Worldwide Consumer Electronics Market

The consumer electronics industry has witnessed a phenomenal growth over the past few years. This growth can be attributed to the increasing effect of state of the art electronic devices on the market. The consumer electronics industry is ushering in the dawn of Convergence. It is the confluence and merging of hitherto separated markets of digital-based audio, video and information technology, removing entry barriers across the market and industry boundaries. This convergence of technologies has resulted in a greater demand for consumer devices, be they portable, in-home (mobile phones, digital camera) or in-car (CD/DVD players), offering multiple functions.

The revolution brought about by Digital technology has enabled the consumer electronics sector to profit from the growing interaction of digital applications such as: camcorders, DVD player/recorder, still camera, computer monitor, LCD TV etc. It has also witnessed the emergence of mobile telecommunications technology, incorporating both digital visual and digital MP3 capabilities. The computer industry has also benefited by being able to make its way into consumer's living rooms. HDTV's with VGA connections and SD/MMC card slots, personal media players, and Microsoft-based Media Center PCs have pushed the two industries even closer together than before.

The overall revenue earned through the sale of audio, video and gaming consoles constitutes the international consumer electronics market. The global sale of consumer electronics is estimated to exceed all expectations to touch an all time high of $135.4 billion in 2006, which indicates 8% increase from 2005. By the year 2008, sales are forecasted to soar up to $158.4 billion, up BY 65% over 2000.

The Asia Pacific region is the market leader wielding the biggest chunk of the market, closely followed by Europe. The European market share is expected to take a drubbing due to the growing demand for consumer durables in the Asia Pacific consumer electronic market. Japanese companies have captured the consumer electronics market. World famous brands such as Sony, Panasonic and Matsushita are all owned by these Japanese manufacturers. Korean companies such as Samsung and LG are all trying to join the Japanese bandwagon. Samsung can claim to be the world's fastest growing electronic company.

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SWOT Analysis Of Electronics

Strengths

1. Presence of established distribution networks in both urban and rural areas2. Presence of well-known brands3. In recent years, organized sector has increased its share in the market vis a vis the unorganized sector. 

Weaknesses

1. Demand is seasonal and is high during festive season2. Demand is dependent on good monsoons3. Poor government spending on infrastructure4. Low purchasing power of consumers

Opportunities

1. In India, the penetration level of white goods is lower as compared to other developing countries.2. Unexploited rural market 3. Rapid urbanization4. Increase in income levels, i.e. increase in purchasing power of consumers5. Easy availability of finance

Threats

1. Higher import duties on raw materials imposed in the Budget 2007-082. Cheap imports from Singapore, China and other Asian countries 

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HOW THE INDUSTRY BREAKS DOWN

The largest are multinational conglomerates with more than 100,000 employees.

The smallest often have only one office with fewer than 50 employees focused on one product.

In the middle are manufacturers that offer a range of products within a certain category, such as speakers and audio accessories.

Industry observers usually break down the market by product category rather than company size.

Consumer durables are items that provide a flow of services to a consumer over a period of time. Examples include new cars, household appliances, audio-visual equipment, furniture etc. The real level of spending on durables has surged in the last eight years.

Among the explanations are:

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Falling prices for many durable products – arising from rapid advances in production technology and the effects of globalization which means that we can now import many of these durables more cheaply from overseas

Low interest rates which have encouraged people to spend more on “big ticket items” – there has been a surge in demand for consumer credit

Strong consumer confidence and borrowing levels. The demand for consumer durables is more income elastic than for non-durables which are usually staple items in people’s monthly budget.

SOME KEY FINDINGS

Asia-Pacific region is the most lucrative area for the consumer electronics industry, as most of the markets are still untapped.

MP3 players continue to drive the audio market worldwide. 

Wi-Fi networking is expected to become a key enabler for the delivery and redistribution of content in homes, particularly for retail consumer electronics hardware.

Mobile camera phone market has emerged as the single largest market for image sensors, surpassing the entire consumer electronics segment, including digital still cameras worldwide.

The strongest growth in consumer electronics segment is expected to come from China by 2010, as the demand for consumer electronics is rising with the rapid pace of economic development and low cost consumer electronics manufacturing.

On the back of this strong demand, China will become the second largest market for consumer electronics, after US.

