Household Equipment Sector Report & Analysis

Recovery on the cards for 2021

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 ?

Easing of the sanitary situation allowing greater continuity in retail activity.
Consumer confidence and consumer spending in large markets.
Resilience of the real estate market.
Increase in commodity prices (copper, plastic, steel).

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2020 proved far less dramatic than anticipated for the household equipment industry. A spectacular recovery in sales in the world's largest markets during the second quarter helped the majority of dominant players mitigate a tough start into 2020, which saw a prolonged freeze in manufacturing, trade and retail activity. Global sales across the consumer electronics, household appliance and furniture industries is estimated to have contracted by only -5% to -10% with significant dispersion between regions (Asia-Pacific fared better than North America, which fared better than Europe) and segments (appliances have been more resilient overall).

2021 should see sales return into positive territory on the back of greater continuity in retail activity, a general improvement of the macroeconomic environment, still strong interest among consumers for their interiors and a high savings rate in the world's largest economies. We anticipate sales to recover by about +5% to +10% for 2021, reaching back to pre-crisis levels in 2022 only. This recovery could be somewhat clouded by a general increase in costs, in particular for raw materials (copper, steel, plastic) and transport services.

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.

Key players

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