Challenges & Opportunities in the Faucet Industry
Authored by Kapil Gupta, Founder Lipka Group of Companies. The faucet industry in India is set to undergo rapid transformation in coming years as due to urbanisation and changing consumer preferences, the market shifts from domination of the unorganised sector to the organised sector. Today, standing as an industry worth billions of dollars, faucets are changing the ambience of our indoor settings. As more sophisticated designs are revealed every year with added functionalities for consumers’ ease, the demand in the market for premium faucets is on the rise. It is estimated that this industry will enjoy a stupendous growth in terms of sales and CAGR in the coming years. There are abundant opportunities for growth as the per capita income of average Indian household continues to project upwards. Yet, with the positive backstage, the industry is riddled with its own set of unique challenges. With the economic slowdown that has arrested the high GDP growth rate of the nation the faucet industry has faced the brunt as well. The ones to suffer the most are not the dominant players but rather the smaller ones. With the government not set to announce any tax rebate for the MSMEs in the near future, Indian manufacturers that are much smaller in scale as compared to the industry giants such as Jaguar, are in a crux. While the top industry players have drastically reduced their prices after the excise duty was removed, the companies with smaller scale operations are finding it difficult to match their pricing. This has put them on a backseat in the market because of increased difficulty in competing. The customer will, without any doubt, prefer a well known brand which is offering its product at a much cheaper price than a smaller player whose goods are priced in a high bracket. At the same time, such a company would also be facing stiff competition from the cheap Chinese goods which are flooding the market. This is also a set-back for the local manufacturers. The industry players, especially the domestic ones, have suggested to the government that GST on scarp should be reduced from current 18 per cent to 5 per cent. Since it is being only used in the industry, it will not hurt the government’s revenue. The faucet industry is riding its hope on a favourable decision from the GST council, which is set to meet this month in Goa. Another pain point for the industry is something which many other sectors are facing. With the largest youth population in the world, India is world’s youngest nation. Yet, the lack of skilled labour is pushing back against the potential for growth which our leaders envision for our country. It is imperative that the government, both at a state and centre level, drive initiatives in all government schools to introduce industrial training as an optional subject. Exposure to skill development training programs from a young age will immensely benefit the youth in building their budding potential to a mastery level. India’s population is also a boon as it provides a huge domestic market which has the ability to consume its home-grown products and keep the sector profitable without relying too much on exports. Though India is still in the developmental stage of creating such a viable market for faucets, recent measures by the government such as Pradhan Mantri Awas Yojana, coupled with the rapid urbanisation spurt, are providing a much needed impetus to this industry. With affordable housing set to witness a rapid growth for the next ten years, thanks in part to investors shying away from real estate and end-users looking for affordable homes, the demand for bathroom and kitchen products will not lessen. Affordable housing requires affordable products that are of good quality. Another avenue for exploration in terms of boosting sales is online space. With a large bilingual demographic that spends a considerable amount of its time online, the opportunity to tap the online sales channels for faucets to generate profitability is too much to ignore. Last, but not the least, the current political climate which has put US - China in a trade war offers a golden opportunity for Indian manufacturers to market their products in democratic economies like US, where the products will be cheaper but still be profitable.
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