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Product Tech Enthusiasts All Adults

Television (any model) 97 % 98 %

DVD Player/Recorder 96 % 84 %

Digital Camera 93 % 62 %

Cell Phone 92 % 76 %

Desktop Computer 90 % 66 %

Consumer Electronics Industry Analysis

Porter’s Five Forces Model Although the Indian Consumer electronics market is highly competitive, the high growth

rates that it promises make it a good industry to enter.

Threat of New Entrants

Capital Requirements and Economies of Scale:

In the case of retail stores, there is lack of good distribution network and lack of

knowledge of consumer buying patterns which calls for large investment in distribution

channels and research to improve the reach.

Economies of scale is required in as there are large fixed costs associated with setting up

a manufacturing plant as there are problems of under-developed infrastructure, erratic

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supply of water and electricity in many areas, a high cost of capital and continuous up

gradation of technical and managerial skills.

Supply Chain Issues:

The existence of too many intermediaries in the supply chain coupled with issues in

logistics, management of POS data, pilferage and distribution and inventory

management, eats away the profits of the retailer, making it unattractive for new entrants.

Product Differentiation:

Though the awareness is increasing amongst the Indian consumers, retailers and manufacturers are unable to increase brand loyalty. The Indian consumer is very price sensitive and hence he keeps hoping from one place to another, hunting for good deals.

Switching costs vary amongst the electronic categories. For instance, the switching costs in mobile phones are high, as consumers who are used to one brand find it difficult to use another brand. However, for televisions, cameras, and even laptops, consumers are ready to try new brands based on price for features offered and service quality or reputation of the brand.

Government Policy:

By encouraging manufacturing zones and improving the infrastructure, the government is

developing the entire manufacturing sector, which will help in boosting the electronics

production in India, which has traditionally been a very small slice of the overall

manufacturing segment. While the government is trying to encourage the growth of the

retail and manufacturing industries in India, there are some policies which need to be

looked at.

The duty structure for electronics adds up to 30% which is a significant amount.

This is mainly due to the multiple tax structure which consists of 12% VAT, 8%

excise, 4% Goods and Service Tax, 2% Central Sales Tax and Local taxes.

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The FDI policy limits to 51% stake for foreign investors, which forces foreign

retailers to use franchise arrangements, and in the manufacturing sector, the FDI is

100% favouring foreign investors.

Existence of the grey market due to poor government regulations to keep

counterfeits at bay coupled with the lack of consumer knowledge and legal

recourse encourages manufacturers to churn out spurious products which can lead

to lost sales of the tune of 10-15%.

Red tapes and bribery in the Indian government system is also a stumbling block

for new retailers or manufacturers.

Taking into consideration the positives and negatives, India still offers a good chance for

new entrants and hence the threat is considered to be low to moderate.

Bargaining Power of Buyers

With the emergence of new channels like the internet, auction sites like rediff.com, the

general consumer (buyers) who usually purchase electronic goods from electronic

retailers, hypermarts, music and book stores, can easily compare prices and go for the

best deals in town. Though the better brands can command a higher price, buyers are

constantly comparing prices, service quality and product features and hence commands a

moderate to high power in this industry.

Large chain stores like Tata Croma, E-Zone have distinct advantage over the smaller

stand alone stores as they can demand good discounts suppliers. As brands play an

important role in the electronics market, the retailers find it difficult to integrate

backwards to produce their own electronic goods as in the case of private food labels.

Considering the market dynamics and the size of the market, the buyers have moderate to

high power in the consumer electronics industry.

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Bargaining power of suppliers

The biggest threat is the trend of large suppliers integrating forward as in the case of Dell,

Apple, Nokia, by setting up their own retail outlets. However, in the Indian electronic

context, there are a large number of suppliers in the market who face overcapacities, poor

distribution, large duties, and declining margins and hence the bargaining power for

suppliers is less and competitive pricing comes into play. With more companies setting

up the manufacturing plants in India, like Nokia in the south, the bargaining power of

suppliers is definitely low to medium. Product differentiation is more and more difficult

in the consumer electronics industry and the existence of cheap Chinese suppliers also

adds woes to the suppliers.

