Why is our market flooded with low-quality electrical accessories?

Suppose the light bulb in your room stops working and you buy a new one. The packet looks okay as does the product. However, the new bulb also burns out within a few days.  

You may have bought a counterfeit bulb. 

Recently, research by Marketing Watch Bangladesh (MWB) has revealed that 47% of the electronic products sold in our market are non-branded low-quality, fake or unauthorised products. 

The number is astonishing given the fact that the combined market size of electrical accessories and lighting products in the country is Tk5,500-Tk6,000 crores and the average yearly growth rate of the market for electrical accessories and lighting products is around 10%-13%.  

The Business Standard reached out to experts to understand how non-branded and counterfeit products have flooded our markets and what measures can be taken to ensure that our local brands can thrive. 

How mass demand created a boom 

Professor Md Mizanur Rahman, former chairman of the Department of Marketing, University of Dhaka and co-founder of Marketing Watch Bangladesh thinks that in the last 25 years, widespread electricity coverage across Bangladesh has created a massive demand for electric products. 

"At one time, the demand for electrical accessories was growing at a rate of 15%-20%. Now, it has slowed down a bit, somewhere between 10% to 15% today. And to capitalise on this opportunity [the demand], the shady businesspeople are producing counterfeit electrical accessories," he said.  

"It is hard to detect the counterfeit accessories at first," he said, adding, "Suppose you buy a socket or a bulb which has the seal of brands like Walton or Superstar. But, in reality, it is made in Jinjira or Nawabpur by counterfeit manufacturers." 

"It is not easy for consumers to figure out which ones are genuine products, and which ones aren't," said Dr Mohammad Naveed Ahmed, Managing Director at Miyako Appliance Bangladesh, "The counterfeiters use this chance to dupe them." 

Since these are labelled with local brands' names, it creates a negative perception in the consumers' minds about their quality. 

"Compared to foreign companies, our local brands are not at all lagging," he said, adding, "We use the same technology nowadays." 

There exists a grey market

Many Chinese products are smuggled into the country under different domestic or foreign names. These are real electrical goods, not fake or counterfeits. Some of them are sold by unauthorised distributors or retailers. 

"Grey market sellers import electrical goods from China via unofficial channels and sell them elsewhere at a profit, but still lower than the official price," said Dr Mizan, "When you buy such goods, you take a risk on warranty, safety and potentially, legality." 

Sometimes, people might seek out grey market sellers because they can't find the specific electrical goods they want from the official distributors. This could be due to the product being out of stock or having regional variations. 

"The grey market can offer you electrical goods at a lower price or when they are unavailable elsewhere," said Dr Naveed, adding, "That is why they have such a huge market share in our country. Companies that import such accessories through legal means have to pay the due taxes and duties. So, they can't sell at such a low price." 

However, the counterfeiters also use the grey market to sell fake goods. 

"They say that their products are genuine goods brought in via unofficial channels. That's how they dupe the consumers, as the consumers also know that such a grey market exists. They see that the fake goods are cheaper, they think these are genuine goods that have come through unofficial channels, so they buy them," he told us.  

How to prevent their production 

"We need more market monitoring by the authorities," said Dr Mizan, adding, "If the counterfeiters were apprehended and punished regularly, then the genuine local products would sell more." 

The Directorate of National Consumer Rights Protection can also find the sellers of fake electrical accessories and fine them. That way, the sellers would also feel discouraged to sell such products. 

Having a strong backward linkage for production would also help bring down the prices of locally produced electrical goods. 

"Our industry does not have a backward linkage, so we have to import most of the raw materials," Dr Mizan said, adding, "If we can produce the raw materials for our electrical goods, we will be able to produce cheaper goods, thus driving out the fake goods." 

There are some government incentives for manufacturers to import heavy machinery for electrical accessories production. However, such machines are needed for large-scale production and the local manufacturers usually do not produce that many items. 

"The government says, there's incentive for you," said Dr Mizan, "but the manufacturers say, we don't need such heavy machines as we don't have that level of sales. The government can help expand the market size for our local manufacturers by cracking down on the grey market, counterfeit products and knock-offs." 

Potential for local brands 

The electrical accessories industry in the country has immense potential. Currently, more than 5 lakh people are directly or indirectly involved with it, including around 150,000 retailers and 2,500 entrepreneurs across the country. 

Among the branded products, 80% are controlled by local brands such as Walton, Superstar or Click. 

The market for electrical accessories is about Tk3,300 crores and the market for lighting products is about Tk2,700 crores. If the growth rate continues, this sector can emerge as very promising. 

Dr Mizan is also hopeful about the increasing market penetration of local brands. 

He said, "If local brands manufacture more electrical goods, their prices will decrease dramatically. Even the counterfeit manufacturers need to invest some money in the manufacturing process, so if the real brands can penetrate the market more, then the counterfeiters would lose their position in the market." 

Dr Naveed is hopeful as well, as the disposable income (income after tax) of our middle-class consumers is increasing and they will be more interested in buying electrical accessories in future. 

He thinks that the government should help the local manufacturers of electrical accessories and create a level-playing field with foreign manufacturers. 

"Those who manufacture their products locally and those who import finished goods from abroad should be brought under a uniform policy. Let our local manufacturers grow. Policymakers should sit with the electrical accessories market leaders to ensure favourable incentives for them so that they may expand their operations."