Philips thinks it is ready for the challenge. It has its own dealers in towns with a population of more than 100,000. But if it wants to make a commercial success of its stove and lantern, it needs to reach many of the country’s 600,000 villages as possible. With its bulb and tube lights, Philips actually reaches a large number of villages. It now plans to use the same network to sell its stoves. It is thus setting up a unified Philips sales channel exclusively for the rural markets. The stove will be the spearhead.
What it means is that rural shops that stock Philips bulbs will also stock the stoves. Sales executives of Philips’ wholesalers will be trained to go to the villages and demonstrate how the stove works. The company also plans to tap farmers’ co-operatives to sell it. In Punjab, for instance, Philips has already tied up with about 150 co-operatives to sell its bulbs, mixer-grinders and irons. It could very well push its stove through the same channel. Another option that the company could use is selling the stove at “mandis” ( Indian whole sale markets). Philips is also in talks with the renewable energy ministry to include the stove in its Village Energy Security Program.
A bigger challenge for Philips will be to get the price right. Only once the Guntur pilot is over will it know if consumers are willing to buy at these price points (Rs 2,500 and Rs 1,000). Farmers, the company is aware, make money only twice a year when they harvest their crops, though expenses are spread evenly through the year. This makes pricing the key. Sivaraman says Philips has tried to keep the price of the stove low. It could have come out with a 100 per cent smoke-free stove but that would have pushed the price up. So, it settled for 95 per cent reduction but brought the price of the stove down to Rs 2,500. The pilot will also test if farmers need credit to buy these stoves. The company may use farmers’ co-operatives if credit support is required, says Krishnan.
The other issue would be where to produce the stove. Potentially, it could be sold all over the country. There are households in every state which use firewood or cow dung. Since the stove is bulky, transporting it over long distances could be unviable. In that case, does it make sense for Philips to assemble it close to the markets? Or outsource production to third-party manufacturers? Sivaraman is not sure if this model could work as this could allow slippages in quality. “We are paranoid about quality,” says he.
And there is light
At the moment, Philips’ lanterns are ready for the market. Apart from the lighting network, the company has dovetailed its lanterns into the “Lighting a Billion Lives” initiative of The Energy & Resources Institute. Over 2,000 lanterns have already been distributed in 42 villages across nine states. Five hundred have been deployed in Myanmar.
Philips is hopeful companies will adopt villages under their corporate social responsibility programmes and people there will be given these lanterns. Some may set up a solar panel in the village, which can charge up to 50 lanterns. These lanterns can then be given on hire for four or six hours. “The business model is viable and self-sustainable,” says Philips Senior Director (strategy and business development) Rakesh Sharma.
Sharma incidentally mentions that most innovations carried out by Philips on its small appliances were copied by rivals in very little time. This, in fact, is an industry-wide problem. There are several small players in the market place who operate out of hubs in Delhi and Ambala and copy the designs of the industry leaders. The danger is all the more there in the case of Philips’ lanterns and stoves. Since the technology is basic, it may not be worthwhile for Philips to apply for patents, given the expenses involved and the time it takes.
Whatever faults rivals may find with the stove and lantern, they all agree Philips has got its timing right. There is substantial purchasing power in the rural markets because of the high prices set by the government for key produce like wheat and rice, and the cash given out under the National Rural Employment Guarantee Programme running in all the districts of the country. Several companies are fine-tuning their strategies for the rural markets. And Philips is no exception.