BSH Hausergate is Europe’s largest white electronics manufacturers. Their brands Bosch and Siemens are quite popular among the consumers and rank pretty high below the likes of Samsung, LG and Haier. Indian market offers a good market opportunity to most manufacturers across the globe due to its sheer size and lack of major domestic manufacturers. The Indian consumer durables market is filled with the Korean, Chinese and American brands.
Most of the consumer durables are sold through the offline channels as now in India. However, in the past 5 years, the percentage of the online sales of consumer durables have increased significantly with the rise of the e-commerce platforms. Numerous players have come up in the online segment and they help the manufactures to reach out to maximum users.
People in the major cities have the luxury of visiting electronics mega retail stores such as Tata Croma, Reliance Digital, Great Eastern, Vijay Sales etc. but the residents of tier 3, 4 cities and rural areas do not have such facilities. They depend on the online market. According to Business Today, consumer durables account for 34% of the online marketplace and out of that 50% of the offline sales of electronic home appliances in India came from non-metro cities.
An IBEF report states that Indian appliance and consumer electronics (ACE) market reached Rs 2.05 trillion (US$ 31.48 billion) in 2017. It is expected to increase at a 9 per cent CAGR to reach Rs 3.15 trillion (US$ 48.37 billion) in 2022. This has raised the hopes of most of the major manufacturers as they have a chance to make it big in the country.
However, the complications have risen for the German major BSH Hausergate. They have been in India for long but their relationship with the major offline electronics retailers in the Southern part of the country has soured recently. During the festive season, it was seen by the offline retailers that the company was giving out deep discounts on the e-commerce platforms. This act by the company jeopardized the business of the offline retailers and their sales dipped significantly.
The major retailers in South India namely, Viveks, Vasanth, Girias, Darling, Shahs and Sathya have come together to issue a written trade advisory regarding their concerns. They have asked the retailers to stop the purchase of goods from BSH starting from 26th December 2018. The stocks already in their stores are to be sold off before the 15th of January 2019 and till then BSH’s sales executive will remain at the store. As soon as the stocks liquidate, these executives will leave and there will be no business with BSH Hausergate thereafter.
Notably, the company plans to invest around € 100 million for setting up a refrigerator manufacturing plant near Chennai, Tamil Nadu. Their aim is to increase the sales of their products in the country and present itself as a competitor to the South Korean giants.
If the people who will sell your goods (retailers) go against the company, then the future does not seem too bright for them. These retailers met with the top level management of most of the major manufacturers and discussed their agony. The problem they face is with the deep discounts that the companies offer via the online e-tailers. This has drastic negative effects on their business and hence they want it to stop. The manufacturers agreed to take actions towards reducing or stopping the deep discounts on the e-commerce websites.
The Indian government recently revamped the e-commerce policy where it has banned practices that eat up most of the offline businesses such as deep discounts, cashback and more. This proves to be even more of a problem for the manufacturers and online players. However, the offline players especially the Indian majors are content with the decision.