Television sales may end FY20 with a 12 percent decline on the triple impact of high goods and services tax (GST), Coronavirus and ever-growing competition.
TV has been a segment in the white goods industry that has usually weathered the storm. However, in FY20, the market has been hit hard by multiple scenarios. There are about 200 million households in India that own a TV set.
The worst period for the segment so far was around the subprime crisis in 2008 when sales were down 7 percent.
The entry of new players
Xiaomi, OnePlus, Nokia and now Realme are among major mobile handset makers that have now entered the television segment in India.
The new entrants and some large online players like Shinco, Kodak and Thomson have aggressive pricing in the segment. In fact, Xiaomi has become the most popular television brand in the country, according to a report by International Data Corporation.
"Online TV players are playing purely on pricing. We cannot cut the rates beyond a point," said the head of consumer appliances at a global white goods firm.
In fact, the Diwali sale saw competition intensifying among the online players. Shinco offered a 55-inch 4K television for Rs 5,555 in a flash sale on Amazon.
A regular 55-inch TV is priced upward of Rs 55,000 and industry insiders said a near 10x price cut is impossible to match as it could mean deterioration in product quality.
The head of the televisions business at a large appliance maker said aggressive pricing is not viable in the long-term.
"We may drop prices in the medium term but that also means that the business will not be sustainable," he added. Since mainstream players like Samsung, LG, Sony and Panasonic dominate a lion's share of the market, aggressive pricing means the sales get impacted. This is because the large players do not play the 'pricing game'.
In India, TVs above 32 inches are the most popular. However, this is also the category that has the highest rate of GST at 28 percent.
A high GST means that the tax burden is transferred to customers in the form of a steep retail price. This could also be the reason why TV prices have more or less stayed constant.
Even during marquee events like the ICC Cricket World Cup 2019 where customers expected deep discounts, price cuts were minimal. This also led to poor sales.
Another factor impacting TV sales is the rise of OTT content. As platforms like Hotstar gain traction, TV sales have been hit.
The senior vice president of a mid-sized Indian appliance firm said customer traffic has converted from TV content to OTT. This meant consumers were less likely to replace their TV sets and would be satisfied watching cricket matches on their smartphone.
When it comes to TVs, the open cell used in LED panels is imported from markets like China. With production in China almost shut, the export of this component has been halted, which has impacted the production of TVs in India.
The supply-demand mismatch has led to a price increase of about 10 percent for TVs. This has hurt consumer sentiment further.
With a duty of 20 percent on completely built units, importing a finished product is expensive. A price increase is, therefore, the only option as of now.
Chance of revival?
A cut in GST rates to 18 percent for all categories of TVs could bring some relief to the sales. TV makers have argued for a lower tax saying large screen televisions are no longer a luxury product.
While the thrust on Make in India on one hand will lead to a boost in production, there are short-term concerns about the local manufacturing facilities.
For open cell component of TV panels in particular, where there is no customs duty applicable at present, domestic production seems some time away. If customs duty exemption for this critical TV part is done away with after September 2020, revival of TV sales could take longer than expected.The only segment that is growing is online TV sales, with annual growth of 30 percent. However, since it is still a tiny fraction of the total TV market in India, its impact to revive the numbers has been negligible.