Nitish Kumar, owner, Koolex Air Conditioners, Haryana, in an exclusive conversation shed light on air conditioner sales in cities like Gurugram. Being a direct dealer of Bluestar, Carrier and Hitachi ACs, he spoke at length about the B2B and B2C business of ACs.
“Air-conditioner is a demand-driven consumer electronics category. Unlike TVs, which a consumer may or may not buy, ACs start selling as soon as the temperature starts spiking. If a consumer has made up his mind about investing in an AC during the summer months, there’s only a slight possibility that he would not buy one,” noted NK.
He added, “AC business is more like automobiles business in India. A model that gets adopted by the masses keeps selling unless and until its brand decides to pull the plug on the same and when this happens, the respective brand is ready with a back-up plan.”
Here are some more excerpts from this conversation around AC sales in India
ACE- When did you start this business? What prompted you to start this business?
NK – I started this business in 1999. It was a time when limited players were dealing with air conditioners in Haryana and India. Multinational brands like LG and Samsung were entering the Indian market.
Additionally, I had completed my diploma in electronics around that time. Instead of working nine to five, I wanted to utilize my diploma skills and hence forayed into this business.
We started Koolex Air Conditioners as a direct dealer if Blue Star products. Later on, we also applied for the dealership of Carrier and Hitachi. Our business comprises of B2B and B2C sales.
ACE- What’s your vision for your business and India’s ACE industry?
NK – The name Koolex represents cooling experts. We want to be the best cooling solution providers when it comes to Gurugram. We aim to achieve this feat by ensuring best-in-class service and solutions.
Our USP has always been suggesting the right air conditioners to our clients. We do not pitch 1.5-tonne ACs to clients for areas where a one-ton AC will suffice. Our business model revolves around service and not money!
Air-conditioner is a demand-driven consumer electronics category. Unlike TVs, which a consumer may or may not buy, ACs start selling as soon as the temperature starts spiking. If a consumer has made up his mind about investing in an AC during the summer months, there’s only a slight possibility that he would not buy one!
ACE – How do you see India’s ACE (Appliances and Consumer Electronics) industry growing from here?
NK- Appliances and Consumer Electronics Industry in India is growing at a fast pace. Almost every consumer electronics brand has been able to do good business here during the last 10 years.
The growth in the air conditioner business depends on two things, technology and population. Brands have started launching ACs that are technologically superior to the outgoing models. The change that started with reciprocating motors is now being led by the likes of inverter and self-adjusting technologies. These sell more as consumers can save money on electricity bills as well as maintenance charges.
Next is India’s population. The huge population size means that the scope for growth is huge. I think ACs are going to be the biggest selling consumer electronics category in India in the next five years.
ACE – Is there a scope for the growth of hot and cold air conditioners in India?
NK- The scope of hot and cold air conditioners in India is not much as winters don’t last long here. Then these are expensive than the normal AC models as well.
The contribution of hot and cold AC sales to overall AC sales is about three per cent. I don’t think this ratio is going to change anytime soon in the future. However, if brands can minimize the gap between the prices of hot and cold ACs and normal ACs, we might see an upshift in the former selling more.
ACE – What are your expansion plans in the near future?
NK- Currently, we are dealing with Bluestar, Hitachi, Carrier, and Aircon services. Now we are planning to take the exclusive brand shops of Mitsubishi or Daikin.
ACE – How’s your business doing in this FY?
NK- We are doing great. In fact, during the last AC season, 75 per cent of our sales were inverter air conditioners. I largely credit inverter air conditioners for this brilliant growth in our business.
It is simple for the brands as well as consumers, more star ratings mean more savings. Consumers save on electricity bills and dealers save on margins. So it is a win-win situation for brands, dealers and consumers!
ACE – How are you handling the challenges created by Online portals like Amazon and Flipkart?
NK- Online channels either source ACs from brands, or from big dealers. There is also a possibility that some of these big players sell 1.3-ton ACs saying that it is a 1.5 ton one. Similarly, in the case of dealers, there’s a possibility that AC models being sold are obsolete.
We try and convey the same message to consumers. Additionally, the transportation cost attached to a big category like AC is much more than that of TVs and smartphones. This factor also helps us sell more ACs. Finally, the service factor is a USP for the offline market as well. We deliver, install and provide service to consumers as per their priorities.
ACE – What’s your strategy for products that get discontinued or obsolete? How do you avoid losses on them?
NK – AC business is more like automobiles business in India. A model that gets adopted by the masses keeps selling unless and until its brand decides to pull the plug on the same and when this happens, the respective brand is ready with a back-up plan.
Moreover, new models carry bigger price tags. This simply means that old models, owing to lower prices, sell more than new models!
ACE – Do you indulge in B2B (institutional) sales also? If yes, how much of that is it, a percentage of your overall revenue?
NK- Yes, we are doing B2B sales. It contributes around 40 per cent of the total business. We are getting help from portals like Justdial and Indiamart to generate leads. Brands that we are associated with also forward B2B leads.
B2C retail is very simple in terms of transactions. Most of the payments are collected at the time of sales. But in B2B cases, corporate houses need time to release the payments. Such cases take 90 days to 180 days’ time. Credits are the reason that there are very few players in this arena.
ACE- Are you accepting digital payments from customers through Debit Cards, Credit Cards, PayTM, etc? Are you seeing an increase in the same? Do you have a finance facility?
NK- We are accepting almost all types of digital payments. As a matter of fact, digital payments are increasing day by day. We offer finance facilities on credit cards only.
ACE- What’s your take on the erosion of margins because of commissions on cards, payment gateways, etc on digital payments? How do you manage this challenge?
NK- Digital payment costs us around 1.5 to 2.0 per cent. After the introduction of the digital wallets and UPI payment methods, the challenges have reduced.