Financial Times

The black market of white goods
By Duruthu Edirimuni
White goods and consumer electronics still bring in broadly two-thirds of Singer’s revenue, but it slowed down last year due to a multiple array of taxes and opening up of the grey market.

Yet it’s unlikely the government will go easy on the tariffs. Singer Sri Lanka Chairman, Hemaka Amarasuriya told The Sunday Times FT on the sidelines of the company’s annual results presentation last week that they estimate the grey market for white goods comprising refrigerators, washing machines and other such consumer durables was estimated to be around 25 percent of the entire white goods market.

“The Customs department statistics are not revealed as it used to be for ‘reasons best known to them’,” Asitha Abayasekera, Marketing Director of the company said.

Finance Manager Lalith Yatiwella said the Customs has stopped releasing the statistics since October 2004. “They have not told the reasons as to why the statistics are not released,” he said.

He said the grey market was estimated at 10 percent in 2004, but at the time the tariff for a white goods consignment was low. “Those days a consignment was taxed at 10 to 15 percent, based on its cost in the freight value, but now it has increased by 35 percent because of the new tariff structure,” he said.
When The Sunday Times FT contacted Director General Customs Sarath Jayatilake, he said the Customs is bound by the World Trade Organisation’s (WTO) valuation code which prohibits releasing competitor information.

“The WTO valuation code that we have been part of since 2004 October bars us from giving out individual company information to other organisations, unless these firms have granted permission to do so. What most companies want are details such as the name of the importer, the country from which the goods were imported and at what price – basically competitor information. We cannot give such private information now,” he said. However, he said that the Customs can release information such as the amount of units of a particular product that has been imported.

Meanwhile Mr Amarasuriya said white goods grew by 15 percent before the taxes were increased, but now it shows single digit growth. He said that the refrigeration penetration is still below 40 percent corresponding to below 200,000 units a year. “We are lobbying the government about these taxes, but we cannot see the light at the end of the tunnel,” he said.

Sales typically peak during periods of harvest, festive times and corporate bonus payments, requiring greater acumen in merchandising. The company’s multi-branding strategy has immensely supported the growth of the company by broadening its potential customer base and securing sales of customers that opt for brand switching at the time of replacing their existing consumer durables.

Brands other than Singer now account for 50 percent of the total portfolio and including other brands fill gaps in the product range of Singer (products not available under Singer, low-priced products for price sensitive customers and premium brands for the brand-conscious).

Meanwhile, Singer plans to invest Rs.500 million this year in branch expansion. “We are hoping to invest about Rs.500 million this year in outlet expansion,” Mr Amarasuriya said.

Singer’s recent focus has been on the expansion of its retail network, introduction of new store formats such as “Singer Mega” and “Modern Homes”, and widening of product offerings that also include brands other than “Singer”. Some of the new formats introduced were to increase the footfall in both socio-economic and geographic terms, while seeking growth outside its core activity of retailing household goods by including motor-cycles in its product portfolio.

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