Paradoxes of Indian cleaning market forces and evolving strategies
Over the years, the focal point of the cleaning market has remained on commercial and institutional segments, more so in the metro and major cities. There is a distinct shift in focus with developing markets in the Tier-II and Tier-III cities. Growth, not just in the commercial and institutional segments but also in the industrial segments, is drawing attention of the cleaning industry.
The convincing factor in the industrial cleaning segment is the direct alignment of professional and mechanised cleaning practices with the “necessity” to attain increased and quality production. The inclusion of industrial cleaning vertical in the Clean India Show, besides commercial and institutional cleaning solutions has widened the visitor base and potential solution seekers. Nonetheless, the issue of volume consumption in any segment is still speculative.
Major consumption for cleaning products that has been coming from the hospitality segment has now percolated to smaller eateries, with even roadside dabbas and restaurants giving attention to quality tissue papers and washroom hygiene services. Foam soap dispensers and sanitizers have added to the status of smaller eat-outs.
The Indian consumer in certain quarters has graduated to deploying ride on scrubbers from the basic single disc and vacuum cleaning machines.
On a different plain, fleet maintenance has gained foothold with State transport buses engineering mechanised car wash systems at their sheds; railways inventing indigenous track cleaning vehicle; civic bodies investing on waste to energy plants… indicating new market avenues for cleaning equipment.
Other encouraging movements in the market include application of cleaning equipment in polishing stones, which is now being innovatively deployed in concrete polishing, a much-in-demand solution.
Tissue papers used in washrooms are meeting industrial requirements; thus replacing lint in manufacturing industries.
Most of the leading international brands of cleaning equipment are available in India and are being delivered through the regular selling channels of distributors, franchisees or direct sellers. The differential price mechanisms adopted to capture the market has over the years contributed to diminishing margins, bringing it down from 30% to 7-8% lately.
When the point of resistance is met and a decision made to buy, sell, and transact at prices of buyer’s choice, the market dynamics is jeopardized; diminishing margins is one of the effects. While this discouraging market dynamics has created a furore and concern in India, sellers seem to be evading consensus over the pricing point. Adding fuel to the pricing paradox is the complex nature of duties/taxes levied at different levels on import, purchase or sale.
Contributing to the differential pricing mechanism, besides import duties, is the approach and affordability of the buyer. Squeezed amid extremes of buyer approach of “need” & “essential evil” and the capacity to buy, prices are being compromised. To a great extent, compromising on price margins on buyer’s demands has been found conducive for seller’s survival in the market. As majority of the market abides by differential pricing & survival methodologies, a fraction of the market has retained price structure by boosting strategies of timely servicing, value added service and training.
Providing accessories like gloves, worker’s gear… free of cost, along with the product for the buyer, besides training and effective after sales services contributes in building buyer’s confidence in the seller.
However, the repercussion of diminishing margins has increased defaulters in the market. The seller strategy of providing equipment on rent, in an attempt to extend the service provider’s (buyer’s) period of payment, has raised speculation on its long term success. Multiple machines supplied on rent may take a longer time to recover cost on investment over and above additional cost suffered on machine maintenance and spare parts replacement. It becomes an expensive proposition when spares are imported, as indigenous manufacturers barely meet the requirement.
In the wake of increasing defaulters and growing mistrust, suppliers are looking at direct selling to end-users than to service providers. The potency of direct selling is spreading wide, leaving service providers to look at alternatives. The advent of a large number of short-lived cheaper machines in the Indian market is largely an outcome of the diminishing purchasing power of majority of the service providers. Analysts caution that the imbalance created by quality/cheap products would adversely affect the market dynamics.
Be it direct or indirect selling, there is a major shortfall in the industry’s investment in intellectual capital. Hiring is getting restricted to existing human capital within the cleaning industry, as sellers have no qualms in taking on board professionals employed by competitors. Sellers are largely shying away from hiring and investing in external professionals, based on the fear of losing them to competitors. Analysts warn of adverse consequences owing to lack of new marketing trend setters and implementers leading to large scale brain drain.