Chapter 2 INDUSTRY PROFILE August 2019

2. INDUSTRY PROFILE
2.1 CONSUMER DURABLE

Durable goods are those which don’t wear out quickly, yielding utility over time rather than at
once. Examples of consumer durable goods include electronic equipment, home furnishings and
fixtures, photographic equipment, leisure equipment and kitchen appliances. They can be further
classified as either white goods, such as refrigerators, washing machines and air conditioners or
brown goods such as blenders, cooking ranges and microwaves or consumer electronics such as
televisions and DVD players. Such big-ticket items typically continue to be serviceable for three
years at least and are characterized by long inter-purchase times.

PERFORMANCE

In the past 10 years, the global market has witnessed a surge in demand as economies such as
Brazil, Mexico, India and China have opened up and begun rapid development, welcoming
globalization with élan. The consumer durables industry has always exhibited impressive growth
despite strong competition and constant price cutting, and the first contraction since the 2001
dot-com bust has been due to the global recession. Given the strong correlation between demand
for durables (both new and replacements) and income, the industry naturally suffered during the
2008-2009 period. However, projections for current year going forward are very optimistic, as
consumers resume spending, and producers launch new enticing variants to grab new customers.
Leading players include Sony Corporation, Toshiba Corporation, Whirlpool Corporation and
Panasonic Corporation.

Developing countries such as India and China have largely been shielded from the backlash of
the recession, as consumers continued to buy basic appliances. In fact, China has been ranked the
second-biggest market in the world for consumer electronics. Despite the recession, their strong
domestic economy and growing high-income population have buoyed demand leading to
aggressive market growth.

There is growing interest for new age products such as LCD-TVs and DVD players. Meanwhile,
the penetration of the basic, largest dollar items such as ovens, washing machines and
refrigerators is also increasing. India too, has witnessed a similar phenomenon, with the urban

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consumer durables market growing at almost 10 %p.a., and the rural durables market growing at
25% p.a. Some high-growth categories within this segment include mobile phones, TVs and
music systems.

The Indian consumer durables industry has witnessed a considerable change in the past couple of
years. Changing lifestyle, higher disposable income coupled with greater affordability and a
surge in advertising has been instrumental in bringing about a sea change in the consumer
behavior pattern. Apart from steady income gains, consumer financing and hire-purchase
schemes have become a major driver in the consumer durables industry.

CHALLENGES

The biggest threats to the local industry going forward are supply-related issues pertaining to
distribution and infrastructure, as well as demand issues due to competition from imported
goods. The lack of well developed distribution networks makes it especially challenging to
penetrate the fastest growing rural areas economically. In addition, regular power cuts and poor
road linkages make systematic production, assembly and delivery problematic.

MNCs hold an edge over their Indian counterparts in terms of superior technology combined
with a steady flow of capital, while domestic companies compete on the basis of their well-
acknowledged brands, an extensive distribution network and an insight in local market
conditions. The largest MNCs incorporated in India are Whirlpool India, LG India, Samsung
India and Sony India and homegrown brands are Videocon, Godrej Industries and IFB.

FUTURE PROSPECTS

Overall, the industry’s future remains robust, and interested applicants will benefit from a
holistic learning experience; Many of the research, sales, marketing and advertising related roles
will necessitate a good on-the-job learning of target audiences, who may well be a totally new
segment, based in never-before visited Class II and III towns. In addition, those with technical
backgrounds will be able to leverage their knowledge and experience to constantly develop and

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innovate the product variants. With more MNCs growing their Indian businesses, there is great
potential to also learn best-in-class systems and management skills.

2.2 HOME APPLIANCES

The 1950s - A decade of change

After years of rationing and shortages, the 1950s were a period of economic prosperity, high
employment and great technological development. Many returned servicemen got married,
established homes and raised families. During this period, Australians enthusiastically adorned
their homes with a dazzling range of new domestic appliances. Hire-purchase schemes allowed
people to take products home and pay for them in installments.

