Hard times for consumer electronics industry as rupee depreciates

With the rupee again touching almost 68 today and the prices of consumer electronic goods likely to witness increase - among other industries such as International and National travel, hotel accommodation and retail expenditure.
Worries for consumer industry as rupee depreciates

According to experts, price increase in consumer electronics, among other things such as hotels and International travel, may seem inevitable as rupee depreciates.

With the rupee again touching almost 68 today and the prices of consumer electronic goods likely to witness increase – among other industries such as International and National travel, hotel accommodation and retail expenditure per say – the Indian customer’s sentiment is going to hit a new low. Separately, the refurbished products industry, which has a tweaked business model of selling used/refurbished products can gain from the fall, especially when the new products are expected to come at a price! Experts predict that the depreciating rupee might provide fresh opportunities for this industry in the days to come.

For home appliance marketers who shell out an increased import cost for consumer electronics, it is in TVs, personal computers and smartphones that the customers will witness price increases to start with, followed by travel and tourism. Whether or not the price hike is imminent is a fact well brought out by Yatra, an online travel agency that reported a 40 per cent rise in its revenue figures in FY 14-15 recently, by way of a report on effects of changing value of rupee.

Trends observed with changing value of rupee in travel industry

The company observed the rupee appreciation survey (done back in 2014, when rupee was at 60) and compared it to the rupee depreciation survey (done in 2015, when rupee was at 66) and has come out with some observations. When the rupee was strong at 60, the percentage of people seeking International travel stood at 89 per cent, and today when the rupee is weak, it is a mere 33.8 per cent.

The currency fluctuation – rupee depreciation against dollar – is likely to see some adjustments in customer’s behaviour as well. Since the rupee has depreciated by more than 45 per cent since the last 5 years, 43 per cent of Indian customers have started opting for budget accommodation. Over time, the holiday destination choice decisions prompted by weaker rupee have shifted from Europe and US to Thailand, Singapore and Malaysia. It also adds that over 60 per cent of people always hold back and wait for rupee to be stable, and embrace the attractiveness of sightseeing at tourist destinations than splurging on shopping and trying out exquisite cuisines.

Sharat Dhall, President, Yatra.com says, “We have always seen a change in the Indian travellers behaviour with the fluctuation of the rupee. The affect largely lies with International travel, where people not only change choice of destinations but also look at compromising on accommodation. With people soon planning and booking tickets for summer vacations it is bound to affect their original choices if the rupee continues to waver at such levels.”

For consumer durables, there’s not much upside to the rupee’s slump

A recent report by Apple suggests foreign exchange fluctuations and currency movement to be reasons behind raised prices. While launching the much anticipated iPhone 6S, the company raised the price of the phone to counter the swell taxes in the country and also the tepid rupee. The falling rupee, which will increase the import cost for consumer electronics and home appliances, will negatively affect the prices of televisions, premium smartphones, personal computers and other electronic goods.

Reboot’s CEO and Co-founder Rahul Chowdhury says, “The prevailing economic conditions are expected to influence sales of refurbished products, especially in the high value segment. Let’s take new personal computers for example – where the price hike is inevitable due to increase in import cost of hardware – their prices will increase as the rupee depreciates. These conditions will influence sales of refurbished products, especially as they will be cheaper than the new products.”

Reboot currently refurbishes about 6,600 products per month and all of them get sold as soon as they are available, the reason why it increased its capacity to about 10,000 products a month in December of 2015. It claims to take it up to 20,000 by March of 2016. A Reboot refurbished smartphone (it only deals in Apple Smartphones under the Mobility Product Range currently) can cost as low as INR 9,999 and an entry level desktop would be for INR 3,999 while the laptop range starts from INR 9,999. Experts predict that the depreciating rupee might provide fresh opportunities for this industry in the days to come.

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