Electronics Companies Targeting Rural Markets to Fight Slowdown
Amid Economic Crisis, the Countryside is Emerging as an Important Factor
In an attempt to counter declining revenues due to the economic slowdown, Indian companies are incorporating various changes in their strategies. One of these changes is to seek new, untapped markets as demand has slumped in urban areas. In this scenario, rural and suburban markets have caught the eye of companies.
Factors prompting these companies to target rural markets include:
1.India’s rural market provides a huge demand base, with more than 720 million consumers spread across 627,000 villages. Furthermore, their per-capita income has been rising at a consistent growth rate of more than 4 percent, which has resulted in increasing disposable incomes.
2.Since rural consumers are reticent to purchase products using financing schemes, this market hasn’t been impacted significantly by the unavailability of consumer loans.
3.The penetration of various electronics products is still very low in rural areas, providing huge growth potential. This is corroborated by the fact that penetration levels in India for consumer electronics products such as refrigerators, VCD/DVD players and Set-Top Boxes (STBs) are at 19 percent, 7 percent and 2.5 percent respectively, most of which is contributed by urban areas. Hence, the focus on rural markets has become even more important.
Electronics companies operating in India have jumped on the bandwagon of companies tapping the rural market. They are undertaking initiatives to strengthen dealerships and distribution channels in these areas to increase the penetration of their products. Furthermore, they are aiming to provide affordable and customized products to suit the needs of rural people. Finally, many companies are marketing through consumer awareness programs and media channels such as television and radio. Noteworthy initiatives recently undertaken in the telecom sector include:
1.Mobile handset manufacturers in January sought $1 billion from the Universal Services Obligation (USO) fund to give free mobile phones and connections to 50 million families below the poverty line, thus erasing the digital divide.
2.To address the affordability issue, handset manufacturing firms such as Nokia, Samsung and Motorola are launching lower-priced entry-level models to cater to rural consumers. Nokia already has undertaken several initiatives for farmers in the areas of microfinance, distribution and value-added services.
3.In an attempt to extend mobile connectivity to every village in the country, leading Indian telco company Bharat Sanchar Nigam Ltd. (BSNL) has announced plans to erect 19,000 towers. It also intends to procure 93 million GSM lines so that all residents of villages with populations of more than 1,000 can avail themselves of mobile-phone services.
In consumer electronics, initiatives include:
1.LG Electronics in January announced plans to make significant inroads into rural markets through channel expansions, establishing a services network and rolling out a slew of entry-level products. The company already has established 45 area offi ces and 59 rural and remote-area offi ces.
2.Samsung has tied up with the Indian Farmers Fertilizer Cooperative (IFFCO) to expand its operations in the rural market.
3.Similarly, Electrolux is in the process of strengthening its distribution in rural areas with an aim to increase the penetration of its products.
Furthermore, in an attempt to bridge the urban-rural gap in India’s healthcare system, Philips India has begun the process of developing microscope-based portable diagnostic kits that rural medical workers can use to test for tuberculosis and malaria.
With rural and suburban markets gaining in importance, such innovative strategies will help electronic product companies to tap the potential offered by these markets. iSuppli believes that although these strategies initially are being adopted by the companies to counter the slowdown in demand, a mutually beneficial scenario for both electronics companies and rural India will unfold in the long run.
In an attempt to counter declining revenues due to the economic slowdown, Indian companies are incorporating various changes in their strategies. One of these changes is to seek new, untapped markets as demand has slumped in urban areas. In this scenario, rural and suburban markets have caught the eye of companies.
Factors prompting these companies to target rural markets include:
1.India’s rural market provides a huge demand base, with more than 720 million consumers spread across 627,000 villages. Furthermore, their per-capita income has been rising at a consistent growth rate of more than 4 percent, which has resulted in increasing disposable incomes.
2.Since rural consumers are reticent to purchase products using financing schemes, this market hasn’t been impacted significantly by the unavailability of consumer loans.
3.The penetration of various electronics products is still very low in rural areas, providing huge growth potential. This is corroborated by the fact that penetration levels in India for consumer electronics products such as refrigerators, VCD/DVD players and Set-Top Boxes (STBs) are at 19 percent, 7 percent and 2.5 percent respectively, most of which is contributed by urban areas. Hence, the focus on rural markets has become even more important.
Electronics companies operating in India have jumped on the bandwagon of companies tapping the rural market. They are undertaking initiatives to strengthen dealerships and distribution channels in these areas to increase the penetration of their products. Furthermore, they are aiming to provide affordable and customized products to suit the needs of rural people. Finally, many companies are marketing through consumer awareness programs and media channels such as television and radio. Noteworthy initiatives recently undertaken in the telecom sector include:
1.Mobile handset manufacturers in January sought $1 billion from the Universal Services Obligation (USO) fund to give free mobile phones and connections to 50 million families below the poverty line, thus erasing the digital divide.
2.To address the affordability issue, handset manufacturing firms such as Nokia, Samsung and Motorola are launching lower-priced entry-level models to cater to rural consumers. Nokia already has undertaken several initiatives for farmers in the areas of microfinance, distribution and value-added services.
3.In an attempt to extend mobile connectivity to every village in the country, leading Indian telco company Bharat Sanchar Nigam Ltd. (BSNL) has announced plans to erect 19,000 towers. It also intends to procure 93 million GSM lines so that all residents of villages with populations of more than 1,000 can avail themselves of mobile-phone services.
In consumer electronics, initiatives include:
1.LG Electronics in January announced plans to make significant inroads into rural markets through channel expansions, establishing a services network and rolling out a slew of entry-level products. The company already has established 45 area offi ces and 59 rural and remote-area offi ces.
2.Samsung has tied up with the Indian Farmers Fertilizer Cooperative (IFFCO) to expand its operations in the rural market.
3.Similarly, Electrolux is in the process of strengthening its distribution in rural areas with an aim to increase the penetration of its products.
Furthermore, in an attempt to bridge the urban-rural gap in India’s healthcare system, Philips India has begun the process of developing microscope-based portable diagnostic kits that rural medical workers can use to test for tuberculosis and malaria.
With rural and suburban markets gaining in importance, such innovative strategies will help electronic product companies to tap the potential offered by these markets. iSuppli believes that although these strategies initially are being adopted by the companies to counter the slowdown in demand, a mutually beneficial scenario for both electronics companies and rural India will unfold in the long run.
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