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Appliance purchases rebound to precrisis levels

Jamuna Nair The Jakarta Post Contributor

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.