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Premiumisation trend catching up in consumer durables

Purvita Chatterjee Rashmi Pratap Mumbai | Updated on April 23, 2018

With rising incomes and aspirations, premium category products are growing faster than the overall industry growth rate.

From Jharkhand’s Jhumri Telaiya to Mumbai’s Cuffe Parade, Indians are shunning smaller brands as well as sizes in favour of large televisions, high-capacity refrigerators, front-load washing machines and inverter ACs. With rising incomes and aspirations, premiumisation is the buzzword in consumer durables, with premium category products growing faster than the overall industry growth rate.

“The exposure to global technologies and lifestyle has created a perception shift and consumer durables are not just viewed as utility products anymore. Consumers are today well aware and equipped with information that helps them understand how opting for better technologies will result in better usability,” Rajeev Bhutani, Senior Vice-President, Consumer Electronics, Samsung India, told BusinessLine.

Premium products have better aesthetics and top-end features such as dust-free fans or high-capacity refrigerators or energy efficient air-conditioners.

The premiumisation trend is visible across categories – from ACs to microwaves, refrigerators and washing machines. “In our Bosch premium washing machines, we are already seeing twice the growth compared to other segments. The rising demand is encouraging us to give promotions and easy finance to aid the premiumisation trend. There is an aspiration to upgrade from manual to more machine assisted washing machine models,” said Gunjan Srivastava, MD & CEO, BSH Household Appliances. Kamal Nandi, Business Head & EVP, Godrej Appliances, points out that while the average consumer durables industry growth across categories was seven per cent last fiscal, the premium segment witnessed a growth rate of over 20 per cent. Like in the air- conditioner segment, the overall growth was 15 per cent, but inverter ACs grew at 25 per cent. “Consumers are seeking better designed and better technology products for both comfort and convenience. And they are willing to pay for it,” he said.

Beyond the metros

The trend is not restricted to just metros and big cities. “The interesting fact is that even tier II and III markets have been showing a sizeable appetite for premium products. When we launched the QLED series in India, 40 per cent of the pre-bookings were from tier II and III markets,” says Bhutani of Samsung. Godrej’s Nandi adds that the penetration of Internet has given access to information to consumers even in smaller towns. “As the fast-paced lifestyle is moving to tier II and III cities, so is the need for comfort products. That’s why there is a spurt in demand from those areas.”

The trend towards premiumisation opens up business opportunity for established MNCs.

Steep import duties

“Considering our strong portfolio in the premium segment we are very well positioned to capture this market. We already have a leadership in the TV, refrigerator and microwave segment and are the fastest growing brand in the washing machine category,” says Bhutani.

Most of the premium consumer durables are imported and companies are paying steep import duties to meet the demand. Like refrigerators attract a GST of 28 per cent with 10 per cent import duties. “We will continue to import our high-end premium refrigerators (from facilities in Thailand). While our volumes are not large here, the sales are growing very fast,” says Gurmeet Singh, Chairman & Managing Director, Johnson Controls- Hitachi Air Conditioning.

John Perinchery, analyst, Emkay Global Financial Services, points out that even the gap in pricing is gradually narrowing between the mass and premium segments as consumer durable players are seeking volumes and want to push the premium products inventory. “The top brands are enticing consumers with premium products at more affordable pricing,” he says.

Published on April 23, 2018

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