Intensity of Rivalry amongst existing players

There are few key players in the consumer electronic market, but as they are part of big

Indian business groups, they have a lot of muscle power and hence the intensity of rivalry

can be placed at a mid level. Though factors such as high transport and storage costs,

lack of differentiation, large investments, and low switching costs tend to intensify the

rivalry, the fact that the market is only at the nascent stage with promises of high growth

rates of 16% coupled with the diverse needs of customer groups, and an untapped rural

market; the existing players seem to be enjoying a relatively low rivalry.

Threat of Substitutes

The threat of substitutes for the manufacturers of these electronic goods is medium to

high unlike the case of white goods. As new technology enters the market at increasing

pace, the manufacturers and retailers need to understand the consumer needs. For

instance the VCR was replaced by the DVD player which will soon be replaced by a Blue

Ray Player. The incorporation of camera in the mobile phones is definitely a threat to the

camera market. Hence product innovations in this segment are very high and players in

this industry need to mindful of this.

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CONSUMER BUYING BEHAVIOUR

WHAT IS BUYER BEHAVIOUR?

  The wealth of products and services produced in a country make our economy strong. Almost all the products, which are available to buyers, have a number of alternative suppliers: substitute products are available to consumers, who make decision to buy products. Therefore a seller most of his time, seeks buyers and tries to please them. In order to be successful, a seller is concerned with.

Who is the customer? What do consumers buy?

When do consumers buy?

How do consumers buy?

From where do consumers buy?

Why do consumers buy?

A buyer makes a purchase of a particular product or a particular brand and this can be termed “ product buying motives” and the reason behind the purchase from a particular seller is “ patronage motives”

    When a person gets his pay packet, and if he is educated ,sits down along with his wife and prepares a family budget, by appropriating the amount to different needs. It may happen that after a trip to the market, they might have purchased some items, which are not in the budget, and thus there arises a deviation from the budgeted items and expenditure. all  the behaviour of human beings during the purchase may be termed as “buyer behaviour”.

HOW CONSUMERS BUY

 1. Need/Want/Desire is Recognized

In the first step the consumer has determined that for some reason he/she is not satisfied (i.e., consumer’s perceived actual condition) and wants to improve his/her situation (i.e.,

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consumer’s perceived desired condition). For instance, internal triggers, such as hunger or thirst, may tell the consumer that food or drink is needed. External factors can also trigger consumer’s needs. Marketers are particularly good at this through advertising, in-store displays and even the intentional use of scent (e.g., perfume counters).

2. Search for Information

Assuming consumers are motivated to satisfy his or her need, they will next undertake a search for information on possible solutions. The sources used to acquire this information may be as simple as remembering information from past experience (i.e., memory) or the consumer may expend considerable effort to locate information from outside sources (e.g., Internet search, talk with others, etc.). How much effort the consumer directs toward searching depends on such factors as: the importance of satisfying the need, familiarity with available solutions, and the amount of time available to search.

3. Evaluate Options

Consumers’ search efforts may result in a set of options from which a choice can be made. It should be noted that there may be two levels to this stage. At level one the consumer may create a set of possible solutions to their needs (i.e., product types) while at level two the consumer may be evaluating particular products (i.e., brands) within each solution. For example, a consumer who needs to replace a television has multiple solutions to choose from such as plasma, LCD and CRT television.

4. Purchase

In many cases the solution chosen by the consumer is the same as the product whose evaluation is the highest. However, this may change when it is actually time to make the purchase. The “intended” purchase may be altered at the time of purchase for many reasons such as: the product is out-of-stock, a competitor offers an incentive at the point-of-purchase (e.g., store salesperson mentions a competitor’s offer), the customer lacks the necessary funds (e.g., credit card not working), or members of the consumer’s reference group take a negative view of the purchase (e.g., friend is critical of purchase).

 5. After-Purchase Evaluation

Once the consumer has made the purchase they are faced with an evaluation of the decision. If the product performs below the consumer’s expectation then he/she will re-evaluate satisfaction with the decision, which at its extreme may result in the consumer returning the product while in less extreme situations the consumer will retain the purchased item but may take a negative view of the product. Such evaluations are more likely to occur in cases of expensive or highly important purchases. To help ease the

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concerns consumers have with their purchase evaluation, marketers need to be receptive and even encourage consumer contact. Customer service centers and follow-up market research are useful tools in helping to address purchasers’ concerns.

