Worldwide Consumer Electronics Market The consumer electronics industry has witnessed a phenomenal growth overthe past few

years. This growth can be attributed to the increasing effect ofstate of the art electronic devices on the market. The consumer electronicsindustry is ushering in the dawn of Convergence. It is the confluence andmerging of hitherto separated markets of digital-based audio, video andinformation technology, removing entry barriers across the market andindustry boundaries. This convergence of technologies has resulted in agreater demand for consumer devices, be they portable, in-home (mobilephones, digital camera) or in-car (CD/DVD players), offering multiplefunctions. The revolution brought about by Digital technology has enabled theconsumer electronics sector to profit from the growing interaction of digitalapplications such as: camcorders, DVD player/recorder, still camera,computer monitor, LCD TV etc. It has also witnessed the emergence ofmobile telecommunications technology, incorporating both digital visual anddigital MP3 capabilities. The computer industry has also benefited by beingable to make its way into consumer's living rooms. HDTV's with VGAconnections and SD/MMC card slots, personal media players, andMicrosoft-based Media Center PCs have pushed the two industries evencloser together than before. The overall revenue earned through the sale of audio, video and gamingconsoles constitutes the international consumer electronics market. The Asia Pacific region is the market leader wielding the biggest chunk ofthe market, closely followed by Europe. The European market share isexpected to take a drubbing due to the growing demand for consumerdurables in the Asia Pacific consumer electronic market. Japanesecompanies have captured the consumer electronics market. World famousbrands such as Sony, Panasonic and Matsushita are all owned by theseJapanese manufacturers. Korean companies such as Samsung and LG are alltrying to join the Japanese bandwagon. Samsung can claim to be the world'sfastest growing electronic company.

BUYING

BEHAVIOR

OF

CONSUMER

ELECTRONICS
Price is a significant influence on purchase behavior but is not always the most important factor. Consumer age, brand, type of product, current product diffusion, and lifecycle stage of a product must be viewed in concert with price to understand purchase process behavior.

 For example, buyers of certain products, including game consoles, high-definition DVD players, DVRs, and photo printers, are more likely to consider product features and capabilities over price. Endorsed by opinion leaders excellent reviews in magazines, TV shows, on blogs, by word of mouth by existing consumers, etc High on quality brand name of apple assures on quality, especially sound and music clarity as well as product durability Associated with the aspirational group for a consumer with a trend setting product like an iPod, it has become a symbol of status and cool and hence become a must-have to fit in with the popular group

GLOBAL CONSUMER BEHAVIOUR

Changing Trends In Women
A Consumer Electronics Association (CEA) study has found that women are more comfortable with technology than ever before, are heavy users of CE products, and have a major influence on technology purchases for the household. Female customers are distinct in their beliefs about technology, in what they desire from consumer electronics, and in the way that they shop for these products, the study indicated. Women are less enamoured of gadgets and technology for its own sake. But the CEA study indicated that women are more open to advice, and when shopping they focus on portability, functionality, reliability and simplicity.

TOP 5 EMERGING NATIONS

BRAZIL CHINA INDIA
2

 MEXICO SOUTH AFRICA The Top 5 Emerging countries contributed $37.6 billion to the global consumer electronics industry in 2007, with a CAGR of 10.9% between 2003 and 2007 In 2012, the market is forecast to have a value of $51.2 billion, with a CAGR of 6.4% over the 2007-2012 period. China is the leading country among the Top 5 emerging nations, with market revenues of $21.6 billion in 2007.

CONSUMER APPLIANCES & ELECTRONICS RETAILING IN CHINA

The worlds fastest growing large economy, and foreign investors and market High Competitive market, margins very tight and, until recently, the available market was shrinking. Presence of Rural rebate scheme for reduced price goods to rural consumers has made the available market a lot bigger though, over the past few years.
Official estimates for the CNY(Chinese New Year 2009) period show sales of

household electric appliances grew by 17.8% over the same period in 2008.

Consumer Durables
Washing Machine Refrigerator Colour Television Camera Mobile Phones Automobiles

Number per 100 Urban Households

95.9 90.2 133.4 47.0 111.4 2.2
3

Number per 100 Rural Households

37.3 17.8 75.1 3.7 34.7 --

Source: National Bureau of Statistics of China, China Statistical Yearbook 2005 NOTE: China Statistical Yearbook 2005 is not available.

