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February 11, 2012, 18:34
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Global Domestic Appliance Markets Resilient in Turbulent Times
15 March 2010International, Major and Small Domestic Appliances
At the GfK Global Domestic Appliance Conference held on 11th March 2010 in Milan, Italy, experts highlighted the global key trends for Major and Small Domestic Appliances.
Major Domestic Appliances
After years of steady growth, the market for Major Domestic Appliances (MDA) experienced a sudden hit when in autumn 2008 the collapsing housing market in the US and the following credit crunch sent its shock waves around the globe. At the beginning of 2009, the outlook for the rest of the year looked rather gloomy as the world was just about to enter the fiercest recession since 1945.
With the global macroeconomic environment deteriorating drastically the economy in general and in particular the home appliance market faced enormous challenges. During the second half of 2009, the world economy showed first signs of recovery. When looking at the picture today, it becomes evident that the MDA market suffered severely in some countries, whereas others performed astonishingly well despite the recession.
For the total year 2009, GfK Retail and Technology estimates a decrease in global turnover of around 8%. In the US the downturn led to a strong reduction of MDA sales of around 12%, mainly due to the ailing housing market and weak consumer spendings.
When looking at the regional picture, developments varied greatly; ranging from -27% in the Ukraine to +30% in Brazil. Regions currently suffering the most are Eastern Europe (especially the Ukraine and Russia), the Middle East, South Africa, the US and in Western Europe the UK, Ireland and Spain.
These markets increased strongly before the crisis started, however as this market growth was driven to a large extent by the housing boom and by consumers borrowing money from the banks in order to buy their kitchen or home appliance, consumer spending was reduced drastically after the crisis and the resulting credit crunch. This scenario was witnessed in the US, UK, Ireland, Spain, Ukraine and the Baltic States. Furthermore, countries such as Russia, Saudi Arabia, Dubai, Iran and South Africa suffered from the falling prices of crude oil and commodities.
It is remarkable that a few countries managed to maintain or even exceed the growth rates of the past. Some positive examples are Brazil, India, Egypt and Indonesia. In Western Europe, Germany also performed relatively well.
India was also largely unscathed during the global recession. Market growth was driven by the rising importance of middle class population. As there was no housing or credit boom as in the US or the UK, these people did not feel the negative effects of the crisis as strongly as elsewhere.
In some countries incentive schemes from the state provided unusual swings in the sales of MDA. Some states supported by providing incentive schema for home appliances in total. Prominent examples are Turkey and Brazil. Some countries acted more specifically, like the Austrian promotion of highly energy efficient products, or the Chinese incentive scheme for rural areas. Right after the incentive schemes started, markets picked up beyond expectation as consumers seized their chances. In many countries around the globe, retailers started specific activities to promote MDA with excellent value for money, sometimes supported by the government ini-tiatives. This resulted in higher sales peaks within certain weeks than in the past.
Unlike previous declines, most end-users opted for up-market products with innovative features. Despite the fact that they could have decided upon entry price points, the better-featured products were usually bought. Mid-term major domestic appliances markets remain highly attractive, as the replacement cycle in the developed countries creates relatively stable market conditions.
No consumer is prepared to live without a washing machine or refrigerator, once this product breaks down at the end of a long life-cycle. Replacement is a must. For developing markets, penetration rates in many countries are still quite low, and initial purchases will drive these markets over many years.
These fundamentally strong market preconditions and the major efforts by governments, manufacturers and retailers resulted in a relatively modest decline on a global level and in improved average prices. For 2010 market conditions will benchmark against these previous turbulences.
Download Major Domestic Appliances Charts:
GfK Global Domestic Appliance Conference_Charts MDA
Small Domestic Appliances
In 2009 the world market of Small Domestic Appliances (SDA) registered a 1.6% increase in terms of value. However, it should be noted that the in-crease did not occur in all regions to the same extent. Areas particularly affected by the crisis were the former Soviet republics (CIS), Middle East and many countries in Africa. Almost forty percent of the total value generated by SDA was represented by Europe, followed by North America with 22% and Japan with 10%. Elsewhere, for countries such as China, India or Brazil it can be stated that other products still occupy higher rankings, such as TV sets, Mobile phones or MDA. For this reason, the SDA sector is still under-proportionally represented there.
Innovation cycles are not necessarily related to market success. The example of Telecom products in Italy documents that more than 90% of all mobile phones sold in 2009 had only been available on the market for less than three years. These extremely short replacement cycles are worlds apart from those of MDA, where 40% of units sold are older than three years. SDA is more durable still. Within this sector, various stages of devel-opment can be noticed between one country and another. A high affinity to domestic appliances unquestionably exists in the bigger countries in Western Europe; the UK, France, Germany and Italy, where the range of products is more widely extended but at the same time more up to date than in, for example, Russia or the Ukraine. It can take up to a year before innovative products have arrived there.
The innovative power and inherent attractiveness of certain product groups becomes apparent when we consider the total amount of articles that are available worldwide. Mobile phones performed a real explosion, with the number of articles nearly quadrupling since 2005 from 5,200 to more than 20,000 different models! So, what happened? The path leads to China, where for one part numerous ‘Fakes’ of top selling premium articles are produced after, or prior, to their actual introduction, and where, in addition, cheap brands from local mass production serve the so-called ‘emerging markets’ of Africa, the Middle East and Asia. Nevertheless, the amount of available mobile phones is still far behind TV sets with more than 34,000 articles, although this market may already have reached its maximal scope. SDA, on the other hand, is growing on a healthy footing and at a reasonable speed; it has turned into one of the crucial frequency carriers in electrical retail. In the US last year, each household bought an average of at least two small appliances.
The variance between single countries is considerable. At the bottom of the scale, we see Egypt, China and South Africa, at the top the Anglo-American countries US, the UK and Australia, followed by Germany and Japan. The demand for SDA is strongly influenced by regional and cultural habits and differences.
What are the expectations for 2010? There are at least three major trends which will have a positive effect on this market:
- The wide range of products, covering kitchen and household ap-pliances, beauty and healthcare.
- Relatively low penetration rates for many of those products, especially in the emerging markets.
- Growing demand for high quality products to make life easier and more convenient.
SDA products are potential "time-savers" and although prices are growing on product group level, they are still affordable. This is an excellent opportunity to manage the future.
Friedemann Stoeckle
Herwig Rubin