With summer temperature on the rise dealers of consumers durables are gearing up for a seasonal spurt in air conditioner sales, reports Serilda Coutinho
Once an item of luxury, air conditioners (AC) these days are considered as necessary commodity. In Goa where the annual expenditure on household goods is higher than other states most middle class choose to have at least one air conditioned room. According to local retail industry experts, in festive season ACs figure high on the shopping list along with the television and fridge, of which the last two are
Summer is when AC sales boom although this year some dealers say that they are looking at lukewarm demand compared to the previous year. To stoke up demand store owners have consumer finance schemes in place that allows a buyer to purchase ACs at interest rates as low as zero per cent or interest ranging from two per cent to three per cent for repayment beyond a year. Dealers are also targeting new home buyers
Check out reveals that, almost all the popular AC brands such as LG, Panasonic, Samsung, Haier, Daikin, Blue Star and Voltas have presence in the state. The top brands in terms of market share are Llyods, Voltas, Daikin, Haier and Blue Star, according to showroom owners.
The current trend is that, Goans are switching to air conditioners from room coolers despite the higher cost. “The GST imposed on air conditioners is currently 28 per cent. If it is reduced to 18 per cent the affordability of ACs will improve,” says Dhanraj Dhond, owner, Casa Madhav, Panaji. He adds that, latest preference is towards energy efficient, 5-star ACs but most buyers settle down for a three-star rated set as “higher rating comes with a huge price tag.
Currently the market is segmented between inverter and non- inverter ACs. According to dealers, inverter ACs are heavier on the pocket by around Rs 7000 but the energy saving of up to 50 per cent when compared to normal conditioners make it attractive for buyers.
Apart from in-built inverters companies have also launched ACs with air purification capabilities. “Air conditioners with air purification technology start from Rs one lakh . “Consumers are willing to spend on this technology clubbed into air conditioners as the cost of a basic air purifier is nothing less than Rs 40, 000,” reveals Vijay Alex Fernandes, senior business manager, Harier.
Store owners say that, they are unable to figure out why exactly sales are lukewarm this year compared to 2019. “It could be the impact of elections or the late summer that has kept buyers waiting to make a decision to purchase. The sales for air conditioners begin from February and go up till June. There are few offers introduced during this period as AC is considered as fast moving products during the summer season. “There has been a drop of around 30 percent in the sales as compared to the previous year,” claims Vishwasrao Talaulikar, owner, Talaulikar Electricals, Panaji.
For CMM Arena Megastore, Merces, where sales are driven by corporate purchases the demand outlook for 2019 summer is good. “Our sales are driven by institutions. Sales of ACs as compared to the previous year are improved. Most of our buyers prefer to purchase inverter AC’s that are costlier. Institution purchases are contributing to rise in sales this year,” says Vishwanath Bhat, brand manager, CMM Arena Megastore.
“We have seen a 30 percent boost in sales from Gudi Padwa onwards,” discloses Dhond. Like other store owners he is hoping that the warm weather before the arrival of the monsoons will induce residents to go in for AC purchase. “We are expecting that the rising summer heat will convince buyers to go in for an air conditioner and we will manage to cover up for the pre-season slow sales before the end of the summer months,” says Mahesh Desai, owner, Desai Electricals, Ponda.
With multiple brands with latest technology flooding the market the general belief among dealers is that, customer’s look at the price first while choosing a particular brand. “Most customers choose price over energy consumption,” points out Fernandes. “Goa’s electricity tariff is lower than other states. Only around 30 per cent of the local buyers buy ACs with inverter despite the energy saving aspect it offers,” he says. Fernandes estimates the market size for ACs in Goa around 40,000 units yearly.
On the pricing front, the cost of non-inverter, one ton AC starts at around Rs 28,000, including the price of the stabilizer and installation. While for a 1.5 ton AC the pricing starts from Rs 33,000. In case of inverter AC the starting price is Rs 35,000 for one ton set and Rs 40,000 for 1.5 ton set. Ground level check reveals that buyers are willing to spend upto Rs 30,000 on an air conditioner. “Inverter AC’s are fast selling in other states and slowly local consumers will make the switch. Most brands are launching new models with the inverter technology,” says Fernandes.
According to appliance store owners, split AC’s are fast moving products while window ACs are getting phased out and demand for portable AC is low. “Portable AC’s are available in one ton capacity and are mostly preferred by hotels and factories . We do get inquires for portable sets but most of the buyers do not prefer to purchase them as the installation and maintenance is difficult as compared to the normal AC’ s and no one wants to take that risk after spending almost the same amount, ” says Desai.
Raising a similar concern Dhond points out that, installation of portable AC’s requires making a hole of about four inches for the exhaust and that is one of the reason buyers are not willing to purchase these units.
Dealers say that, portable AC’s have a mere one per cent share in sales similar to the window AC’s. “We manage to sell only around 8-10 window AC’s in a month and these are usually by customers who opt for a replacement of their older AC,” says Fernandes. Sales for window AC’s are made only on order basis.
Goa’s AC market is robust but dealers are discovering the usefulness of consumer finance in pushing sales. Electrical stores have tied up with banks like HDFC, Axis, ICICI, Kodak Mahindra and finance companies such as Bajaj Finserv to make the process of payment simple. Availing consumer finance is easy as everything is taken care of at the store itself.
“From choosing the product to getting the finance sorted and then installing the product everything is taken care within the store,” points out Bhat. Apart from simplifying the process of applying for the loans through registered dealers, banks also offer cash back on loans through debit or credit card purchases.
“About 70 percent of our buyers prefer to go in for financing schemes as there is a zero percent down payment offered on most brands at no extra cost. Also paying in monthly installments does not make them feel the instant pinch on the pocket,” informs Fernandes.
AC industry in India looking at 15 % increase in sales
AC manufacturers expect double-digit sales growth of 14 per cent in 2019-20 with bulk of the demand spurt occurring in the ongoing summer season. Companies are hoping for higher adoption of superior technology and power efficient range of inverter air conditioners by consumers. The Indian AC market size is estimated at 4.5 million units currently and it has more than 20 companies competing for market share.
Globally the room AC market is estimated at 130 million units with a penetration of 30 per cent. Comparatively India has an AC penetration rate of only four per cent. Industry players therefore see huge potential in sales. Future demand is expected to occur from smaller cities and town where the government has rural electrification plans. ACs are an aspiration purchase in interior areas, smaller cities and towns but customers are aware of brands.
New models of AC’s being launched by companies are energy efficient and with in-built inverter. They are designed to deliver extra cooling power, faster temperature pull-down and extra comfort through precise temperature setting.