Indian companies lose as MNCs rake it in through barter
BARTER suddenly seems to be the new buzzword for consumer goods manufacturers. Reeling under wide-spread consumer rejection, and with growth far below expectations, exchange seems to be the only way out for most MNCs. Televisions, refrigerators, washing machines—all come at half the maximum retail price (MRP) if you're willing to exchange your old goods. You can't get a better deal; and the companies can't ask for more.
Foreign companies, that is. According to a retail audit of 1.8 million TV sets undertaken by market research gurus ORG in 1996-97, foreign brands are on a new high: Sam-sung has seen a whopping ninefold jump in sales, Akai saw a 162 per cent increase, world leader Sony's sale of TVs rose by 87 per cent, and Panasonic saw its sales graph move up by 70 per cent.
The fantastic numbers didn't increase the market size, though. Like a zero-sum game, Indian manufacturers balanced the equation: Onida, once the envy of successful Indian brands, saw a fall of 33 per cent, while Videocon's sales slumped by 5 per cent. Only BPL bucked the trend—mildly—with its sales increasing by 11 per cent.
Behind these numbers is a sound focus on marketshares—not profits. Take Akai. The company first offered a free 14-inch CTV with a 21-inch one. Having tasted blood, it then offered a music system free with its 29-inch model. And in its latest exchange scheme it offers Rs 10,000 off on a new TV if you give them your old one. Others seem to be taking the cue.
Thomson has launched exchange schemes for its 14, 20 and 21 inch TV sets. It's also offering to finance the purchase with instalments spread over a year. Among the Indian brands, Crown has an exchange offer for TV sets, and Godrej is offering a similar scheme for its refrigerators.
The schemes, no doubt, are attractive. In the case of TVs, the cable boom has rendered many old TV sets obsolete (since the number of channels is limited). And so when an attractive exchange offer comes your way, you grab it. Here again, it is the Indian manufacturers and brands who suffer. For the old TV being exchanged will most likely be an Indian brand.
So what happens to your old goods? They find their way into the used goods bazaar. Some are dismantled; their components sold separately. Thus, if a secondhand TV sells for Rs 5,000, the dealer who sells it earns a massive commission of 25 per cent on the MRP of the TV. All the dealers Outlook contacted claimed that this was where they derived their margins from.
Obviously, such losses can be borne only by the cash-rich, profit-sacrificing, long-term players; not Indian companies.