Home appliance sales rebound to precrisis levels

Home appliance sales rebound to precrisis levels

Jamuna Nair, Contributor, The Jakarta Post

Home appliances. What are they? They are things that have made
us appear 20th century and our ancestors dated. They are godsends
for without them we would have to contend with washerwoman hands,
chopping wood in the backyard for that morning cup of coffee or
breaking our backs brushing out the carpet.

As short as our memories are, today we take these household
"cannot-do-withouts" for granted, thanks largely to a deluge of
these appliances sparked by the perception that every householder
would surely need at least one appliance to make coming home from
a punishing day at the office less unnerving.

And blessed we are too that the gamut of electric and
electronic home appliances, from air conditioners to hair dryers,
come in a wide range of sizes, shapes, brands and prices to
felicitously match the degree of comfort we seek and our bank
balance.

On the home front, Indonesia's 220 million something populace
is without doubt an extremely tantalizing proposition to
marketers of home appliances. So it is no wonder that there is
keen competition for a slice of this pie among the legions of
local, joint venture and foreign producers in the home appliance
industry here.

Sharp, Matsushita, Toshiba, Sanyo, Hitachi, Aiwa and Sony were
some of the Japanese concerns that have set up factories and
outlets here as have Korea's LG, Samsung and Daewoo, and Taiwan's
Tecco. On the other hand, Cosmos and Maspion are, among others,
homebred Indonesian companies -- sons of the soil, if you will.

Presently there are no such European or American ventures here
but their products, including Electrolux (Italian), Kelvinator
(American) and Maitag (American), are available here.

According to Jino Sugianto, general manager of Sharp Yasonta
Antarnusa, Japanese companies had captured 70 percent of the
market. For example, Matsushita's P.T. National Panasonic Gobel
has the lion's share of the air conditioner market with 27 per
cent, with LG and Toshiba its closest rivals.

Sharp, Jino said, was proudly holding a 20 percent share of
the refrigerator market with LG and Toshiba close behind. Sharp,
he added, also boasted a 40 percent share of the coveted color
television market.

Targeting the low and lower middle income groups, the
principal player for electrical appliances such as electric fans
was P.T. Maspion.

The Planet Group is another local enterprise that is making
headway in the field with brand names including General, Fujitsu,
Media and Dast.

The obvious question that comes to mind is why are foreign
brands more popular than their local counterparts, especially
with respect to major electronic products?

Adhi Sukmono, director of P.T. Top Jaya Antariksa, a maker of
Toshiba refrigerators, contended that major electronic appliances
such as air conditioners, refrigerators and washing machines were
typically purchased by the upper middle and higher income groups
who were willing to pay a premium for reputable goods.

Another reason for this phenomenon he declared was that the
public had been longer acquainted with foreign brand names than
local ones.

As a case in point, P.T. National Gobel, which produced home
appliances under the brand name National, was established in 1970
becoming the first Japanese (Matsushita Electrical Industrial Co.
Ltd.) and Indonesian (Rachmat Gobel) joint venture here.

While Sharp too has been in the country for 31 years, P.T.
Maspion was only spawned about 10 years ago.

So, although P.T. Maspion's electrical products, which are
sold under the Maspion and Uchida brand names, are more well-
received by the lower income groups, its electronic goods are
facing an uphill battle wooing the brand-conscious upper middle
and higher income groups.

Just the same, there is no room for smugness in this business
if the intention is to maintain or increase one's market share,
or simply stay afloat.

Sharp, for instance, has been relentless in its advertising
campaigns and has maintained competitive prices in its quest for
a greater portion of the market pie.

And to have an edge over one's competitors in this highly
lucrative industry, innovation is key.

Matsushita introduced new models of air conditioners every
year, said P.T. National Panasonic Gobel's general manager of
home appliances Tan Hong Gie.

"Sharp launches new and attractive designs of its products
every one to one and half years," Jino said.

Many producers said that although sales of home appliances
fell at the onset of the economic crisis in 1997, they had
rebounded to precrisis levels.

Indonesia's huge potential market (approximately 40 percent of
the total population) for these appliances makes for plump
pickings and, as a result, has propagated the marketing of
original equipment manufacturing (OEM) products where companies
buy products of popular brands, sometimes with slight
modifications in design and color, and trade them under their own
brand name --- a short, safe and convenient road to success?

There is also a great demand for cheap Chinese-made appliances
such as those produced by, among others, Haier, Changhong and
Chunlan.

So it is not surprising, as Adhi illustrated, that although
there was an 11 million-unit demand per year here for
refrigerators, the most popular was the one-door 140-liter
capacity unit, which enjoyed a 70 percent share of the market
despite the fact they need to be defrosted! Frugality is
obviously the order of the day.

As far as washing machines go, there is only a need for
between 200,000 units and 250,000 units per year, Adhi said.
Evidently they are not the hottest household item in town.

Similarly there is also no stampede for vacuum cleaners as
most homes are not carpeted according to Jino. We are after all
living in the tropics.

To be a major player in the industry, the products must be
locally produced, Jino pointed out.

"Imported goods are subject to high import duties and
therefore can't be sold at competitive prices," he explained.

Adhi regretted that imported finished goods were burdened with
a 15 percent import duty tax, 10 percent government tax, 20
percent luxury tax and 2.5 percent prepaid income tax, which
amounted to a debilitating 47.5 percent of the cost of the
product!

This had encouraged smuggling, he lamented. However, smuggling
by sea was a thing of the past, he added.

"Today we have 'administrative smuggling' like under invoicing
and falsely declaring goods" he said, stressing that these crimes
would discourage foreign investors.

So when buying home appliances, it would be well-advised for
consumers to ensure the products had a valid warranty card with a
registration number, cautioned Adhi, who is also the secretary
general of the Indonesian Association of Electronic and
Electrical Appliance Industries.

Jacobus Salim, general manager of P.T. Maspion also expressed
his frustration that the government was not doing enough to stamp
out unfair business practices and protect the local industry from
cheap imports, especially from China.

The Association of Electronic and Electrical Appliance
Industries, which acts as a bridge between the industry and the
government, had proposed that the government protect the local
industry from a possible torrent of foreign goods when the ASEAN
Free Trade Area took effect next year, said Adhi.