GLOBAL INDUSTRY POSITION

Support voluntary, market-oriented programs and initiatives, including industryled standards, which highlight and sustain energy efficiency in the electronics industry Continue to work cooperatively with governments in the development of energy efficiency initiatives that complement and support voluntary approaches and continued innovation, expanded consumer choice, and enhanced product functionality Oppose government-imposed approaches that stifle innovation, reduce consumer choice, and limit product features and services

Trends in Electronics Market

Propelled by growing middle class population, changing lifestyle and rapid urbanization, the Indian consumer electronics industry is forecasted to grow at a rapid rate of 10% to 12% in the coming few years. Volume sales of washing machine will be driven by growth in fully automatic category during 2008-09 to 2011-12. The market for televisions in India is changing rapidly from the conventional CRT technology to Flat Panel Display Televisions (FPTV). Currently, the split between CRT and FPTV is around 97% and 3% respectively, and the share of FPTV is projected to increase at robust rate in near future. Frost-free refrigerator sales, certainly growing at a much faster pace than the direct-cool category, are anticipated to drive the Indian refrigerators market over the forecast period. The AC market in India is projected to grow at 30% to 35% for the coming few years. Driven by young population, demand for MP3 players and digital video appliances are anticipated to surge at double-digit rate in near future. The low penetration level of consumer electronics goods coupled with increasing preference for comfort and luxurious goods are widely attracting the foreign as well as domestic players to the industry 4

 TRENDS IN TERMS OF TECHNOLOGY AND PRODUCTS INDIA

Lower duties, cheaper technology and strong competition with low entry barriers ensure competitive prices Increase in brand and product choice

Value-for-money pricing lead consumers to upgrade from corded to cord-less phones, from conventional CRT to flat-screen or plasma/LCD TVs, from 15- to 17-inch computer monitors, from 1- to 3-megapixel cameras, from monochrome to colour phones, etc Huge boom in mobile phone purchases with high penetration even in rural markets (launch of value for money, no frills, reliance phones gave an impetus to rural penetration) With internet penetration also increasing along with growing number of service providers, the sales of modems, routers and accessories has gone up.

CONSUMER BEHAVIOUR TRENDS

Shift from buying predominately during Diwali and other festive seasons to year round purchasing Consumers more aware of brands Consumers more conscious of style, looks, technical specifications More research is done on technically advanced gadgets, but there has also been an increase in impulse buying with increasing disposable incomes, competitive prices and wide choice.

KEY PLAYERS IN ELECTRONICS AROUND THE WORLD

COMPANIES PRODUCTS

Videocon Industries Godrej Whirlpool India Mirc Electronics Panasonic Voltas BPL Limited Electrolux Samsung Hoover LG Electronics Eureka Forbes Sony Blue Star Bajaj Electronics Nokia

Refrigerators, Washing Machines, Television, Air Conditioner, Microwave Ovens Refrigerators, Air Conditioners Refrigerators, Washing Machine Television Television Refrigerators, Air Conditioners Refrigerators, Television Vacuum Cleaner, Refrigerator Vacuum Cleaner, Refrigerator. Television, Mobile Phones Vacuum Cleaner Washing Machine, Refrigerator. Television, Mobile Phones Vacuum Cleaner Television, Mobile Phones, DVD Players Air Conditioners Geysers, Electric Fan Mobile Phones

OVERVIEW OF INDIAN MARKET

Pre liberalization dominated by a few domestic players like Godrej, Allwyn, Kelvinator, and Voltas Post-liberalization many foreign companies have entered into India, dethroning the Indian players and dominating the market Consumer durables sector is one of the fastest growing industries in India LG and Samsung, the two Korean companies have been maintaining the lead in the industry with LG being the leader in almost all the categories The rural market is growing faster than the urban markets but penetration level is very low
6

 CTV segment is expected to the largest contributing segment to the overall growth of the industry The rising income levels, double-income families and increasing consumer awareness are the main growth drivers of this industry

Consumer Electronics in India

India has an increasingly affluent middle class population that, on the back of rapid economic growth, has made the countrys consumer electronics industry highly dynamic. The industry has been witnessing significant growth in recent years due to several factors, such as retail boom, growing disposable income and availability of easy finance schemes. But still, the consumer electronics goods, like refrigerators, microwave and washing machines have low penetration in the country, representing vast room for future growth. The report finds that since the penetration of several products like TVs and refrigerators are reaching saturation in the urban areas, the markets for these products are shifting to the semi urban and rural areas. This analytical research evaluates the Indian consumer electronics industry. It briefly discusses about the current and emerging trends in the industry, underlining the future potential areas and key issues crucial for the industry development. It provides an insight into the emerging and potential future trend in all the categories and highlights the key strategies that need to be worked upon to get success in the highly competitive industry. The report thoroughly analyzes the historic performance and future prospects, offering 4year industry forecast, of following consumer electronics products: Washing Machines (Semi-automatic & Fully Automatic) Television Set-top Box Refrigerator (Frost-free & Direct Cool) Air Conditioner Microwave Oven MP3 Players Digital Camera & Camcorder Mobile Handsets PCs (Desktop & Notebook)

Different Segments of Indian Consumer

The Socialites
Socialites belong to the upper class. They prefer to shop in specialty stores, go to clubs on weekends, and spend a good amount on luxury goods. They are always looking for something different. They go for high value, exclusive products. Socialites are also very branding conscious and would go only for the best known in the market.

