Rise of the Indian consumer

Recent times have witnessed a revolution in consumer lifestyle and a consequent rise in demand for consumer durables and personal vehicles
Consumer durables

Apart from steady income gains, consumer financing and hire-purchase schemes are proving to be major drivers in the consumer durable and automobile industries that is contributing by almost 20 per cent or more to the GDP.

Consumer Durable Industry: an insight
The Indian consumer has undergone a metamorphosis of sorts with demand for improved lifestyle. Consequently, consumer durables industry has witnessed a considerable change in the last few years. There is an increased interest for LCD-TVs and DVD players. The demand for washing machines and refrigerators is also increasing. Urban consumer durables market is growing at almost 10 % p.a., and the rural durables market is growing at 25% p.a. Some high-growth categories within this segment include mobile phones, TVs and music systems.

Higher disposable income coupled with greater affordability and a surge in advertising have been the main reasons in bringing a change in the consumer behaviour pattern.

Consumer financing and hire-purchase schemes are other reasons that is simplifying the purchase pattern.

Growth-trend segment wise
Mr Y. V. Verma, President, CEAMA, Consumer Electronics and Appliances Manufacturers Association, said that the Rs 35,000-crore consumer durable industry is poised for growth, backed by advanced and smart technologies making their foray into the market.

Sales of display category products such as Flat Panel Displays — LCDs, PDPs — rose by 45 per cent this year, although the sales of air-conditioners and home appliances surged by nearly 12 per cent and 23 per cent, respectively.

According to Mr Verma, “Big has become beautiful” for almost all consumer durables and electronics brands, with LCD, plasma and LED television screens getting bigger; refrigerators  getting larger; and washing machine capacities increasing.

The industry is expected to grow at a rate of more than 15 per cent in 2011. The digital display market size for flat panel displays in 2010 was 2.8 million units, which is estimated to rise to 4.5 million units by 2011; market size of refrigerators was nine million units this year and is projected to grow to 12 million units in 2011.

Likewise, the existing market size for washing machines is five million units and it is anticipated at six million units next year, though the size of the room air-conditioners market is 3.4 million units and likely to reach 4.4 million units by 2011, he said.

SWOT analysis

1. Presence of established distribution networks in both urban and rural areas
2. Presence of well-known brands
3. In recent years, organised sector has increased its share in the market vis a vis the unorganised sector.


1. Demand is seasonal and is high during festive season
2. Demand is dependent on good monsoons
3. Poor government spending on infrastructure
4. Low purchasing power of consumers


1. In India, the penetration level of white goods is lower as compared to other developing countries
2. Unexploited rural market
3. Rapid urbanisation
4. Increase in income levels, i.e. increase in purchasing power of consumers
5. Easy availability of finance.


1. Higher import duties on raw materials imposed in the Budget 2007-08
2. Cheap imports from Singapore, China and other Asian countries.

A peek into Automobile Industry
The automobile industry in India happens to be the ninth largest in the world. It contributed by 5 percent to India’s GDP in 2009. Following Japan, South Korea and Thailand, in 2009, India emerged as the fourth largest exporter of automobiles. Several Indian automobile manufacturers have spread their operations globally as well, asking for more investments in the Indian automobile sector by the MNCs.

Segmentation of market share of automobile industry in India in percentage

Passenger vehicles: 15.96

Commercial vehicles:3.95

Three wheelers:3.60

Two wheelers: 76.49

Top automobile companies are Tata Motors, Hindustan Motors, Ashok Leyland, Maruti Suzuki, Hyundai and Bajaj.

SWOT analysis    

1. Domestic Market is large
2. Government provides monetary assistance for manufacturing units
3. Reduced Labour cost


1.Infrastructural setbacks
2. Low productivity
3. Too many taxes levied by government increase the cost of production
4.Low investments in Research and Development


1.Reduction in Excise duty
2.Rural demand is rising
3.Income level is at a constant increase


1.Increasing rates of interest
2.Too much competition
3.Rising cost of raw materials

According to Vinay Bysani of Viveks, CD business is Rs. 42,000 Cr and  CDIT business is in excess of Rs. 1,00,000 cr ! (this includes CD + IT + Mobile).

"I feel:

1. CD business is growing at 15-20% on Y on Y basis

2. There is a population that is getting into both consumption and replacement purchase mode

3. Standards of living are increasing

4. Peer pressure

5. Want to live life for today rather than for tomorrow

6. Live life today – on tomorrow’s cash flow (Credit based purchase – finance / credit card / EMI based life)

7. Want to give one’s family a better today than to ask them to dream for a better tomorrow

8. If not now – when is a right time !  Tomorrow never comes

So, the trend will see a forward growth".

Lars Sorensen CEO, Damco, South Asia avers in detail while emphasising on the role of logistics in demand of consumer durables, “Indeed, rising income levels in India has led to a spurt of growth in consumer goods industry and with many international brands setting up shops the market has become all the more competitive. With Damco predominantly involved in the freight forwarding of export and import cargo we have seen a rising trend in the imports of consumer goods from destinations such as Far-East Asia. As a result we believe that there exist lot of opportunities to bring about cost efficiencies by providing world class logistics services to clients in retail and consumer goods industry".

He admits that if infrastructure is improved, the demand will increase further as the biggest hurdle faced by manufacturers and logistics service providers alike is the under developed infrastructure to support the seamless movement of goods which results in unnecessary delays and cost escalations. Added to this is the current low adoption of IT and other forms of technology to support the entire supply chain process.

He further shares the advantage of hiring a 3PL that brings to the table the global best practices (acquired by servicing customers across the globe), a wide network of partners and other associated service providers for activities such as warehousing and storage, inland cargo movement, document management, an inherent ability to understand customer’s needs as per different business requirements, adopting a KPI based approach wherein a single target is broken down into achievable and measurable milestones and finally allowing the customer to not own any functional assets used for managing the supply chain. The combination of these benefits contributes to optimising the supply chain cost at a very high level.

Consumer durable such as televisions, washing machines, kitchen appliances, desktops, printers are witnessing rapid growth along with globally branded apparels, footwear, sports gear and accessories”.

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