A look at India's Consumer Electronics Industry - I

India’s nominal GDP was US$1.17trn in 2008. Average annual GDP growth of 6.5% is predicted by
BMI to 2013. With the population forecast to increase from an estimated 1.19bn in 2008 to 1.27bn by
2013, GDP per capita is expected to expand by nearly 59% by the end of the forecast period, to reach a projected US$1,563. Consumer spending per capita is assumed for a rise from US$594 in 2008 to US$1,105 in 2013. The growth in the overall retail market will be driven, in large part, by the explosion in the organised retail market. Organised retail refers to the familiar Western concept of chain outlets, department stores, supermarkets, etc. According to Investment Commission of India (ICI) data, this segment accounted for US$12.1bn of sales in 2006, or 4.6% of the total retail segment. The forecast is that organised retail sales will reach US$76.2bn by 2013, representing 10.7% of the total and generating employment for some 2.5 million people in various retail operations and over 10 million additional work forces in retail support activities including contract production & processing, supply chain & logistics, retail real estate development & management etc.

                   The Organized Retail Penetration (ORP) is the highest in footwear with 22 per cent followed by clothing.  Organised consumer durables retail is very low at around 5 %. This shows a growing opportunity in this sector.

                  According to a McKinsey 2005 report, while Food and Grocery took the highest share of wallet, and electronics took only a mere 5%, the proportion of spending on electronics was definite bound to increase by 2015 and also the growth rate for the share of organised retail in the electronics segment was set to increase from 15% to a astounding 45% in 2015. Non - food categories will lead the shift to organized retail.

                   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.

                               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. 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

Taking a look at the individual segments in the consumer electronics segment, we can broadly classify them as:

1. 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.

2. 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.

3. 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.

Well, that was the industry overview. Coming up next, the Porters five forces analysis for this industry. Until then,

Cheers!!!

Signing off,

Shauvik.