As you enter the Philips head office in Gurgaon, you see a room that you can’t miss, even if you tried. Its ceiling is festooned with psychedelic lights that will not look out of place in a Pink Floyd concert, but there’s no music around. Instead, the dedicated space turns a pleasant shade of green, which turns into something that could be called purple, and something else (pink?), then back to green.
The effect is both aesthetic and oddly soothing. It’s tempting to dally but there’s work to be done. “This is just a small range of our products,” Nirupam Sahay, president, Philips Lighting India, assures us. “What you are seeing are our colour kinetic products for mood lighting.” Sounds artsy, too.
There’s a vague sense of déjà vu in knowing this — after all, we’re here because we are curious about the ‘Philips Light Lounges’ that have sprung up all over the NCR region in the past couple of years. Everybody knows of Philips, sure, but the lighting, home products and healthcare major, which was delisted in 2004, has maintained an oddly low profile despite being up to some interesting things.
So why exactly is it setting up exclusive Light Lounges when more in-your-face consumer brands like apparel and footwear are struggling with standalone outlets and are, in fact, preferring multi-brand formats? The lighting division’s corporate office — the company also makes everything from street lights to car lamps — seems like a good place to start asking.
But first, some background. The latest available data, although it pertains to FY10, shows why lighting is such big business for Philips in India. In FY10, Philips India’s overall sales went up from about Rs.3,265 crore to Rs.3,725 crore, indicating a growth of 14%. The lighting segment did twice as well, growing by 28%, from approximately Rs.1,677 crore to Rs.2,158 crore. During this period, within lighting, sales growth in lamps was 17%; professional luminaires stood at 36%; lighting electronics came in at 24%; and the automotive segment went up by 41%. The most significant growth was recorded by consumer luminaires or home decorative lighting, where sales shot up by an impressive 62%.
Sahay says Philips’ home decorative lighting business has maintained CAGR of 70% over the past three years. Rough industry estimates place home decorative lighting — comprising lamps, luminaries (fixtures and fittings) and accessories — at about Rs.1,500 crore, or 17% of the entire Indian lighting industry.
He adds that Philips’ extensive market research showed that customers were often left confused by the plethora of unbranded products in the home decorative lighting segment. The Light Lounges were conceived and launched in 2009 to service this market. The first outlet came up in the Kotla Mubarakpur area of New Delhi’s South Extension. In the next three years, 77 more were opened in cities like Jodhpur, Ambala, Dehradun and Lucknow. Additionally, there are 780 Light Shoppes — dedicated Philips Lighting shop-in-shops within, say, a hypermart.
The novelty of the concept was the main reason why the company went for it. It’s the first time any lighting company, whether Indian (Bajaj, NTL, Surya Roshni) or international (GE, Osram), has tried such a strategy — the Indian decorative home lighting market is fed largely by China-made imports, making it a huge opportunity waiting to be tapped. Then, there is the age-old association with the brand. “We have been in India for over 80 years and are currently market leaders in the lighting industry,” Sahay says with the assurance of someone working with a trusted brand that’s been around for ages.
And then there was light
The aesthetically designed Light Lounges are conceived as ‘experience centres’ that show how light can be played uniquely in different parts of a home — for example, the lighting in a bedroom for adults is ‘elegant’ as opposed to that of a ‘cheerful’ child’s room, or how a study (good but not harsh light for reading from the right angle) functions very differently from the lighting in the living room (the best place to showcase décor).
Luminaires, or home decorative lighting, is the fastest growing sector of the lighting industry
It shows customers what they would like to have but hadn’t thought about before. Philips Lighting’s R&D happens in Noida; while some home decoratives have been Indianised, others are global award-winning products. “The idea was to put it all [Philips’ entire decorative lighting range] together in one place and allow the customer to get a first-hand feel of a variety of applications for lighting,” Sahay points out.
The ‘globalised Indian’ clientele knows it cannot find guaranteed, safe, long-lasting and energy-efficient lighting options in the ubiquitous unorganised market. And home-owners, having invested most of their life’s earnings on their property, invariably want the best and travel the extra mile to get there, so prices are not a deterrent. “Philips has done the right thing by launching the Light Lounges,” feels Rajeev Karwal, CEO of ‘venture catalyst’ Milagrow, who has been associated with the Indian consumer durables industry for 20 years.
“Not only does a dedicated light shop allow consumers to get an excellent feel of the product, it also allows them to use the expertise of a lighting specialist from the lighting company to arrive at what suits them best.”
The boom in the construction industry also benefited the lounges, in Karwal’s view. He adds that Philips will remain the market leader because its global competitors like GE and Osram have not taken a keen interest in the Indian market. And even if they do, it will be a long time before they catch up, leaving Philips with a large field all to itself.
The Indian lighting market is valued at over Rs.9,000 crore, according to data available with the Electrical Lamp and Component Manufacturers’ Association of India (ELCOMA). “In 2005, the Indian lighting industry’s market size stood at Rs.4,500 crore — which means that it has more than doubled in the last five years,” points out ELCOMA’s secretary general, Shyam Sujan.
Fillip to Philips
Philips’ global vision and tagline (‘sense and simplicity’), announced in 2004, signalled a shift in company strategy. Since then, the Dutch multinational has focused on making lighting, home products and healthcare divisions its core business. Currently, close to 60% of Philips India’s overall sales is from the lighting business. Of this, 60% comes through a mix of electrical and non-electrical outlets while the remaining is accounted for by the professional lighting solutions business (which includes hospitality, retail, etc).
The ripple effects of this re-orientation are still being felt. Philips’ exit from televisions is one example — the parent company KPENV decided to sign brand licensing agreements in 2010, keeping its name but exiting the business. In India, this agreement is with PEEP (Videocon), which manufactures, sells and distributes ‘Philips’ TVs in India.
The strategy revamp forced the business out of the limelight, and Philips India has tried to make up for the vacuum by approaching its lighting business with a renewed seriousness. “Leveraging this old presence does pay because the user already knows what sort of quality is on offer,” says Karwal.
He seems to be right. Capitalising on the success of its lounges, Philips expanded into mini metros and tier 1 cities after kicking off in metros three years ago. The company wants to have 150 Light Lounges by 2015. However, Philips says the challenge is to crack the rural market. Sahay says, “That’s a challenge for the future.”
If the franchisee experience is any indicator, the Light Lounge model is glowing. To set up a lounge, dealers offer their space exclusively; Philips co-invests, designs and stocks the store. Investment depends on its location and size. A franchisee in Delhi said his initial investment was around Rs.5 lakh; Philips took care of the décor and fittings. He didn’t have to pay rent because he owned the shop; otherwise, the cost of real estate would have to be factored.
The shops are located where home-owners are likely to shop for renovation and home décor material. Sunil Jain is the owner of the first Light Lounge at Kotla Mubarakpur, an area that’s frequented by contractors, home buyers and interior designers. Jain has been in the lighting retail business for 25 years and, interestingly, owns two lighting showrooms in the same area: Rays, which stocks unbranded imported decorative lighting from China, and the lounge. Over the past three years, sales from the Philips showroom, which is run by his daughter Ayushi, have doubled compared with the Rays store. “Sales at Rays have dipped,” Jain admits, adding simply, “The [Philips] brand name sells.”