The Conservatives
The Conservatives belong to the middle class. The conservative segment is the reflection of the true Indian culture. They are traditional in their outlook, cautious in their approach towards purchase; spend more time with family than in partying and focus more on savings than spending. Slow in decision making, they seek a lot of information before making any purchase. They look for durability and functionality but at the same time is also image conscious.

The Working Women

The working woman segment is the one, which has seen a tremendous growth in the late nineties. This segment has opened the floodgates for the Indian retailers. The working woman today has grown out of her long-standing image of being the homemaker. Today, she is rubbing shoulders with men, proving herself to be equally good, if not better. Working women have their own mind in decision to purchase the products that appeal to them.

The Youth
The rise of next generation has been written about with unbridled optimism and enthusiasm, based on the coming of age of liberalization children. They are global in their
8

worldwide view and have been exposed to enormous information unlike their parents, raised amidst a consumption-friendly and consumption encouraging social discourse. They are expected to be at the forefront of creating a new, modern, west-embracing consumer society, as well as yield the demographic dividend that will drive economic growth

Revolution in Indian Consumer Behaviour

Rising disposables incomes(higher buying power) Male no longer the sole income generator Enjoys travelling, shopping and eating out Increased indulgence in entertainment and lifestyle products Pester power, Seeking variety Seeking value for money(High quality and price consciousness) Technology Savvy (Internet, Mobiles, Voice Recognition) Getting used to speed of service Convenience seekers

Segment Definition
In general consumer electronics refers to a variety of electronic equipment used by private customers. This industry can be divided into many segments: 1. Traditional Consumer Electronics: audio and video equipment 2. Computing Devices: Computers, Calculators, Laptops

3. White Goods: Household /Domestic Appliances such as washing machines, irons, vacuum cleaners, grinders, etc 4. Personal Care: Hair Dryers, shavers, electric toothbrushes. In addition to this, the emergence of telecommunication has lead to the convergence of mobile technology into the consumer electronics industry and hence this paper will only deal with traditional consumer electronics, mobile phones and computing devices which can be termed as Brown Goods as per industry definitions. Henceforth in this paper consumer electronics will refer to Brown Goods.

Brown Goods Industry in India

Out of the electronics industry in India, the consumer electronics segment is one of the biggest markets. The consumer electronics industry comprises of communication devices, computing devices, audio, video and gaming products. Televisions, music players, digital players, cameras, laptops, PCs, mobile handsets and accessories, gaming consoles commonly fall into the consumer electronic category.

Consumer Electronics (Brown Goods) Market Share

3%

33%

37% Mobiles Audio/Video/Gaming Computers

Others

27%

10

In 2008, the market size was estimated to be $22 billion and growing. With the growing population in India, exceeding 1 billion, the consumer electronic Industry is all geared up for fast growth in the coming years. The predicted figure for the consumer electronic market by 2013 is around $46 billion, growing at a compound annual growth rate (CAGR) of 16%. This astounding growth is due to many factors, the major ones including Rising disposable incomes coupled with increasing consumer exposure Increase in manufacturing in the local grounds Credit/Financing schemes which make purchase easy Growing competition , leading to better deals Increased reach due to better distribution networks

Taking a look at the individual segments in the consumer electronics segment, we can broadly classify them as:

Computers
According to Business Monitor India Report, the computers (laptops, desktops and accessories) market took up a share of 33% of the consumer electronics wallet in 2008. It also states that with the prices of PCs coming down by nearly half, the sales went up from $5.8bn in 2008 to $6.0bn in 2009. Its very interesting to note that the current PC penetration is only 2% and this leads to excellent growth opportunities with a predicted CAGR of 13% for the period 2009 to 2013.

11

 Audio, Video and Gaming Devices

The audio, video and gaming devices take up close to one third of the wallet share in the consumer electronics segment. This segment is set to grow at 22% CAGR from 2009 reaching US $15 in 2013. The main product in this group is Television, with new technology such as Plasma TVs entering the market and cricket being the main attraction for most Indians, the Indian Premier League, Common Wealth Games 2010 are all helping in boosting the drive for upgrades.

