May 29, 2019|
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Online retailing has had a major impact on Indian consumers; there is a growing trend of online retail across segments, but particularly in electronics and apparel. Indian online shoppers spend close to Rs. 12,800 per shopper per year and this number is expected to rise to Rs. 25,138 by FY 30. It is estimated that online retail, which currently constitutes 25% of organized retail in the country, will make up 30% in FY 30.
In terms of segments, food and grocery have seen a rise in online spending, where convenience is the main factor. Indian consumers also tend to purchase home care and personal care products online. As health awareness rises among customers, there is an increasing willingness to buy natural variants of skin care, health and oral care products. Apparel is another area where Indians have taken to shopping online with 62% having made a purchase online in the past year. Interestingly, in footwear, men made the most purchases. Electronics segment is the most impacted by online retail, with 60% of consumers having shopped for electronics online due to heavy discounts and cashbacks available online.
The trend towards online shopping is due to both discounts as well as convenience, although data indicates that convenience is most important. Even though currently online retail constitutes just 3% of total (organized/unorganized) retail in India, it is expected to rise to 8% by 2030 while the overall rise in retail in India will grow by 9% by FY30. Busy lifestyles, changing consumer habits and a focus on convenience means that Indian online retailing has become mature. There are expectations of new major entrants to the sector as well, which may lead to further proliferation of internet retailing.
The ordeal of the Indian summer is about to set in. This is a time when demand for goods to stave off the heat picks up full steam. Even though the Indian air conditioner market is still nascent, AC penetration is set to touch 7-8%. In the current year, a delayed onset of summer has resulted in flat or dipped sales of air conditioners in India by 30-40% in March; however, South India has seen robust air conditioner sales where month-on-month sales grew by 200%. Rising penetration of units, urbanization and high disposable incomes are drivers of sales.
The fan market is seeing a preference for products with innovative features. Major Indian brands of fans have been launching products in the premium segment, which include features like remote controls, improved aesthetics and powerful motors. The fan market in India is worth nearly Rs. 10,000 crore and is expected to clock compounded annual growth rate (CAGR) of 15% over the next 5 years.
A large part of the country is tropical where cooling appliances are required year-round. Increase in purchasing power of the consumer and availability of financing options mean the sector can generate significant growth.
Meanwhile the market for refrigerators, which slowed down in Q4FY19, has picked up pace in the last week of March and April. Financing continues to account for more than 50% of transactions and this trend will continue to dominate for the foreseeable future.
Cables and Wires
The Cables and Wires (C&W) segment has seen a CAGR in excess of 23% and reached 14.5 million km in the period between FY 14-18. It is expected that this segment will double over FY 18-23 to Rs. 1,03,300 crore. The drivers have been the government push termed as ‘power for all’ and affordable housing mission ‘housing for all by 2022’. Construction of railways is also expected to pick up pace with electrification and building of high-speed railway projects, a driver for growth of cables. Possible demand drivers are also electrical vehicles (EVs), which need more than 3 times the amount of wiring that conventional vehicles do. The sector anticipates higher revenues as there is more demand for high voltage cables and housing wire consumers are also opting for premium and niche products. Consumers who are more aware about safety now prefer branded cables and their involvement in purchases has risen sharply. As Indians become more upwardly mobile, there is a trend of urbanization and nuclear families on the rise, which in turn, is feeding demand for housing and electrical appliances. We can expect significant upside for the sector based on various government policies and schemes, and general trends observed in the country’s demography.
India’s domestic passenger traffic grew by a meagre 0.1% YoY (year-on-year) in March 2019 as the aviation industry experienced severe disruption from ticket cancellations by the troubled Jet Airways. Adding to the woes of Indian airlines was the grounding of the fleet of Boeing 737 Max aircraft, which led to further capacity constraints. Apart from the trouble facing individual airlines, there are other challenges for the aviation sector in India like shortage of skilled manpower and increasing air fares, which are limiting domestic passenger numbers. However, Indian low-cost carriers have seen growth and should bottlenecks be removed, the Indian aviation industry can witness 1 billion trips with a fleet of more than 2,000 aircraft by 2040. Even though the data for March 2019 is weak, the trend of growth in domestic passenger numbers continues as evidenced by data released by Directorate General of Civil Aviation. Numbers released by the DGCA show that between January and March 2019, 354.53 lakh passengers were carried by India’s airlines compared with 337.90 lakh in the same period last year indicating growth of 4.92%. The grounding of Jet Airways means that its competitors have gained significant advantages and they are already the most valued airline stocks globally. India’s fast-growing aviation market needs the addition of nearly 45-50 planes each year and now due to the increased demand-supply gap, existing airlines will have to add at least 150 planes this financial year, out of which 100 will be added by the main competitors of Jet. Thus, there are significant opportunities still to be explored by investors in this sector.
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