The media has since then been awash with advertisements announcing new products, generous schemes and offers. Videocon is giving away Rs 15 crore worth of gifts. Samsung's Phod Ke Jeeto offer has buyers winning ctvs, air-conditioners,
washing machines and cellphones. Philips Sure Win offer is giving away a lakh of prizes, including computers and music systems with a Ford Ikon as a grand prize. As if this wasn't enough, we also have the Panasonic Mela, Sony Surprise offer, and bpl's Mahotsav offer among others.
And it's worked. Gulu Mirchandani, cmd, mirc Electronics, explains how value engineering has helped bring manufacturing costs down by 5-7 per cent, and retail prices by Rs 1,000-1,500. Component manufacturers, already suffering from huge inventories due to poor demand from other industries, also cut their rates by about 5 per cent.
Mirchandani points out that products under his flagship brand, Onida, are priced the highest in their categories among Indian brands. Though he hasn't announced any price cuts or special offers yet, he has pumped in Rs 40 crore against Rs 32 crore last year in advertising and brand-building. Sales are no longer falling and the annual growth could be up to 5 per cent over last year. All eyes are now on sales in the coming Diwali week which will mark out the trend clearly.
A Code of Conduct committee, headed by ex-cetma president K.S. Raman of Sundersons Electronics, was instituted to deal with trade issues with a clear-cut objective to ensure fairness in deals between manufacturers and the trade. The committee has already sorted out about 20 cases, mostly concerning non-payment for supplies. Typically, manufacturers have model-specific discounts based on factors like quantity, end of month, early bird and annual pickups. These are decided and distributed by branch heads from a budget allocated by the corporation. In most cases, the salespersons have over-promised, collected payment from the retailers and then not paid up. "We sorted out such disputes and helped restart those counters," explains Raman.
A Purchase committee has also been set up to look at purchase issues. Vendors or original equipment suppliers to the industry tend to have different rates for customers. The Purchase committee is trying to rationalise this, though it is a complex issue as rates depend on the volumes a customer buys. The committee is comparing notes on issues like quality of supplies and delivery schedules. Vendors, on the other hand, are trying to absorb or spread increase of raw material prices to stay afloat and yet contribute to raising consumer interest. With a net margin of 3-4 per cent, the going is pretty tough but they are learning to recognise the value of higher consumer interest.
While the members are otherwise fierce competitors in the marketplace, they have been sworn against gimmicks and unethical business practices. "It is yet a dog-eat-dog world but we have learnt to sit together and build one-to-one relationships," says a component manufacturer. Karwal explains that there have been companies that offered very cheap products earlier but are now virtually out of business.
Philips grew by 15-20 per cent in August-September over this period last year. The new technology segments are showing promising results. The vcd MP3 hi-fi segment grew by 50 per cent and is now worth Rs 100 crore. "We compete not just with each other but with other industries like cellphones and two-wheelers," says Karwal. He claims their growth has been possible only because they were able to attract the consumers' surplus funds at the cost of other luxury items like cellphones. The industry is focusing on the fact that while products like cellphones are for an individual's gratification, ctvs and audio products make the entire household happy.
Now the industry wants to tackle issues like duties which are blocking its further growth. Duties on finished products work out to 45 per cent because of the high duty on picture tubes. "Our indirect taxes are highest in the world," wails Mirchandani. The Chinese market for ctvs is 25 million against 5 million in India. So, for the Indian market to attain global relevance, duties need to be rationalised. Customs duty in China, Korea and Taiwan is 18, eight and one per cent respectively. With vat, which will hopefully come next year, and lower duties, products could become another 10-15 per cent cheaper. In other words, this means you could take home a big-brand standard-size ctv with you in under Rs 10,000.
In the meantime, the mood in the industry is upbeat, simply because it bucked a recessionary trend. It certainly deserves its two cheers, considering that it's done what no other industry seems to have managed so far—organised itself without waiting for government reliefs.