Mobile Handsets
The largest chunk of the consumer electronic market goes to the mobile handsets and accessories with 37% of Indian spending in 2008. With the telecommunication boom and lower call rates, the handset market is poised to grow at 19% compounded annually and reach a staggering figure of about 380 million units by 2013. The mobile penetration in the rural market is 15% and is the most as compared to other categories. In the future, most vendors will definitely target the 3 tier cities and rural customers

12

Existing Players in the Indian Market

Consumer Electronics ManufacturersThe main electronic manufacturers in the
Indian market are Videocon Industries, LG Electronics, Samsung, Onida, Panasonic India, Bose India, BPL, etc. The upcoming players are D-Link, Samtel , WeP and Tyco followed by Nokia and Motorola.

Figure: Market Share of Electronics Manufacturers Source: Centre for Monitoring Indian Economy

Videocon Appliances Ltd

One of Indias ingrown companies, Videocon boasts of an annual turnover of the tune of US$4.1billion. It has 17 sites in India, and is known to be the third biggest manufacturer of picture tubes in the world. It also has global presence, with plants in Mexico, Italy , Poland, China and the Middle East.

13

 L.G Electronics
The market leader in consumer durables is LG for close to a decade in India. They have also been recognised for their superior innovation and after sale service. It is proud of their distribution channels which offer its products to the breadth and length of India. As early as 1998, LG with a budget of Rs500 crores set up manufacturing facility with a state-of-the art technology at Greater Noida, near Delhi. L.G also has recently entered directly into the consumer market by setting up retail shops and boast of retail sales Rs. 10,000 crores in 2008

Samsung Electronics
Samsung entered India in 2002 with an 80 acre sprawling facility at Noida and mainly manufactures colour TVs, mobile phones and some white goods. Its manufacturing facilities are best known for its high automation, high quality and state of art. Recently they opened another unit at Sriperumbudur, near Chennai. This facility has an investment plan of USD100 million starting from 2007, over a 5 year period .

Nokia, India
Nokia also set up its manufacturing plant in Sriperumbudur, Chennai in 2006, just taking 5 months to complete the entire factory construction. Starting with 550 people, it has grown to a size of 8000 people today and employs 70% women. The manufacturing facility, with a sprawling area of 200 acres, incorporates the best quality, high efficiency and a great supply chain system.

Consumer Electronics Retailers

Viveks The Unlimited Shop
Viveks is one of South Indias oldest consumer electronic retailer founded in 1980s, which set up a retail outlet at Chennai, with humble beginnings of housing fans, radios, fans, mixers, irons, heaters and other household equipments. Till 1994, it had set up only
14

3 showrooms, however, with a strategic initiative for rapid expansion, it established its dominance in the two states on Tamil Nadu and Karnataka with 51 showrooms covering a retail space over 1,75,000 sq.ft and boasting of a group turnover of Rs. 400 Crores and with wide product offerings. It plans of setting up of 50 more showrooms in south India.

Infiniti Croma
The Croma retail chain is owned by Infiniti Retail which is a Tata sons 100% subsidiary and set up its first store in 2006, which was 20,000 sqft and had an initial investment of Rs 35 million, hosting various brands in household durables and consumer electronics. It strategically has an alliance with international organized retailer, Woolworth for backend operations. They plan to open out 40 stores by 2010 and Croma distinguishes itself by providing one-stop shopping with customized consultation to the middle- and uppermiddle class customer segment.

E-Zone
E-Zone, an electronics specialty store, which has several brands all under one roof, was launched by Future Group, in 2007 at Lucknow. They have an interesting store format which consists of three dedicated zones - Liberation Zone, Experience Zone and Home Zone to meet the electronic needs of the entire family. E-Zone competes with Croma, by offering the best deals and low prices and is positioned more towards the lower-middle and middle class customer segment. The company has expanded to 40 stores, all over India in about 2 years.

NEXT Retail India

NEXT Retail India, Ltd. is a subsidiary of Videocon Industries, Ltd and opened its first retail electronic store at Indore in 1999. Today, NEXT Retail India Ltd has more than 300 outlets across 16 states with a presence in 145 towns spanning metros and large towns and claim to be Indias Largest Electronics Retail Chain; a giant in the organized retailing of consumer electronics, and home appliances. NEXT has more than doubled its
15

last years turnover in the current financial year. Their plans ahead are more ambitious with a targeted turnover of 1800 Crores for next year with 600 plus outlets. Besides these top players, there are speciality stores dealing only with mobile phones, laptops and exclusive dealers for the big electronic brands.

