An opportunity of electric proportions: The growth of electronics and consumer goods sector in 2022

Updated: Apr 29

The consumer goods and electronics markets in India are soaring at a rapid pace, with the consumer electronics market — one of the largest in the world — set to reach Rs. 30,000 billion ($400 billion) by 2025.

There are several push-and-pull forces at play here. A rise in disposable income spread across the country, including rural areas, could be a strong indicator for growth in these categories. However, consumer behavior changes all the time, and a new Coronavirus variant can influence a change in buying patterns.

Here's a comprehensive overview of these sectors and how brands can find a way to engage more consumers sustainably.

The COVID-19 Effect

COVID-19 has created a colossal impact on people's lives, so much so that it now drives most of our buying decisions. Though the pandemic has taken a toll on global economies and societies, certain sectors have survived and thrived. The consumer electronics sector is one of them.

The Indian consumer goods sector displayed resilience during the second COVID-19 wave and clocked a steady 16.1% CAGR in 2020 and 2021. The demand for essential items has skyrocketed and with people needing to be more digitally connected than ever before, electronics have become pretty essential.

With people spending more time at home, the use of consumer gadgets like smartphones, laptops, computers, speakers, etc., has increased. This is also why the global consumer electronics industry has also shown enormous growth amid the pandemic.

Blurb: Uncertainty can be both a driver for growth and a hindrance. eCommerce brands must always take this into account and analyze sales trends to see what works for them and the potential for things to go wrong.

The Increasing Role Of The Rural Sector

The electronics and consumer goods sector has usually focused on urban segments. Traditionally, urban markets have led to growth in the consumer goods and durables industry. However, these consumer goods and electronics retail trends could reverse as rural sales continue to surge.

In Oct-Dec 2020, rural sales for everyday goods increased by 14.2%, though the entire industry only grew by 7.3%. These consumer goods retail trends will continue, offering a major opportunity for brands in other sectors- powered by Government policies around bringing high-speed internet to all villages, and the falling prices of some electronic goods such as smartphones.

In keeping with these early markers of growth, demand for consumer electronics is also skyrocketing in rural areas. The annual consumption growth of consumer electronics was 9.7% in rural India vs. 8.6% in urban India in 2018.

Blurb: With the pandemic pushing the adoption of home appliances, the rural sector is set to emerge as a major profit center for consumer electronics brands.

A Golden Opportunity For Smaller Brands

The Indian retail market is saturated, with a few brands occupying the majority market share. These include Havells India, Bosch, Voltas, Panasonic, and Phillips in consumer electronics.

However, the rising digitization and the expansion to the rural sectors have allowed small brands and new companies to reach a wider audience. Companies with their assembly units in China such as Xiaomi and Vivo have managed to provide cutting-edge features for lesser in smartphones, television sets, and home entertainment systems.

Plus, Government initiatives like Make In India and Aatmanirbhar Bharat have further encouraged consumers to buy from local brands, giving an essential boost to smaller brands while also reducing the cost of producing them.

Blurb: With growing eCommerce and increasing digital literacy, new brands can reach a broad audience and compete with big brands on a national stage simply by going direct-to-consumer.

Affordability Is Crucial, But So Is A Profit Margin

The pandemic has taken a toll on the spending power of most consumers in the country. A whopping 10 million people lost jobs in the second wave, declining the income of 97% of Indian households. Hence, affordability has become an essential purchase factor for shoppers, especially in the consumer electronics sector.

Hence, the demand for mid-range smartphones, laptops, and other gadgets has increased rapidly. As a result, Xiaomi enjoys the largest market share in India (22%), followed by Samsung (19%), Vivo (15%), and Realme (14%),

Though premium brands like Apple have shown a staggering Y-o-Y growth of 212% in Q3 2021, affordability will play a critical role in driving purchase decisions for several years to come.

This is where payment options like no-cost EMIs and buy-now-pay-later schemes come into the picture. Such payment methods allow consumers to buy things as they need them and make staggered payments over time. We, therefore, predict that the growth of India’s retail sector will be directly tied to the availability of flexible payment options.

Suggested Reading: How Buy-Now-Pay-Later is changing the face of Indian eCommerce

Environment-Conscious Buying

For the first time in living memory, countries worldwide appear to have a unified stance on climate change. India is one of the leading countries in the Climate Change Performance Index 2022.

Indian consumers are actively shopping from environment-friendly brands. Hence, there's a clear opportunity for green brands to enter the market. Established brands are also expanding to the green space.

For example, electronics brands that have clear plans for how to upcycle and recycle their waste will gain favor with consumers, as will brands that solely serve the refurbished products’ market even for larger electronic items such as home appliances.

In other words, brands now need to own the entire product lifecycle and not just its production and sale, and this in itself has the potential to create new niches and sales channels for existing brands.

Consumers will be closely watching to see which brands are green and which ones are simply greenwashing their offering. Therefore, brands can start small and scale their conscious choices over time by adapting to this trend.

India’s consumer goods and electronics sectors showed impressive growth potential in 2020-2021, creating several opportunities for existing and new brands to reach new customers and drive business growth.

Digitization will play a pivotal role in years to come. As digital literacy continues to increase, more people realize the benefits of eCommerce- seamless buying, flexible payments, and hassle-free returns and replacements. Brands with digital selling capabilities will, therefore, outperform physical-only retailers.