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GfK: Signs of Recovery for Western Europe’s Technical Consumer Goods Markets (9/12/2009)

Source: GfK TEMAX® Western Europe, GfK Retail and Technology

GfK TEMAX Western Europe shows positive signs: a lower decrease in the Q3 2009 than in the previous quarters Nuremberg, November 30, 2009 – In the third quarter of 2009, consumers in Western Europe spent just over EUR 43 billion on technical consumer goods. After a decrease of 8.0% in the first quarter, followed by -9,2% in the second quarter, the recent quarter shows a better performance with a less negative development of -5,5% compared with the same period in the previous year. Excluding currency effects, the market performance is 2 percentage points up at -3.4% in the third quarter. Two out of the top three markets in Western Europe in terms of value, Germany and France, showed a stable development in the third quarter. The UK market is also back on track. These findings are based on GfK TEMAX® Western Europe, an information service developed by GfK Retail and Technology.

The Small Domestic Appliances market has experienced the most positive revenue development; closing the third quarter at -0.2% for Western Europe. Major Domestic Appliances remains a relatively stable and constant sector; the current slow down this quarter of -2.9% compared to the -5.5% observed for the previous quarter might be the first indication for a European turnaround. Consumer Electronics and Photo have more than halved their decline compared with Q2-09, while Office Equipment and Telecommunications both improved from previous two-digit losses in the second quarter, to a one-digit decrease. The year 2009 has seen the markets take full advantage of the integration of electronics into contemporary lifestyles.

SDA – Key markets continue to be widely unaffected by the economic environment

In total, consumers spent EUR 3.2 billion on Small Domestic Appliances in the third quarter of 2009, showing a stable development (-0.2%) compared to the same period in 2008. This is once again an impressive development considering that without the effects of the exchange rate in the UK, the overall development in Western Europe would have been positive. All Western European countries showed positive growth rates with the exceptions of the Italian, Dutch and UK markets still being in the red, though the latter has already achieved +2.1% in local currency. In addition some countries (e.g. Greece, Spain) which showed negative developments in the beginning of the year turned positive.

Within the hot beverage maker product group, systems using capsules or pads for coffee brewing continued to be a driver for growth. In the area of personal care appliances, epilators were growing steadily, and also powered oral care appliances showed good development. Within Kitchen Appliances, kitchen machines and handheld blenders enjoyed particularly healthy growth.

With regards to the European distribution scene, online sales become increasingly important and SDA is no exception. However, the share of online sales differ strongly by product group, but top levels of online sales already reach up to 30% value share (of total product group sales). In Q3 2009, online retailers generated the majority of their revenue with vacuum cleaners and hot beverage makers.

MDA – Popularity of high-value features continues

The Major Domestic Appliances market once again ranked second in terms of growth rate. Overall, sales in value terms amounted to EUR 8.1 billion in the third quarter, decreasing by 2.9%. Many Western European markets still exhibit negative trends after the first three quarters of 2009, although the picture is changing. With the exception of Austria and Germany, the only countries with positive growth rates in the first and second quarter, the Belgian and Swedish markets are also now back in the black in the third quarter.

Even in times of a market downturn, consumers tend to prefer high-end features. For various product groups capacity increases can be observed: Higher kg-classes in the product groups washing machine and tumble dryer product groups, larger capacity classes for refrigerators and freezers, more place settings in dishwashers, larger cavity sizes in ovens and wider hobs. The consumer expects that these products are energy and water efficient. Prominent examples are A++ cold appliances and dishwashers consuming less than 12 litres per wash cycle. Concerning distribution channels, the internet gains further importance throughout the major countries with a share of around 7 % in Western Europe.

Photo – Still in decline, but best quarter of 2009

In the Photographic market sales value amounted again to EUR 2.1 billion as in the previous quarter and faced a decline of 4.7% as against last years quarter. This is a better result compared to the development of each previous quarter in 2009 so far. Germany, Austria and France have returned to positive growth rates.

A full detailed summary of the photo market will be available following the GfK Imaging Summit in Nuremberg. The event takes place between November 30th and December 1st. Further information can be found at: www.gfkrt.com/imagingsummit

IT – Focus on Usage Value and Innovation

Just behind the Photo market in terms of value development is the Information Technology market, worth EUR 10.2 billion. Despite fears earlier in the year, the drop in value is quite moderate, -5.4% across Western Europe in the third quarter. With the launch of Windows 7, it is certain that Q3 developments were transitional, and early trends show a massive success in corresponding hardware sales of the first launch weeks. As such, Spain, Portugal and the United Kingdom still experienced a doubledigit drop in Q3. Nevertheless, the green shoots were already there: the sector is recovering – Q2 development was -7.7%. Germany showed a positive growth of 2.9%.

“Mobility” continues to drive the PC market, especially with demand for Netbooks and Notebooks. The derivatives e.g. Mobile Mice, Portable Hard Disk Drives and Storage Devices have also continued to drive growth. Of the supplementary usage models, Large-Screen-Size-Monitors performed well. More than simply a “growth of innovative segments”, additional usage factors and new ways to use IT in everyday life, at an affordable price, will drive growth. No longer do we see the growth in general equipment of 2008 and 2007.

