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HOUSEHOLD EQUIPMENT

Households cut down equipment spending after the Covid-19 boom

M

MEDIUM RISK for entreprises

  • Fragmentation

  • Internationalization

  • Capital Intensity

  • Profitability

  • Fragmentation

  • Internationalization

  • Capital Intensity

  • Profitability

Updated in June 2023.

Strengths & Weaknesses

Strenghts
  • Stronger purchasing power under deflationary pressures, declining interest rates & high savings
  • Development of IoT ecosystems and smart home devices to generate new needs 
  • Public incentive programs for recycling home appliances in Europe (trade-in options)
  • Stronger urbanization rate in emerging countries (new demand)
  • Greater energy optimization thanks to technology innovation
Weaknesses
  • High supply-chain rreliance on Asia for domestic appliances and consumer electronics
  • Cyclical industry strongly connected to level of household confidence
  • Sluggish real estate activity (moderate traction for “new home” spending) 
  • Higher concentration of diffusion networks due to dominant position of global marketplaces
  • Technology innovation extends product lifespans, and in turn replacement cycles  

 

What to watch ? 

  • Trends in the real estate market (new housing starts and resale transactions)
  • Trends in employment, salaries, savings and consumer credit
  • Trends in commodity prices (steel, copper, plastics)
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The household equipment industry emerged stronger from the pandemic, with booming consumer demand sending sales of appliances, consumer electronics and furniture to all-time highs in Europe and North America. Sales and profits peaked in the second half of 2021 before slowly eroding because of rising procurement costs (steel, copper, resins) and component shortages (semiconductors). The increase in the cost of living, together with the high comparison basis of 2021, already caused global sales of household equipment to recede in 2022.

Looking forward to 2023, we expect the risk environment to deteriorate significantly:

  • The general increase in cost of living (food, personal and home care goods, fuel, etc.) is eroding the purchasing power of households for discretionary goods.
  • A major driver for replacement purchases, the real estate market will suffer from the increase in interest rates in Europe and North America.
  • In this context, we anticipate global sales to recede further in 2023, while remaining above pre-pandemic levels.
  • While softening, commodity and energy prices will remain high and pressure profit margins. Meanwhile, weak demand will make it more difficult for manufacturers to maintain high price tags.
useful description of image if informative and not decoration only.

Household Equipment comprises different industries involved in the design and manufacturing of domestic equipment for households. While companies exhibit very different profiles between segments, they have in common a strong sensitivity to consumer spending and a reliance on Asia Pacific, mostly China, for their manufacturing activities. Mature economies still make up for the vast majority of demand.

- Consumer electronics: audio and video equipment, computers, mobile phones etc. with an estimated USD2,450bn in turnover. Product markets are now largely mature and driven by replacement sales. A handful of companies generally dominates their markets and focus on design, R&D, marketing etc. while outsourcing manufacturing to contract manufacturers. Asia Pacific concentrates more than 85% of global turnover. Mexico is the only significant manufacturer outside of the region.
- Domestic appliances: small appliances (home care, personal care, cooking aids…) and large appliances (refrigerators, ovens, dishwashers, washing machines…) with an estimated USD530bn in turnover. Much like consumer electronics, product markets are largely mature and dominated by a few large global players and smaller niche, regional competitors. Asia Pacific’s share of global turnover stands at about 80%. Other manufacturing countries include Germany, Italy, Turkey and the U.S.
- Furniture and furnishings (USD520bn in turnover) is, on the contrary, a highly fragmented industry dominated by small- and medium-sized companies working closely with designers and retailers. A few mature economies, including Germany, Italy and the U.S., still have a significant presence in the industry.

Contacts

 
Allianz Trade Economic Research
research@allianz-trade.com
Aurélien Duthoit
Sector Advisor for the Retail, Technology and Household equipment sectors 
aurelien.duthoit@allianz-trade.com

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