India’s consumer market has witnessed sea change over the last decade. Like urban markets, consumers in rural markets are now more technology-savvy and are increasingly demanding sophisticated electronic durables and white goods. This trend has been driven by Minimum Support Price incomes to farmers as well as an ameliorating power situation in small towns and villages. In fact, where farmers get facilities like instant payment of cash when they sell their produce at stores like the ITC’s Choupal Saagars, they are empowered to pick up consumer products like washing machines, televisions, refrigerators, DVD players, microwave ovens, etc from that store itself. At these stores, consumer electronics comprise 15% of sales, growing at 40% each year. These factors, along with a growing perception of white goods as assets, has revolutionised the electronics segment in the consumer durables category.
Industry experts say that the consumer durable market, pegged at Rs 50,000 crore, for products like TVs, washing machines, refrigerators and air conditioners is growing between 15-20% annually in urbanIndia; in contrast to the rural market, where growth is much higher – at about 60% a year. With such a clear reason to target rural areas, several electronics big-wigs are charging ahead, and LG electronics is leading the pack. As of May 2011, 21% of this company’s turnover came from the rural market. But success has not come easy to LG, which has tried its hand at a spectrum of activities to build its presence in rural India.
LG Electronics has made use of vans and road shows to showcase their goods to villagers and, local language advertisements to communicate with rural targets. To penetrate the hinterlands, the company set up 45 area offices and 59 remote area offices, in addition to participating in rural haats, melas and mandis. LG has tied up with stalwarts in the rural space, ITC and DCM Shriram Consolidated Ltd (DSCL) to employ unconventional distribution modes. The company is now looking to boost promotional efforts in 14 states with high disposable incomes. For this, it will harness the hub-and-spoke model, by roping in distributors of commonly purchased items such as fertilisers and two-wheelers.
Another white goods brand which has always thrived in small town Indiais Philips India. The company has always used local language advertising, graffiti and radio advertising to drive its growth. It has also been reported that the company demonstrates its products to village headmen and pursues a sale to influence buying decisions in villages. Another example is of Godrej Appliances Ltd. A household name in the Indian home appliances space for generations, the company test marketed its battery-powered ChotuKool refrigerator priced at only Rs 3,700 or half the cost of a fridge, in regions that had irregular electricity. For the launch and promotion of this prototype project, locals were employed as entrepreneurs selling ChotuKool in their villages at a fixed commission. Furthermore, a tie-up with India Post helped Godrej sell the product through post offices too, and helped boost distribution and coverage in villages where there were no retailing alternatives.
ChotuKool enabled local vendors and businessmen to engage novel methods of growing their businesses. Rural flower vendors and kirana store owners were able to stock a larger range of goods for longer using this innovation. Having achieved such positive results, the company now hopes to add more low-cost innovations to its ‘Chotu’ family, namely a low-cost washing machine ChotuWash as well as a low-cost water purifier.
Today, like Whirlpool, several electronics companies face traditional hurdles and prejudices regarding the utility of goods like washing machines and refrigerators. Akin to many white goods companies, Whirlpool is already present across price points and is continually strengthening its distribution network. More and more companies are now leveraging their networks and knowledge of rural markets for the next phase of growth. In this way, several behemoths in the space are etching unique growth trajectories for striking it big in the rural India.