Household Equipment

Stay-at-home orders and economic recession to take a heavy hit on turnover

MEDIUM RISK for entreprises

Fragmentation
Internationalization
Capital Intensity
Profitability

Fragmentation
Internationalization
Capital Intensity
Profitability

Structural growth drivers (population growth, urbanization)
Capacity to innovate and create profitable niche markets

Strong sensitivity to swings in consumer sentiment and real estate / construction activity
Concentrated customer base (specialty retailers)
Consumer electronics: saturated products markets (computers, mobile phones, TV sets, audio equipment, etc.)
Furniture: fragmented industry, domination of small and medium-sized enterprises

What to watch ?

The return to normal after the Covid-19 outbreak in key regions (Asia Pacific, Europe, North America)
Trade tensions between China, the world's factory for household equipment, and the U.S.
Large retail insolvencies that will hurt trade receivables and retail sales

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2020 will see an unprecedented slump in revenue for household equipment specialists. Because of the prolonged retail freeze in the wake of the Covid-19 outbreak, and the subsequent deterioration of consumer sentiment, we anticipate aggregate sales for consumer electronics, household appliances and furniture to decline by as much as 20% down to USD 5,550bn. Even with a progressive recovery in global GDP growth, we expect sales to remain below their 2019 levels until 2022 at best in the world’s largest markets (North America, Europe, China). In the short run, household equipment companies are also likely to feel the pinch of the ongoing wave of bankruptcies among discretionary retailers, with lost receivables and turnover. Looking beyond 2020, the industry could also suffer from renewed trade tensions between the U.S. and China, the world’s factory for virtually all major consumer durable industries.

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 USD 4,800bn in turnover. Product markets are now largely mature and driven by replacement sales. A handful of companies generally dominates their markets and focuses 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 etc.) and large appliances (refrigerators, ovens, dishwashers, washing machines etc.) with an estimated USD 1,060bn 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 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.

Key players

Country	Role	Sector risk
China	#1 manufacturing country	B Medium risk
United States	#2 manufacturing country	B Medium risk
India	#3 manufacturing country	B Medium risk
Germany	#4 manufacturing country	B Medium risk
Italy	#5 manufacturing country	C Sensitive risk