Why Consumers Buy :

 Customers make purchases in order to satisfy needs.  Some of these needs are basic and must be filled by everyone on the planet (e.g., food, shelter) while others are not required for basic survival and vary depending on the person.  It probably makes more sense to classify needs that are not a necessity as wants or desires.  In fact, in many countries where the standard of living is very high, a large portion of the population’s income is spent on wants and desires rather than on basic needs. 

    For example, in planning for a family vacation the mother may make the hotel reservations but others in the family may have input on the hotel choice.  Similarly, a father may purchase snacks at the grocery store but his young child may be the one who selected it from the store shelf.  So understanding consumer purchase behavior involves not only understanding how decisions are made but also understanding the dynamics that influence purchases.

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TYPES OF CONSUMER PURCHASE BEHAVIOUR

      Consumers are faced with purchase decisions nearly every day.  But not all decisions are treated the same.  Some decisions are more complex than others and thus require more effort by the consumer.  Other decisions are fairly routine and require little effort.  In general, consumers face four types of purchase decisions:

Minor New Purchase – these purchases represent something new to a consumer but in the customer’s mind is not a very important purchase in terms of need, money or other reason (e.g., status within a group).

 Minor Re-Purchase – these are the most routine of all purchases and often the consumer returns to purchase the same product without giving much thought to other product options (i.e., consumer is brand loyalty).

Major New Purchase – these purchases are the most difficult of all purchases because the product being purchased is important to the consumer but the consumer has little or no previous experience making these decisions.  The

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consumer’s lack of confidence in making this type of decision often (but not always) requires the consumer to engage in an extensive decision-making process..

Major Re-Purchase - these purchase decisions are also important to the consumer but the consumer feels confident in making these decisions since they have previous experience purchasing the product.

For marketers it is important to understand how consumers treat the purchase decisions they face.  If a company is targeting customers who feel a purchase decision is difficult (i.e., Major New Purchase), their marketing strategy may vary greatly from a company targeting customers who view the purchase decision as routine.  In fact, the same company may face both situations at the same time; for some the product is new, while other customers see the purchase as routine.  The implication of buying behavior for marketers is that different buying situations require different marketing efforts

Consumer Buying Decision Process

   “Nothing is more difficult and therefore, more precious, than to be able to decide is quoted to be the words of Napoleon. This is amply true in the case of consumer too. It is for this reason that the marketers are bound to have a full knowledge of the consumer – buying decision process.

   However it should be remembered that the actual act of purchasing is only one stage in the process and the process is initiated at the several stages prior to the actual purchase. Secondly even though we find that purchase is one of the final links in the chain of process, not all decision processes lead to purchase. The individual consumer may terminate the process during any stage. Finally not all consumer decisions always include all stages. Persons engaged in extensive decision making usually employ all stages of this decision process. Where as those engaged in limited decisions making and routine response behaviour may omit some stages. The consumer decision process is composed of two parts, the process itself and the factors affecting the process.

  A survey conducted by the marketing team of shoppers stop Ltd. Reveals the psychography of the modern shopper.

Accordingly the survey classifies customers in to the four segments namely

Convenience Shoppers Value Shoppers

Image Shoppers

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Experience Shoppers

Convenience shoppers  for instance ,are people who consume relatively less amount of time while shopping. Also they look out for the width and depth of the range they purchase and conduct their annual shopping at one shot.

Value Shoppers always hunt for value for money ; Prefer quality reassurance and benchmark offerings among other related attributes.

Image Shoppers are fashion- conscious and look out for the latest trends and labels.

On the other hand , Experience Shoppers are attentive and prefer personalized services look out  for the right ambience, prefer giving personal advice on clothing at the time of purchase , and prefer not to buy at one sold.

Cultural factors Influencing Consumer Behaviour

Cultures, which only goes on to make the marketer's job tougher. Some of the few

cultural factors that influence buyer behaviour are:

1. Product (colour, size, design, and shape) There are many examples that support this point. A good example would be Philips audio systems. Urban India looks at technology with the viewpoint of „the smaller the better‟. However, in rural India, the viewpoint is totally opposite. That is the main reason for the large acceptance of big audio systems. Thus Philips makes audio systems, which are big in size and get accepted in rural India by their sheer size.

2. Social practices

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There are so many different cultures, and each culture exhibits different social practices. For example, in a few villages they have common bath areas. Villagers used to buy one Lifebuoy cake and cut it into smaller bars. This helped lifebuoy to introduce smaller 75-gram soap bars, which could be used individually.