Mobile Phones Speciality Retailers

The main players in the mobile phone retailer market are The MobileStore, UniverCell, Cellucom, etc. The MobileStore currently has more than 1050 outlets and plans to have a network of 2500 stores by 2010 across 650 cities, covering virtually every major town in every state across India. Chennai-based mobile retail chain , UniverCell, currently has 300 company-owned stores across the four southern states including 70 in Andhra Pradesh, and is trying to touch 400 stores by March 2010 through the franchisee mode. Cellucom which hosts mobile and laptops, first outlet was opened in January 2007 at Gurgaon. Currently there are 120 stores across 15 cities including top four metros. These outlets cover the entire value chain in formats like stand-alone stores in Malls, as well as Shop-in-Shop within Shopper's Stop, Lifestyle and other large-format chain stores

Laptop Speciality Stores

It is very interesting to note that there are very few multibrand laptop speciality retail chains in India. Most laptop showrooms are local players or dealers for the big brands like Lenova, HP, Acer, etc.

16

Key Drivers
Young Population with rising incomes
45% of the Indian population is below 25 years which accounts to close to 500 million consumers (18+) of which 230 million are in Urban India. With the rising incomes and education levels, the discretionary expenditure is increasing.

Figure 1 Share of Wallet - Indian Consumer Trends

Availability of Easy Credit Options

With all the major players offering easy EMI schemes and with the increased penetration of Credit cards, the Indian consumers now have an easier access to consumer electronics

Changing Consumption Patterns

Gone are the times when people bought electronics with the intension of using it for years together. With increasing speed of innovations and as new technologies come in, the Indian consumer wants the latest and the best. Now mobile phones are changed every year, laptops once in 2 years ,etc. People want to be trendy and are becoming gizmo frenzy.

17

 Falling Prices of Consumer Electronics

With new models, products and more competition, prices are being driven even further down. Especially in the mobile phone segment, prices fall as much 20% after 6 months after introduction.

Figure 2 Retail Prices of Consumer Electronics

Challenges
Price Wars
With the increase in price wars due to the entry of new players in the market and increase in manufacturing capacity by some original manufacturers, the profitability and margins of the companies are adversely affected. Hence companies need to increase focus on product / store differentiation to address various segmental specific needs
18

 Lack of Distribution Networks and Logistics Management

Getting stock into a store in India is a massive challenge given the poor city roads and complex intra city transportation regulations , high cost of moving goods between starts, inefficient storage ( e.g. small store backrooms owing to expensive real estate). It is of utmost importance to design an efficient network. Transportation, including railway systems, highways has to meet global standards. Airport capacities, power supply, warehouse facilities and timely distribution are other areas which need to be enhanced. The distribution network is also highly fragmented and is very poor in semi-urban and rural areas.

Presence of Gray Market in Consumer Electronics

Presence of gray market in consumer electronics products, especially in DVD player, music players is definitely eating into the sales of the retailers. Counterfeit products are present across a wide range of products.

Increasing Awareness of the Indian Consumers

With the increase in access to Internet information, and availability of wide range of choices, consumers have become quite smart. They want the product that is easy-tohandle, good in quality and low in price. Most importantly, consumers want some guarantee for the product that they are buying. The role of electronic companies doesn't end on the sale of the product, but continues till the end of guarantee period.

Trained manpower shortage in India

There is lack of talent in consumer electronics retailing. Retailers need to spend heavily on training its sales force to match the expectations of the Indian consumers both in terms of technical knowledge and soft ski

19

References:
Consumer Behavior In Indian Perspective Suja Nair Himalaya Publishers Consumer Behaviour Walker Modern marketing - - R.S.N Pillai, Bagavathi http://www.businessdictionary.com/definition/brown-goods.html

http://www.dare.co.in/news/others/cut-duties-on-electronics-hardware-to-12-from30-assocham.htm India Consumer Electronics Report Q4 2009 By Business Monitor India China and Indias Electrical and Electronics Industries : A Comparison of Market Structures By Koichiro Kimura Technopak, India Impact of Organized Retailing on the Unorganized Sector Mathew Joseph, Nirupama Soundararajan, Manisha Gupta, Sanghamitra Sahu (May 2008) AT Kearney Report 2009 Indian retail: on the fast track and time for bridging capability gaps KPMG Report India Calling 2009 KPMG Report www.univercell.in www.themobilestore.in www.viveks.com www.cromaretail.com www.next.co.in http://www.cci.in/pdf/surveys_reports/indias_retail_sector.pdf http://www.articlesbase.com/marketing-articles/customer-buying-behaviour999729.html

20