Shashi Arora (SA), CEO, Lloyd, in an exclusive conversation EFY Group, shed light around the connection between different channels and consumer electronics sales in India. He is of the view that five years down the line, the offline channel, will continue to contribute more to the overall consumer electronics sales. Lloyd, as a consumer electronics brand, depends more on the offline channel.
“Consumers who are buying an AC, a refrigerator or a washing machine for the first time would like to experience it first. They will want to know how the machine, they are investing in, works before paying for it,” stated SA.
He continued, “Offline retailers need to make sure that they do not lose out on the revenue part. The need of the hour is to adopt to the product ranges that have better prospects in the offline channel. For instance, they should invest in TVs which are bigger than 40-inches. Similarly, they need to adopt new categories like water purifiers and water heaters.”
Here are some more excerpts form the conversation around channels and consumer electronics sales
ACE – Which channel can play a bigger role in helping consumer electronics brands penetrate markets with product categories like ACs, refrigerators and washing machines?
SA – The penetration rates for most of the product categories that you mentioned are very low. In fact, categories like TVs, which enjoy better penetration rates, are coming with replacement cycles. Barring big cities and tier II markets, a lot of consumers still use cathode ray powered conventional TVs. Which channel will play a role in getting those adopted is also a big question!
Coming to your question, I would like to first highlight the size of consumer electronics market in India. When you boil it down to different product categories, this size, gets multiplied further. Given this humongous size, I am of view that while online channel will may play a role, the offline channel will be of more importance.
ACE – Why do you think the offline channel will be more important than the online channel in penetrating markets beyond tier four cities?
SA – Do you remember the first time you experienced a smartphone or a smart TV? It was most probably through the offline channel. A lot of us like to experience the product first before investing in it. This fact gets cemented when we are trying or investing in a product that we have not experienced before!
Consumers who are buying an AC, a refrigerator or a washing machine for the first time would like to experience it first. They will want to know how the machine, they are investing in, works before paying for it.
ACE – Do you think offline channel will be as important five years down the line as it is today?
SA – Not just five years, I am of firm view that the offline channel will continue to be the mainstay for a long time than that. The shift from offline to online takes a lot of time. Giving the example of smartphones again, it would be good if we can calculate the time at which they were introduced and the time they took to switch to online sales.
ACE – What categories do you think will make a switch to online sales like the smartphone sales?
SA – Consumer electronics categories that require physical and technical help in installations and demos will continue to be sold much more through the offline channel. It could be a washing machine demonstration or an AC installation. The coordination between the consumer, brand and the brand’s executives is very important. Online might take a long time to achieve that.
Moreover, repeat orders are much easier to make through the online channel. You prefer a cookies brand; you can simply order it through the online space because you know the taste. However, a fully automatic washing machine works different than a semi-automatic washing machine.
Washing machine from brand A works different than a washing machine from brand B. I think the experience associated with heavy appliances categories can be facilitated much better through the offline channel.
ACE – The smartphone and smart TV verticals are almost led by the China-based brands here! Will the same happen with other consumer electronics brands?
SA – The China-based brands can manufacture and keep the costs low because their government offers them subsidies to manufacture locally. The need of the hour is to make sure that brands based in India feel motivated to Make in India. Our government can play a big role here. It could be subsidies on making locally in India, or support in terms of availability of raw materials and components.
For instance, India, as a warm country, has a lot of potential in the AC vertical. Still, we have AC penetration rates as low as five per cent. ACs are counted under the luxury products category. We need to ask ourselves if ACs are luxury products or products that consumers need. Luxury products attract 28 per cent GST. Probably, a factor that is not helping in the adoption of these.
Subsidising manufacturing in India and reducing GST are some of the things that the government can investigate to give a boost to the local brands here. This can help all the brands to push forward the local consumer electronics industry collectively.
ACE – Do you think channel partners do not feel confident in retailing products that attract higher GSTs?
SA – Products with higher GST tend to become expensive. ACs are already the highest priced appliance in consumer durables. With 28 per cent GST they become even more expensive, so retailers too would benefit if the Government brings down the GST level on ACs and big-size TVs.
ACE – What is Lloyd’s overall channel strategy?
SA – We are largely an offline brand. All the above-mentioned reasons make it clear why we are an offline heavy brand.
India, as a country, is very fragmented. It is not like a big country from the west where there are only a few big stores for consumer electronics sales. Two big players, in such countries, close big deals easily.
India, on the other hand, has thousands of channel partners. Each of them has got a good hold in the geographies they operate. So, our approach towards the country and consumers here is also very balanced.
As a matter of fact, Lloyd’s take on the channel strategy is on these lines only. We are sure that we can grow together with these tens of thousands of channel partners and retailers in our map. We believe in making our products available to the fellow Indians through these partners in the offline space.
ACE – Any message for the small retailers in the offline channel?
SA – It is important to make sure that you do not lose out on the revenue part. The need of the hour is to adopt to the product ranges that have better prospects in the offline channel. For instance, try investing in TVs which are bigger than 40-inches. Similarly, adopt categories like water purifiers and water heaters.
Change is the law of nature and the law must be followed. Initially you might have difficulty in retailing new product categories, but these difficulties will go away just the way they did when you first started retailing smart TVs instead of CRT TVs. Have faith in yourself and keep yourself updated about what’s happening in the market.
Author – Mukul Yudhveer Singh.
An avid reader, Mukul finds peace in books and technology. He’s as passionate about writing as he is about cricket and Playstation. If not writing or reading, you will most likely find him drawing tattoo designs or analyzing political campaigns.