3. Decision-making by male headThe male in Indian culture has always been given the designation of key decision maker. For example, the Mukhiya‟s opinion (Head of the village), in most cases, is shared with the rest of the village. Even in a house the male head is the final decision maker. In rural areas, this trend is very prominent.

4. Changes in saving and investment patternsFrom Gold, Land, to Tractors, VCR‟s, LCD TV‟s etc.

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MARKETING IMPLICATIONS OF CONSUMER’S DECISION PROCESS

          It was during 1960’s that a number of theories to explain the consumer ‘s decision process started appearing. The three leading theorists were Howard-sheth , Engel Kollat-Blackwell and Nicosia. Since then a considerable research on the marketing implications of the process has been developed and tested the applications of many elements of marketing.

        Many of the marketing strategies and tactics will have to be developed in relation to consumer attitudes. Marketing strategies,if effectively used, will go a long way in initiating and developing consumer attitudes in favour of the products.

THE IMPORTANT MOTIVES, INFLUENCING THE ULTIMATE  BUYING BEHAVIOUR OF CUSTOMERS.

1. Fear                         : To overcome theft, you may purchase a burglar alarm(out of  

                                        fear)

2. Desire for money    : Purchasing when the price falls down.

3. Vanity                      : Getting costly items to be admired by others

4. Pride                         : Possessing luxurious items for high position in the society 

5. Love and affection   : When you purchase toys, dresses for your sister, it is out of 

                                       affections.

6. Sex and romance      : Spending much on dresses, ornaments etc.

7. Fashion                      : Imitation motives : Old people dress like young ones.

8. Possession                  : This refers to collection of stamps, coins etc.

9. Health and Physical :Purchasing health foods, vitamins etc.   Well being

10. Comfort  and          :Purchasing equipments like refrigerator, pressure cookers etc

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Convenience             

Consumer Electronics Market

Rapid Innovation

Dynamic Market Place

Highly Competitive Industry

Significant Time-To-Market Pressures

Significant Cost Pressures

Rapid Rates of Market Penetration

Rapid Transition from One Technology to another

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ECONOMIC FACTOR AFFECT THE BUYER’S BEHAVIOUR

1. Disposal personal income :

    The economists made attempts to establish a relationship between income and spending. Disposal personal income represents potential purchasing power that a buyer has. The  change in income has a direct relation on buying habits.

 2.Size of family income :

   The size of family and size of family income affect the spending and saving patterns. Generally large family spend more and short family spend less, in comparison.

 3. Income expectations :

    The expected income to receive in future has a direct relation with the buying behaviour. The expectation of higher or lower income has a direct effect on spending plans.

 4.Propensity to consume and to save :

   This goes to the habit of spending or saving with the disposal income of buyers. If the buyers give importance to present needs, then they dispose of their income. And buyers spend less if they give importance to future needs.

 5. Liquidity of Fund :

    The present buying plans are influenced greatly by liquidity of assets i.e., cash and assets readily convertible into cash, e.g. bonds, bank balances etc.,

 6. Consumer Credit :

  “ Buy now and pay later” plays its role effectively in the rapid growth of markets for car, scooter, radio, furniture and the like.

Economic model suggests behavioural hypothesis :

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Lower the price of the product, higher the sales. Lower the price of substitute products, lower the sales of this product

Higher the real income, higher the sales of the product.

Higher the promotional expenses, higher the sales.

INTERNAL INFLUENCES OF BUYERS

psychographics (lifestyle),

 personality, motivation, knowledge,

attitudes,

beliefs, and

feelings.

demographics,

Consumer behaviour concern with consumer need consumer actions in the direction of satisfying needs leads to his behaviour of every individual depend on thinking process.

EXTERNAL INFLUENCES OF BUYERS

culture,

sub-culture,

Locality,

royalty,

ethnicity,

family,

 social class,

reference groups,

lifestyle, and

market mix factors.