During the 1950s, the role of women was generally considered to be that of the 'homemaker'.
Bright television and magazine advertisements encouraged women to stay at home and create a
domestic haven for their families using the new appliances on offer. These devices promised to
raise standards of living and release housewives from the shackles of household chores.

Electric stoves, refrigerators, toasters and kettles revolutionized the kitchen, and vacuum cleaners
and washing machines shaved hours off time spent cleaning. Women could enjoy more leisure
time while still creating a clean, comfortable home for their families. Many women chose to join
the paid workforce, changing the shape of the Australian labor market forever.

Home appliances also came to symbolize the success and modern outlook of their owners and
were often displayed in the lounge room for visitors to admire.

By the end of the 1950s, many small appliances that were at first considered luxuries, like kettles
and electric mixers, were now considered 'must-have' items. Other appliances, like washing
machines and refrigerators, however, were still expensive and out of reach for many families.

1960s - Mass production and disposable appliances

In the late 1950s and early 1960s, developments in manufacturing technology led to a huge
increase in mass production. This included the production of electrical appliances. Coupled with

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an increasingly prosperous economy, mass production meant that most appliances became not
just affordable, but essential parts of everyday life.

Manufacturers, however, realized that they were facing a major problem. If they continued to
design high-quality products that lasted decades, then consumers would have no reason to keep
buying their products. Thus, many manufacturers began to produce lower-quality appliances that
were designed to be thrown out and replaced rather than repaired. This forced people to
continually purchase new appliances.

In order to sell more products, manufacturers also created more diverse, innovative products that
boasted a variety of features. Irons, for example, now came with useful improvements like
thermostats (a device that regulates temperature) - which rendered previous models of irons
obsolete.

1960s - Design considerations

The aesthetic qualities of domestic appliances became a prime consideration for consumers in
the late 1950s. The appearance of early home appliances bore many similarities to heavy
industrial factory equipment - an attempt by manufacturers to emphasize the efficiency of their
products. Such designs, however, tended to make appliances look more like hard work than a
pleasurable experience.

Many people also liked to display appliances in their lounge rooms as show pieces rather than
hide them away in the kitchen and laundry.

As a result, manufacturers altered the design of home appliances. Rather than looking like pieces
of industrial machinery, appliances became smoother, shinier and more stylish and available in a
variety of colors.

1970s and 1980s

By the 1970s, owning a wide range of home appliances was deemed essential for daily living.

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Microwave ovens did not gain widespread popularity in Australia until the early 1980s, although
they had been commercially available since the late 1950s. Microwaves revolutionized food
preparation - making it possible to defrost, cook or reheat food in very little time, and prompting
a growth in the consumption of frozen convenience meals.

Other popular kitchen appliances of the 1980s included food processors and blenders, which also
made cooking quicker and easier.

1990s - Environmentalism and the era of improvement

Many of the home appliances used by Australians in the 1990s were essentially the

Same ones used in the 1950s, albeit with minor improvements and added features. Some brand
new appliances were also available - consumers could choose from an incredible array of
machines that would make cappuccinos, bake bread, churn homemade ice cream and even blow
the leaves off their driveways.

Advances in home appliance technology led to the introduction of different plastics and other
new materials. Thermoplastics increased strength and durability and other plastics reduced the
weight of appliances, which in turn lowered transport costs. A 'noise-free' dishwasher was
released in the early 1990s and manufacturers developed quieter motors and new, sturdier types
of metal and glass.

Environmental impact of home appliances in the 1990s

Constant modification meant that home appliances in the 1990s quickly became outdated. The
design of most appliances also made them difficult and expensive to repair and many devices
were often discarded after a short period of time. Large numbers of old home appliances began
to pile up in landfill areas.

Throughout the 1990s, concerns were raised about the environmental consequences of dumping
home appliances in landfill. Many appliances, especially older ones, contained toxic substances

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like lead, chlorofluorocarbons (CFCs), oil and grease. These substances could leach into soil and
water and have serious health and environmental effects.

