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Prices of low-end white goods on a downswing

Partha Ghosh in New Delhi

Entry-level prices in the consumer electronics market have crashed by up to 25 per cent over the past one year.

While in the past couple of years, the decline was evident in the entertainment electronics segment - colour TVs, audio systems, among other things - this year, the trend was visible in the durables category as well.

Entry-level prices of refrigerators fell 7 per cent, those of microwaves dropped over 20 per cent.

The prices of washing machines and air-conditioners fell 13 per cent and 12 per cent, respectively.

The president of the Consumer Electronics and TV Manufacturers Association, Rajeev Karwal, said the price cut was essentially being derived from value packaging.

"That was one of the five-point agenda we discussed with the members. Since we cannot expect the government to reduce duties every year, we have to devise our own measures to expand the market, and then depend on the economies of scale," he said.

The results are clear. During the year, the air-conditioners market grew around 25 per cent, while the colour TV market over 15 per cent.

The refrigerators market also grew 10-12 per cent, though the washing machines sales remained stagnant. The microwaves market grew over 20 per cent.

"As far as colour TVs are concerned, 2002 has been the best year for the consumer. After heavy discounts in the festival season, you can expect them and price cuts ahead of World Cup cricket," says Ajit Nambiar, chairman and managing director of BPL Ltd.

Additionally, local brands used the market expansion created by the top brands to penetrate into rural and semi-urban markets with a lower price positioning.

The average price of refrigerators dropped 7 per cent, while that of washing machines 12 per cent. Entry-level prices dropped Rs 1,000-1,500 in each category.

Today, a microwave of a multinational corporation is available as cheap as Rs 5,000. Compare this with last year's entry-level price of Rs 7,000.

Ravinder Zutshi, vice-president, Samsung India, said: "The idea was to reach out to customers who could so far buy nothing more than an oven-toaster-griller. There is a large consumer base which needs a microwave for re-heating only."

Last year, the prices of air-conditioners had dropped because the market grew a mere 8 per cent as compared to a 32 per cent growth in the previous year and piled up inventories.

Manufacturers reduced prices to be able to clear as much inventory as possible. In the beginning of the year, they got together to plead for a price revision. But that did not happen.

"Since the market grew over 25 per cent this year, there was a huge price cut in the process among competitors. That, in turn, helped the market grow further," says Salil Kapoor of LG Electronics.

The drop in prices has been the severest in the case of VCD players. But this is primarily due to an influx of cheap imports from China and other South-East Asian countries.

While the top players cater for the premium market, the smaller players are tapping the huge entry-level customer base.

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