The appliances industry was impacted significantly, especially in cooling categories such as air-conditioners, refrigerators, chest freezers and air coolers, in the summer of 2020. The uncertainty hampered demand and hurt consumer sentiments since early March. The loss in April was 100 per cent, while the industry experienced 60-70 per cent drop in sales in May.
During the initial lockdown period, plants, warehouses and dealers were adequately stocked to meet any immediate surges in demand. Few months into the lockdown, the industry experienced some challenges in terms of raw material shortages and logistics with intermittent containment zones and restrictions in the movement of goods and fluctuating market opening norms, affecting sales.
However, with a gradual lift in lockdown, from August onwards, there was an uptake in demand and it has since shown an upward trajectory. This growth was fuelled by premium appliances like frost-free refrigerators, fully automatic washing machines and microwave ovens indicating that consumers were looking for appliance upgrades that could deliver comfort and convenience to help them tide over the domestic challenges, given the reduced access to domestic help and difficult work from home conditions for everyone in the family.
The new lifestyle centered around ‘home’ and ‘safety’ is driving a change in purchase decisions with more acceptance of high ends delivering better health or hygiene or convenience – be it in the form of greater storage and reduced trips to the market or reduced laundry time or reduced time and effort on dishes, etc.
Essentials like refrigerators, washing machines have been witnessing higher purchase intent along with hitherto niche categories like dishwashers. New categories like UV disinfection devices have emerged.
New hygiene and health features have became part of the proposition across sectors.
The trend of home appliances substituting domestic help will continue for some time, albeit to a milder extent, particularly in densely populated cities, till Covid-19 vaccines are made available and administered across. Reversal of pay-cuts by several firms, improving the consumers’ disposable income is also aiding sales.
E-commerce saw increased traction this year and although the consumers will continue to frequent stores offline for purchase, the e-commerce channel is likely to operate at a higher threshold henceforth.
On the flip side, the rising commodity costs are anticipated to impact the industry for some months. Logistics remains a challenge for some imported products due to freight issues and delays in port clearances. The industry lost over 25 per cent of sales in Q1FY21. Recovering the lost revenue will not be easy and we expect that the industry will de-grow by 10-15 per cent this year.
Since the lockdown, the Cabinet has undertaken multiple initiatives to boost overall demand and consumption through all-encompassing economic packages for the consumers. This was coupled with a slew of policies favouring domestic manufacturing under Aatmanirbhar Bharat initiatives including production incentive scheme (PLI), Atmanirbhar Bharat Rojgar Yojana and import restrictions to boost ‘Made in India’.
We believe that ACs have a huge growth opportunity; the category has been most impacted by the pandemic; and given the rising temperatures is not a luxury anymore, especially in view of changing work life patterns. Hence, we advocate the lowering of GST tax slabs on ACs from 28 per cent to 18 per cent. The offset will spur demand and help attract investments in the electronics value chain, making India more self-reliant.
The writer is Business Head and Executive Vice-President – Godrej Appliances and President CEAMA.