Rs 16,000 for a fan? Orient Electric bets big on new luxury cooling product

(L-R) Gaurav Dhawan, Head of Fans Business, Orient Electric; Rakesh Khanna, MD & CEO; Anika Agarwal, Chief Marketing and Customer Experience Officer

It is not a fan. It is not an AC. It is not a cooler. “It is the perfect blend of all three,” managing director and chief executive officer Rakesh Khanna said in an interview at the launch of Orient Electric’s new product, Cloud3.

It is capable of bringing down the temperature by up to 12 degrees, the company claims. At a time of rising prices and high interest rates, finding customers for a product priced at Rs 15,999 can be a hard task but the management does not see this as a problem.

“Whatever checks we have done through a consumer insights team, we received 100 percent acceptance," said Khanna. Edited excerpts:

What would you say are the highlights of this product?

ACs circulate the same air without having much fresh air intake. A cooler has the disadvantage of high noise levels. Ceiling fans on the other hand don’t provide cooling. Cloud3 addresses all these issues.

Just four and a half litres of water is sufficient for one full night or about eight hours. So the humidity doesn't go very high in the room and the consumer does not feel uncomfortable. It's using a technology to create a cloud and then use that to cool, rather than the entire wet pad process at a very high airflow (as in the case of desert coolers).

Priced at over Rs 15,000, do you think consumer acceptance will be a problem?

While inflationary pressures are there, I believe this product will be insulated since it is a lifestyle product. High-end products are continuously doing well in the market.

Five years down the line, how much can this product contribute to your revenue?

We are not putting out any projections right now because we have done only a controlled level of consumer check. It can be a great value proposition for consumers. But we would make a comment on volumes only after we have seen sufficient numbers of consumers using and going for a repeat purchase.

What kind of competition do you see in this space?

It's a completely new market, it's a fresh idea.

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Since it is a luxury product, will the margins be higher than the company level of 9-10 percent?

The margins will be in line with our regular margins currently. We have priced the product as low as we can and don’t want to push for higher margins as of now. We don’t want price to become a barrier for purchase.

That said, our overall margins will improve from next year onwards. Right now, we are investing heavily on development capabilities which is pushing the EBITDA (earnings before interest, taxes, depreciation and amortisation) lower. But these are only one-time costs to develop strategies that will provide great benefits later.

Could you share some examples?

We are revamping our go-to-market strategy. We are also upfronting e-commerce development.

In fans, for example, we were working with a master distributor concept—that is, for every state, we had one master distributor. We looked at our low-performing states and picked six names. We completely dismantled the existing distribution network in those states and created a fresh one.
In four out of these six states, we have grown 60 percent this quarter. This is a tremendous change.

And what kind of growth are you seeing in the e-commerce space?

E-commerce contributes less than 10 percent to our top line at the moment. But we hope the number reaches 20 percent in the next few years. In this particular quarter, the e-commerce segment has grown 4x on a low base.

We are very bullish on this space and we are investing heavily in terms of visibility of product range, building a strong team and IT infrastructure for the back end.

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Fans now need to have a mandatory star or energy consumption ratings which make them costlier. How does it affect Cloud3?

The government is rolling out star ratings for every electrical category but it hasn’t done so for TPW fans yet. TPW stands for table, pedestal and wall, under which Cloud3 falls.