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ENVIRONMENTAL FACTORS

BUYER'S BLACK BOX BUYER'S RESPONSE

Marketing Stimuli

Environmental Stimuli

Buyer Characteristics

Decision Process

ProductPricePlacePromotion

EconomicTechnologicalPoliticalCulturalDemographicNatural

AttitudesMotivationPerceptionsPersonalityLifestyleKnowledge

Problem recognitionInformation searchAlternative evaluationPurchase decisionPost-purchase behaviour

Product choiceBrand choiceDealer choicePurchase timingPurchase amount

Black box model

The black box model shows the interaction of stimuli, consumer characteristics, decision process and consumer responses. It can be distinguished between interpersonal stimuli (between people) or intrapersonal stimuli (within people).The black box model is related to the black box theory of behaviourism, where the focus is not set on the processes inside a consumer, but the relation between the stimuli and the response of the consumer. The marketing stimuli are planned and processed by the companies, whereas the environmental stimuli are given by social factors, based on the economical, political and cultural circumstances of a society. The buyer’s black box contains the buyer characteristics and the decision process, which determines the buyer’s response.

The black box model considers the buyers response as a result of a conscious, rational decision process, in which it is assumed that the buyer has recognized the problem. However, in reality many decisions are not made in awareness of a determined problem by the consumer.

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SOME KEY STATISTICS

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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

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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

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.

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CONSUMER APPLIANCES & ELECTRONICS RETAILING IN

CHINA

The world’s 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 Number per 100 Urban Households

Number per 100 Rural Households

Washing Machine 95.9 37.3

Refrigerator 90.2 17.8

Colour Television 133.4 75.1

Camera 47.0 3.7

Mobile Phones 111.4 34.7

Automobiles 2.2 --

CHINA DEMOGRAPHICS

0-14 years: 20.1% (male 142,085,665/female 125,300,391) 

15-64 years: 71.9% (male 491,513,378/female 465,020,030) 

65 years and over: 8% (male 50,652,480/female 55,472,661) (2008 est.)

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

GLOBAL INDUSTRY POSITION

Support voluntary, market-oriented programs and initiatives, including industry-led 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

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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.

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)

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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.

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KEY PLAYERS IN ELECTRONICS AROUND THE WORLD

COMPANIES PRODUCTS

Videocon Industries Refrigerators, Washing Machines, Television, Air Conditioner, Microwave Ovens

Godrej Refrigerators, Air Conditioners

Whirlpool India Refrigerators, Washing Machine

Mirc Electronics Television

Panasonic Television

Voltas Refrigerators, Air Conditioners

BPL Limited Refrigerators, Television

Electrolux Vacuum Cleaner, Refrigerator

Samsung Vacuum Cleaner, Refrigerator. Television, Mobile Phones

Hoover Vacuum Cleaner

LG Electronics Washing Machine, Refrigerator. Television, Mobile Phones

Eureka Forbes Vacuum Cleaner

Sony Television, Mobile Phones, DVD Players

Blue Star Air Conditioners

Bajaj Electronics Geysers, Electric Fan

Nokia Mobile Phones

OVERVIEW OF INDIAN MARKET

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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

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

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India has an increasingly affluent middle class population that, on the back of rapid economic growth, has made the country’s 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 4-year 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 30

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

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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

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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

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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.

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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

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37%

27%

33%

3%

Consumer Electronics (Brown Goods) Market Share

Mobiles

Audio/Video/Gaming

Computers

Others

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. It’s 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.

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

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Existing Players in the Indian Market

Consumer Electronics Manufacturers

The 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.

Videocon Appliances Ltd

One of India’s 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.

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Figure:

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

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.

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Consumer Electronics Retailers

Viveks – The Unlimited Shop

Viveks is one of South India’s 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

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 back-end

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 upper-

middle 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.

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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 India’s Largest Electronics Retail Chain; a giant in the organized

retailing of consumer electronics, and home appliances. NEXT has more than doubled its

last year’s 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.

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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.

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.

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Figure 1 Share of Wallet - Indian Consumer Trends

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

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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

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-to-

handle, good in quality and low in price. Most importantly, consumers want some

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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 skills.

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Frequently Asked Questions by the Buyer

o What are the features of the product ?

o Is there any upgraded version of the product available ?

o What is the price of the product ?

o Is there any free gift or discount available with the product ?

o Is there an exchange offer ? Is it on a particular product ?

o What about the product warranty ?

o What are the after sales services of the product ?

o Is there a home delivery service ?

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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-from-

30-assocham.htm

“India Consumer Electronics Report Q4 2009” By Business Monitor India

China and India’s 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-behaviour-

999729.html

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