Consumer durable cos bet on small towns for revival
2 min read . Updated: 03 Jul 2020, 10:48 PM ISTRural markets likely to see faster recovery due to a good monsoon and govt stimulus
Small towns and parts of rural India could hold the key to reviving short-term demand as forecast of a normal monsoon and enhanced government schemes are likely to encourage households in these markets to spend on low-ticket consumer electronics, said consumer durable companies.
These companies, which tend to rely largely on urban markets for selling large appliances, see a strong potential for direct cool refrigerators, semi-automatic washing machines, fans, coolers and TVs in small towns and villages.
“In the current context, there are multiple factors that are signalling a faster revival of the rural markets," said Ajay Sharma, senior vice-president, Usha International, which earns 15-20% of its business from rural markets. A good monsoon and a good harvest of primary staple crops will boost rural incomes. Hence, “the rural market will start recovering earlier compared to the urban market", he said.
Usha International is seeing demand from small towns and rural markets for products such as fans, sewing machines, home and kitchen appliances, and water pumps.
With rural areas comparatively less affected by the covid-19 pandemic, additional government allocation towards the rural employment guarantee programme, and reverse migration to villages could also support the rural economy. Analysts expect urban markets to slow down due to job losses and salary cuts.
“If you look at the economic slump caused by the pandemic, rural markets will definitely see a faster recovery in the short term because of the direct impact of a good monsoon," said Manish Sharma, president and chief executive, Panasonic India and South Asia. This “will put more money in the hands of farmers", he said.
The company expects a 15% year-on-year growth in rural markets even as urban markets will stay flat.
It expects to sell more semi-automatic washing machines and direct cool refrigerators in smaller cities.
Havells India Ltd also expects villages to do better as big cities take time to deliver sales growth.
“We hope that the curve flattens and believe that urban markets will take a couple of months at least to come back on track. However, rural markets are likely to perform much better in the immediate future as they are recovering faster," said Prag Bhatnagar, senior vice-president, Havells India.
The lockdown hit sales across India as shops remained closed and people stayed indoors. Some firms are reporting signs of pent-up demand following the easing of curbs since May. In urban markets, this was especially true for categories such as laptops, tablets, and cooling products as people spent more time indoors and worked from home.
“April was a washout, but we witnessed an improvement in demand during May and June. The cooking appliances segment has seen significant growth in mass and mid segments," said Sharma of Usha International.
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