Product margins of consumer durable companies have dwindled over the years. Rising input cost, growth of organized retail and intense competition from both competitors and private labels have led to significant price pressure affecting margins. At the same time, brands have been unable to increase their service revenues due to the non-adoption of modern technologies and a sheer lack of understanding of consumer preference, especially millennials.
A specific case to the point is the country’s automotive sector. Passenger vehicles have lost their aspirational charm. Mobility is seen as a necessity rather than a status symbol at least in key urban centers in India. Someone who still wants a car is looking for temporary ownership (leasing, subscription or long period rentals) or are typically using ola or Uber. In addition, ride-sharing has also been in mild flavor in the recent past.
The auto sectors inability to respond to millennials preference has resulted in subdued growth (I must admit this is just one of the reasons for slower growth apart from policy and structural issues but has a long term bearing on the industry’s development). Auto companies are currently trying to reinvent as a provider of mobility service rather than manufactures of high-quality vehicles. Nevertheless, it is an opportunity missed by the incumbents.
I fear consumer durable, home appliances companies are also going a similar path. Companies are extremely focused on internal digital transformation projects including some impractical IoT pilots that won't move the needle in terms of growth in emerging and cost-sensitive markets like India. A focus on the services that the millennials prefer rather than high tech intelligent products can significantly boost both revenues and profits. As an example, companies can look at simplifying extended warranty purchases. When I recently bought a TV from a nearby retail shop in Bengaluru, the retailer didn’t sell extended warranties. He requested us to call the companies toll free number, register the product and send them a demand draft... We could have managed to buy it on their website, but the experience was just not optimal.
Startups have led the way in innovative thinking in these aspects where they have made products or services specifically targeting millennials. However, unlike auto, we haven't seen large-scale disruption yet by startups in the consumer durable and home appliance space, but it is bound to happen.
Companies can truly innovate by choosing to adopt technologies that make practical sense but must be ready for a bit of experimentation. The first step is to have a direct two-way interaction with customers and making it extremely easy for consumers to interact with them. To conclude, millennials want an on-demand, seamless and hassle-free product ownership experience (not just purchase experience) and companies that cater to these expectations will see long term profitable growth.