Value for Money, Not Smart Home Technology, Will Drive AC Sales: Industry Expert

In an exclusive interview, Blue Star Managing Director B. Thiagarajan shares his insights on the growing demand for air conditioners, emerging trends in the industry, and the company’s strategies for staying ahead in the market.

What brings you to Hyderabad?

We consider Hyderabad a very important market. In fact, after Tamil Nadu, Andhra Pradesh and Telangana are our next biggest markets. We always prioritise Chennai followed by Hyderabad when we start a new season. We have over 15% market share here and are the number two brand.

This summer season is significant because while other categories aren’t growing, the air conditioner category continues to grow with a CAGR projection of 19%. To grow in this category, we need to offer products at every price point and type, whether it’s heavy-duty, Wi-Fi, fast cooling, or soft and cold. We are launching around 150 models, which is why we are here.

What key trends do you see in the air conditioning industry, and how are they impacting consumer behaviour?

We are seeing several trends in the air conditioning industry. Firstly, growth is driven by the aspirational middle class, who are looking for value for money. This trend is driven by e-commerce, which enables consumers to buy at the lowest possible price and maximise value.

Another trend is the growth from tier 3, 4, and 5 towns, with over 65% of our sales coming from these areas. Brands are now built 24/7, 365 days, through continuous engagement, rather than just through advertising campaigns.

Consumerism is also on the rise, with 40% of air conditioner sales coming through consumer finance, a significant increase from 3-4 years ago.

How do you see the convergence of e-commerce and modern retail impacting the consumer electronics industry?

E-commerce is no longer a separate entity; it’s converging with modern retail. 50% of sales come from large format retailers like Bajaj Electronics, Croma and Vijay Sales, and they are behaving similarly to e-commerce. Prices are transparent, and consumers are aware of them. The new trend emerging is ONDC, which will enable everyone to participate in e-commerce.

How do you balance consumer demand for innovative features with the need for energy efficiency and sustainability?

Energy efficiency is no longer a differentiator, it’s regulated. The industry is heavily regulated, with energy level changes every two years, depletion, global warming, and e-waste considerations. The India Cooling Action Plan and energy conservation building codes also play a role. With a 28% GST, regulation is stricter than even the tobacco industry.

How do you think smart home technology will influence the future of the air conditioner industry in India?

Smart home technology will play a role in shaping the future of air conditioners, but it’s a function of cost. Consumers will adopt Wi-Fi enabled ACs if the price difference is marginal. However, I don’t see Wi-Fi as an essential feature, especially since many Indian consumers don’t have 24/7 Wi-Fi at home.

What’s emerging is the importance of functional reliability, extreme weather resistance, and value for money. Consumers will jump at offers that provide value, such as 10-year warranties or affordable pricing.

How effective are air conditioners with built-in filters in addressing indoor air quality concerns?

Addressing indoor air concerns, many filters have been introduced. Some machines can take care of air purification, making separate air purifiers unnecessary. However, pollution needs to be tackled at the source; we can’t keep polluting and rely on machines to clean the air. There’s a limitation to what machines can do.