The past few months have not only seen a major fluctuation in the prices of FMCG products such as detergents, soaps, shampoos, but also in the colour television and refrigerator segments.
Though any upward or downward price movement changes the sales trend in both the sectors - consumer electronics and FMCG - the similarity ends there, with the customer being more `price sensitive' in the FMCG segment.
Agreeing that pricing and brand image play a pivotal role in both the segments, a Consumer Electronics & TV Manufacturers Association (CETMA) official said, "With the huge gap in the pricing structure of the two categories, there is not much similarity in the price movement of the two. Price war in the FMCG sector has a different connotation. In the consumer electronics segment other parameters such as technology and product feature play an important role."
"The intrinsic nature of both the industries is different. While FMCG products are low involvement purchases, consumer durables are high-involvement purchases," Mr Anil Arora, Head (Marketing), LG Electronics India Pvt Ltd, pointed out.
According to Mr Kishan Kalani, COO, Kevin Infotech Pvt Ltd, manufacturers of the Oscar brand, "While in the FMCG sector a customer is open to experimentation and impulse buying due to low prices, the same is not true of consumer electronics. While buying consumer electronics products, the customer is more cautious about trying something new. He/she is concerned about issues such as after sales service and warranty. The FMCG customer is more price sensitive, while a consumer electronics customer is ready to pay more for the promise of better quality/brand value."
He further pointed out that overall, the consumer electronics industry is less volatile in their price movements in comparison to FMCG industry.
In concurrence with the view of Mr Kalani was Mr R. Zutshi, Director (Sales), Samsung India Electronics. He pointed out that product quality and features primarily lead the consumer electronics market since the value of purchase is significantly higher. Technology too has a bearing on the purchase decision.
Says Mr Ravi Shankar, Senior Vice-President, TNS India Pvt Ltd, "Price movement is not so frequent in the durable industry. Manufacturers only introduce new products at different price points with different package of features if they find a potential for them in the market. In the case of FMCG segment, price promotions are used to induce repeat purchase of the same brand."
Elaborating further, he said, the durable industry is governed largely by excise and custom duty structures. The two affect the prices tremendously as a large number of components are imported.
"Durables were considered luxuries and the Government taxes them heavily. Only now duties on durables have been brought down considerably, making them affordable," he said.
Input costs, assembling costs and freight are large components in the price besides duties, Mr Shankar explained, adding that the "FMCG price structures are governed by retailer margins, distribution and advertising costs. Input costs are not high per unit, so a comparison is not possible. Price wars are common in the FMCG market to prevent brand switches at point of sale."