Disused appliances also began to use up valuable landfill areas in densely

Populated regions, where landfill space was fast becoming a scarce resource.

As a result, the use of high energy-consuming appliances and the large-scale dumping of home
appliances in landfill areas became less socially acceptable towards the end of the 1990s. People
were encouraged to think carefully about the level of waste they were contributing to landfill and
to consider their energy use in the home when buying and maintaining appliances.

Social impact of home appliances in the 1990s

Time savers or time suckers?

When launched in the 1950s, home appliances were hailed as the key to relieving women from
hours spent on household tasks. By the 1990s, the responsibility of performing most household
chores still primarily fell on women, but research found that domestic appliances may not have
actually saved women a great deal of time at all.

This peculiarity may be explained by the fact that as consumption increased throughout the
decades, the quantity of household chores also increased. Washing machines, for example, may
have reduced the time it took to wash clothes, but the amount of clothes people owned in the
1990s had dramatically increased. Also, home appliances may have made Australians more
efficient, but the general level of home cleanliness that was considered acceptable had also risen.

In the 1940s, Australians spent around six hours per day purchasing and preparing food. By the
1970s, this had dropped to two hours. By the end of the 1990s, many Australians ate a large
proportion of take-away or supermarket convenience meals, and spent just 30 minutes in the
kitchen each day.

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2.3 REFRIGERATOR

The "Refrigerator Industry in India" examines the evolution of the refrigerator industry in
India over the years. It examines the change in the structure of the industry after the
liberalization of the Indian economy. It also takes a look at the different types of refrigerators
available in India and examines their characteristics. In addition, the note explores the
characteristics of the refrigerator Industry in India and the major players in the industry. The
distribution channels used by the major players are also discussed in detail. The note ends with a
description of the future of refrigerator industry in India.

Till the 1980s, players like Godrej, Kelvinator and Voltas controlled almost 90% of the market.
Earlier, the white goods sector was categorized as a luxury goods industry and was subject to
oppressive taxation and licensing. The situation changed after the liberalization of the Indian
economy in the early 1990s. The government removed all restrictions, and now there is no
restriction on foreign investment, and licenses are no longer required. Post-liberalization, a
number of foreign companies entered the market and many domestic players also diversified into
refrigerators. BPL and Videocon, who already had a presence in the consumer electronics
market, leveraged their strengths to enter the durables sector.

In India, refrigerators have the highest aspiration value of all consumer durables, with the
exception of televisions. This accounts for the high growth rate of the refrigerator market. The
refrigerator market has been growing at a rate of about 15% per year, while the consumer
durables industry as a whole has grown at almost 8%. The size of the refrigerator market is
estimated to be 3.5- 4 million units approximately, valued at Rs 50 billion. The domestic
penetration rate of refrigerators is about 9%. The penetration of refrigerators is considerably
higher in urban areas, which account for 75% of the demand, with rural areas constituting the
other 25%. The electrical industry covers a wide range of products which includes white goods
i.e. refrigerators, washing machines, air-conditioners, microwave ovens, washing machines, etc.
The existing production capacity is sufficient to meet the domestic demand as well as exports.
The industry has been de-licensed.

Household electrical appliances are now widely used in the country and two technical aspects
specific to these products are safety and quality. Steps have also been initiated to ensure adequate

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testing facilities and availability of quality raw materials and components to the manufacturers to
help them in conforming to the specified quality standards. Greater consumer awareness about
the quality and safety of these goods is also expected. For safe disposal of lead acid batteries a
notification under environment protection act has also been issued.

The refrigerator industry is highly competitive which implies a high premium on quality of the
product. Manufacturers of refrigerators have, in general, improved the quality of the product,
especially the reliability of the compressor. In so far as new technology is concerned the concept
of "Frost free" refrigerators has been gaining popularity. Non CFC (Non-Chlro-fluro-carbons)
refrigerators are being manufactured in the country but because of their high initial cost the
demand is sluggish.

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