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BW Businessworld

‘We Want To Be Among The Top 3 In India’

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Kitchens and home appliances are going through a renaissance globally. They are moving away from being necessities to becoming style statements. The young want intelligent appliances that can connect with smartphones and can be operated at the touch of a finger. The €10.5-billion Bosch Siemens Hausgeräte, a fully-owned subsidiary of Robert Bosch, is fast embracing the cloud, along with mega trends such as Big Data and the Internet of Things (IoT), to stay connected with the consumer of the future. In India, it has invested Rs 50 crore on a manufacturing facility and is infusing Rs 650 crore this year to bolster its distribution, marketing and service departments. Karsten Ottenberg, chairman and chief executive officer of Bosch Siemens Hausgeräte, says his company understands the modern consumer in emerging markets such as India, where the focus is on bringing global platforms with local packaging. He spoke to BW | Businesworld about the merits of technology and its impact on the business. Excerpts:

What has changed after Siemens’ takeover? Have you tweaked the management structure and what are the trends in your industry?
This year, it has become a 100 per cent member of Bosch. The company is now part of a larger group. But, the company will be run independently. Siemens left the consumer business because it was not in its strategic interest. However, for BSH the consumer business is important. Appliances have become connected devices and the data collected from them adds value to the customer. Today, BSH operates in 41 countries. While there is no change in the management structure, Siemens will benefit from being part of Bosch because of the latter’s prowess in research and development, in IoT and services, which it has built over the years. It makes sense for Siemens because it can leverage Bosch’s knowledge and technology. We have a strategy for accelerating growth and it was done with the consent of all the shareholders. The ambitions on brand positioning have not changed much. If you look at the numbers of the past 15 years, you will find that we have been growing very well. We work with local teams and have given them decision-making powers on what is to be sold in their markets. The global strength of our brands should be in sync with local regions.

How would you compare India with other economies and their ability to spend?
In India, the market is evolving. We are number one in the built-in kitchen space and the premium kitchen segment. We work on partnerships for architectural kitchens and that is a fast-growing segment in the premium-plus segment. The innovation trends are very high on kitchen design, too. In India and in other emerging markets, the spend goes through different phases. The good thing is that the average spend is going up in emerging markets. People in the $5,000 per capita income bracket will buy a washing machine. If the per capita income is $20,000, they will upgrade to a washing machine that can offer them personalised service.

We have low-cost entry points in India and we see people upgrading. But the premium market, in India, is a target segment. We believe a substantial number of households will want to buy premium kitchens. There is an effort to be among the top three players, and for that reason, we are increasing our service capabilities. Our sales strategy has multiple dimensions; it is an omni-channel strategy, including online sales. We have dedicated franchisees that sell our products in India. At this point, we want to shape the distribution strategy well to reach the number three position in India.



Customers here are still focused on shopping in brick-and-mortar stores. So, we need to work out what the households want. We need to figure out whether they want their products connected to smartphones. We need to figure out how we can serve them better between our retail stores, kitchen studios and service centres. We have over 200 multi-brand stores selling our products and we have 30 of our own studios. We will add 200 more in the next five years. China is still a fast-growing market. We want to provide value-added services that make sense to each region. For example, in the oven that we launched here, you can choose the kind of recipe you want and program the cooking over the phone. This is the value-add that we want to offer to our consumers in the premium segment. In China, we are in the top three. Globally, the appliances industry is a $130-billion market and the leaders are Whirlpool, Electrolux and BSH. India is only a $3.5-billion market today, and can grow fast with the growth of the middle-class.

There is no clear market leader globally. Why is that so?
In the Asean and India regions, the Koreans are number one. But in China and Europe, they are not in the top three. They are in the top four in the US. I must emphasise that our industry is trying to win the new consumer in emerging markets. The middle-class is spending and the numbers tell us that the growth will happen in the future. All this depends on the structure of income distribution, which is very different in each region. We need to study what the customer will pay for the product. Keep in mind that it will be a locally-made product and we will offer innovations as the core value. That does not mean we will enter the mass segment, we will always want to play in the premium mass segment. The entry-level product is not where we will play. For us, the average product price is Rs 31,000. We have launched a 7-kg washing machine, instead of the standard 6-kg washing machine, denoting that Indian households need large appliances.

