Indians are buying more premium products, pushing up the average selling price (ASP) of several categories such as televisions, refrigerators, laptops, smartphones and shoes by up to 18% in the past one year.
While ASPs had gone up in 2020 and 2021 as well, that was driven by both price increases and premiumisation. But now, with prices remaining stable for the past six months, an increasing shift towards premium products is solely driving ASPs, industry executives said. The strong ASP growth has come even as sales of entry- to mid-level segment products, which contribute 70-80% to total sales in their categories, are still to reach pre-pandemic levels.
As per the latest numbers from market researcher GfK India, the ASP increased 9% for laptops, 4% for TVs and 4-6% for appliances in 2022 compared with the year before.
For smartphones, the average price was up 18% to a record $224, research firm International Data Corporation said, driven by strong sales of mid-premium and premium handsets. While the Indian smartphone market shrank 10% by the number of units sold in 2022, the mid-premium ($300-500) and premium ($500+) price segments grew 20% and 55%, respectively, it said.
Prices stabilised after the June quarter last year and the premium mix drove sales since, said Godrej Appliances business head Kamal Nandi, adding that the trend was continuing in 2023 as well. “The striking feature since Covid has been recurrent price hikes and faster sales of the premium segment, while the mass segment has de-grown, pushing up ASPs,” he said.
The move towards premiumisation continues to gain pace across consumer durables and home appliances against all odds, said GfK India’s head of market intelligence Anant Jain.
“This indicates the shift towards aspirational buying enabled by the convenience and simplicity of feature-rich products.”
Even in apparel and fashion, there is a higher purchase preference towards premium products.
Shoemaker Bata India, in an analysts call last month, said sales of sneakers with an ASP of ₹2,000, shoes sold under premium brands like Hush Puppies with an ASP of ₹4,000 and Comfit of about ₹2,100 were growing. In comparison, sales of products priced under ₹1,000 declined by ten percentage points in total sales in the December quarter.
“ASP sequentially as well as compared to last year is up by about 13% (in the December quarter). However, unlike, let’s say, the first half of this (fiscal) year, it is all being driven by premiumisation and no sequential price increases that we have taken,” Bata India chief executive Gunjan Shah told analysts.
Departmental store Shoppers Stop said its ASP went up by 10% last quarter. Aditya Birla Fashion and Retail said in a recent investor presentation that premium and luxury segments were outperforming, while the value segment “faces headwinds in view of inflationary pressures”.
Several companies have also changed their product portfolio mix in the last two years with higher focus on premium products.