI also set to play the hard game with neighboring country . Due to the border dispute with China which has a history of decades behind it, but recently has escalated to an all time high level; there is a strong opinion among citizens and various think tanks to completely ban Chinese Import and simultaneously make things within country . This factor single- handedly has potential to become a rage and bring Electronics Category back in great shape ..
Time to Act Now to reap the benefits !
OMNAMAH
Hare+
Image Source:Freepik
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