Look, India will grow if the infrastructure is in place. Cross-border movement of goods across states should have a uniform tax; so the proposed goods and services tax will free up money for consumers. There is a positivity in India and there is growth; Europe, after the collapse a couple of years ago, is recovering very slowly. Our manufacturing facility in Chennai, which was  set up recently, will help us export in the future. This must tell you why we are focused on the Indian market; it is very important for us. As a manufacturer, we also need to look at modular architectures; there will be one platform that will fit the globe. But it will be built keeping local needs in mind.

What innovations are you focusing on based on your knowledge of consumer behaviour?
We have launched an app called HomeConnect, which is connected to the cloud; it offers all kinds of services. But connectivity is very important for such a service. These value-added services for customers will increase brand value. This cloud platform is open to developers to build apps on and engage the consumer. There is another trend — the co-creative business model. Here, the consumer can, through our appliances, connect with appliances of other brands. It is too early to speak about this and the trend is to make the mobile device the centre of the consumer appliance world. There is also scope for predictive maintenance and the use of Big Data for insights; which is big business too. There is another thing — the consumer needs to allow us to capture information about them. But there are issues related to security which the organisation must ensure. We need to focus on consumer value as the core. A customer wants the product to work well and then you can engage them with connected technology. However, a week without connectivity is a nightmare today.

Connectivity is a given. In emerging markets, not all areas will have connected appliances. However in India, with 4G coming in, the next generation of products could be important for those who decide to use such devices to operate their kitchens. There is a need to use data generated from apps to help us bring future products into the system. All corporations will use cloud architectures to deliver service. The consumer will install many apps and we will collect the data to deliver several kinds of services along with our ecosystem of partners. It is also our job to protect data and the customer in the process. The cloud adds value because the consumer can use the phone to operate the oven or any appliance, and it is left to the consumer if she wants to link kitchen and home appliances to the cloud. They need to give consent to share data and can also stay away from sharing data.
 
Is Bosch planning its own operating system?
Our app is agnostic of mobile operating systems. Our appliances can connect with different devices; however, we have our own operating system on the appliances. The app is the bridge between Apple and Android platforms, anyone can build apps on these platforms and link with our appliance. We need to guarantee our consumer on the performance of appliances. After that, we can decide what kind of app should be running on our appliances. Home appliances are tailored to individual needs and they are very personal when connected to smartphones. The network problem is solved because households have WiFi. We have a small data analytics team that can track consumer habits and the company is creating a big data platform. We are working with some service providers for our data services. Cloud-based analytics is growing fast and, as a corporation, we need to know if it is going to be good for us if we have do Big Data analytics on our own or work with other service providers.

Are you working with startups on any new ideas?
We are working with startups globally. In India, we see it becoming popular and we are observing trends. We are taking minority stakes in small companies in Europe. This is a very new objective for us, and we have not disclosed the names of the companies that we have invested in. Data Analytics, cloud, material sciences and ecommerce platforms are some of the business areas that we have taken risks in with smaller companies. There are a number of mega trends; IoT is here to stay. Manufacturing is heading the IoT way, too. Devices are going to be ever more important for personal experiences. Cloud and data analytics will be here. Robotics and 3D printing are going to be popular. There are a couple of things, like robot assistants at home, that are already being experimented with in other corporations. 3D printing through sugar and chocolate bases were very popular in the Consumer Electronics Show in California. I mean to tell you how powerful technology has become and the consumer is at the centre of it. All of the above trends are a reality. Connectivity is the key and what adds value to the consumer will win.

Next year, home appliances will be more intuitive and enrich consumer experiences. In India, digital is an important story because there are reviews of customers on social platforms and large corporations cannot ignore these conversations.
 
Pure play retailing is at the end of its journey. There has to be a multi-channel approach. Most of the successful companies are those who transformed themselves into online companies. Today, in the UK, 20 per cent of all purchases are from online channels. Of my top 10 retail customers there in 2002, six retailers are finished today. They were not ready for the online explosion. Multi-channel retailing is the way forward and we work with our partners to have a mix of selling
channels.

(This story was published in BW | Businessworld Issue Dated 06-04-2015)


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