Well, if you are looking for ‘The Next…’ or ‘Emerging’ trends after pandemic recedes then watch out for this space.
Emerging economies like India have gained pace rapidly after the scare of the pandemic has subsided due to various factors owing to:
- The rapid pace of Vaccination
- Herd Immunity (Clusters)
- Restrictions on Travel
- Better Crowd management
Beyond the pickup in the overall scene of economic indicators like IIP (Index of Industrial Production), Electricity consumption, and demand for fuel; there are several second-order effects emerging.
Work for home, supplemented by restrictions on domestic services offered by support staff has pushed the need for ‘Home Automation’. Products responsible for Home Automation fall into the category of ‘Consumer Durables’. They are better known in the industry as White goods (AC, Washing Machines, Cleaning equipment, Refrigerators, etc.) or Brown goods (TV, PC, Digicam, etc.).
One segment that has picked up momentum and is gaining attention from the industry due to the low base effect is white goods. Several emerging economies including India had low penetration of white goods due to the availability of vast affordable labor. Covid-19 made a dent in the pool of labor market and raised up wages esp. in Tier-1 and Tier-2 cities. Spillover effects of this trend are visible in the white goods segment that experienced waiting periods for home cleaning equipment at the leading dealer touchpoints.
From the past 18 months, the sales growth trend of white goods has gained enough momentum to catch the attention of OEMs. Several OEMs have committed to installing additional capacity to manufacture goods locally to offset the growing demand and raised prices to factor in rising inflation due to high commodity prices like steel, commercial fuel, and labor shortages.
Currently, penetration of few white goods like that of Air Conditioners [HVACs] stands at ~6% in India and that points to enormous room for growth. Sales for this segment had oscillated between 15-20% before the pandemic knocked doors.
Data Source: India Brand Equity Foundation (IBEF)
Within emerging economies, India’s Per capita income had grown by ~10% on an average over the period ranging from 2012-2020. Barring 2020 (which represents the black swan event), the growth in per capita income points to significant potential for the population to spend on discretionary products.
Data Source: Central Statistics Office (CSO)
The combination of rising disposable income and demand for discretionary products points to rising consumption for consumer durables. Rightly so, OEMs have started committing to install additional capacities to cater to the demand.
Data Source: Industry, livemint
Consumer durables comprise a large part of discretionary spending. Rising disposable income provides room for spending on this category of products. Withing consumer durables, Air Conditioners represent a segment of products that is largely under-penetrated, and rightly so the OEMs have found this gap to be addressed with priority. The supply of locally manufactured AC units will play a significant role in bringing down cost structure. Local manufacturing help strengthen the ecosystem for sales, services, and spares as well. Overall, this points to the sweet spot for leading brands to seize the opportunity.