Price competition has been moderate, but the change in product mix, with the appearance of these new products, results in negative value development, although consumer demand in unit terms is still positive. This value trend is challenging to all IT Vendors, in what is already a tough financial environment.

Consumer Electronics – Television drives the market

Consumer Electronics breached the EUR 10 billion mark with sales of EUR 10.6 billion. This follows the 9.8 billion recorded in the second quarter and CE remains the largest market. Compared to the third quarter of 2008, the segment recorded a loss of 6.9%. Despite a stable or negative accumulated market development in the first nine months, Austria, Germany and Italy showed positive growth rates in the third quarter and are performing far better than the other Western European countries.

The drivers in the CE market are clearly all the products in the “TV environment”. Positive sales trends are visible in two areas in particular: Firstly the consumers’ search for better picture quality (LCD-TVs with LED, Full HD, 200Hz etc). The second area can be seen in a demand for better content and smarter access (Set-top Boxes, Blu-Ray Players, built-in HDTV tuner in the TV Display, web access with the TV).

However, despite continued positive sales trends for large LCD and plasma TVs with mostly advanced display technology (Full HD) and built-in digital TV-Tuners, the market again decreased in terms of sales value across Western Europe as a result of significant price erosions in all relevant TV segments. The consumer demand itself, reflected by devices purchased, is still growing. A positive consumer demand for digital Set-top Boxes and Blu- Ray Players highlights consumers’ desire in Western Europe for digital (even High Definition) content on the TV Display. In this context the Italian market shows peculiarities: it is very positively influenced by the analogue switch off in several regions and both TV and Set-top Boxes recorded extraordinary growth.

Within HIFI, consumer investment in new products and features is ongoing. Soundbars within the speaker sector, new home theatre systems with Blu- Ray Players, new form factors, design and new digital receivers led to an increase in the average price in these HIFI categories.

Office and Consumables – Multifunctional Laser Colour Printer is the light amidst the gloom

Total sales of Office Equipment and Consumables amounted to EUR 4.1 billion in the third quarter of the year. The growth rate is at -7.2%; a better performance compared to -11.0% in the second quarter.

There is however still a big difference between the Mediterranean countries and the other more Northern European countries – the UK aside. Portugal in particular is the most dramatic with a decrease of more than 40%, followed by Spain and Greece. On the other hand Austria, Belgium and France have already achieved positive results. This might be a cause for optimism for the fourth quarter.

2009 was a year of switchover: Hardware was slow, 13% down compared to end of the third quarter, with companies and individuals reluctant to upgrade their printers, whereas usage was consistent. Hence, Cartridges and Toners are still performing reasonably well, especially compared to the hardware trend. Both products declined by only 2 to 3% versus last year.

Multifunctional Inkjet Printers are declining by only -4 to -5% and performing much better than the total market. They account for almost two thirds of the total printing market. An encouraging increase of 5% for Multifunctional Laser Printers can also be noticed. This is largely thanks to the spectacular increase of Colour Laser Printers with growth of just under 30%. In particular the impact of consumer channels – close to 50% – are responsible for Multifunctional Colour Laser Printers moving up from less than 20% last year to more than 30% of total laser printing. This is the indicator the industry had presumably been waiting for and there is currently no indication that this situation will change within the coming months. Telecommunication – Smartphones and Touchscreens are soaring

The Telecommunication market recorded a sales volume of EUR 4.8 billion in the third quarter of 2009, which represents a 9.3% drop. France rocketed up by 7.3%, the Netherlands maintained a positive development, while other countries declined. Greece and Spain were particularly severely hit.

Sales of smartphones are still showing an increase of 120% worldwide so far. More and more handsets with an open Operating System are entering the market. Many of these products have pre-installed social networking applications, which are especially interesting for the younger target groups. The key trend is still mobiles with touchscreen, especially in Europe. In the last six months, 40% of all new products launched in Europe have been equipped with a touchscreen. Such products are now available over quite a wide price range. In Europe around 20% are available under EUR 150, almost 50% are still at prices above EUR 200. Another development is GPS

functionality. In the EU, almost two thirds of the total navigation devices are phone based whereas the other third are Mobile Navigation Devices. Concerning usage, those dedicated devices are definitely leading. To push the usage of phone based navigation the market participants need to create more transparency on prices and point out the advantages of pedestrian navigation. A slight recovery of the smart-/mobile market is expected from the second quarter of 2010 onwards.

Sector and Country Developments still differentiated in Western Europe

Led by the Austrian and the German market, as well as in Belgium, France and Sweden more sectors reached positive growth rates than in the previous period. GfK TEMAX shows additional signs of recovery: all sectors note lower decreases this quarter compared to the second quarter and are on the right track. The same applies for the total Technical Consumer Goods markets for most countries as well, the third quarter closed with positive signals.

The survey

GfK TEMAX® is an index developed by GfK Retail and Technology to track the consumer durables markets. GfK TEMAX® is published internationally. The findings are based on surveys carried out by the retail panel of GfK Retail and Technology. The retail panel comprises data from over 200,000 retail outlets worldwide.

www.gfktemax.com