Technical consumer goods market in the CEE deep in crisis

2010-02-24


The technical consumer goods market in the Central and Eastern Europe (CEE) region has undergone dramatic drops in sales in 2009. Over the period, in the Czech Republic, Poland, Romania and Slovakia, all segments, which include consumer electronics, major and small household appliances, photo, IT, office equipment and telecommunication, went down significantly. Even winter season sales, which usually shift demand for technical consumer goods, did not help to improve the grim image of 2009 in most cases.


Romania affected the most, Czech Republic least
The most serious situation has occurred in Romania, where the overall market for technical consumer goods in 2009 decreased by 42.6% y-o-y reaching €1.4bn, according to the GfK research. The steepest decline within the sector was suffered by the IT and office equipment segments as they dropped by 51.6% and 53.8% respectively. Small household appliances went down by 23.6% in 2009 in comparison to 2008. Even the fact that almost all products in this group saw price erosion in 2009 was not enough to change customers’ inclination to save money, instead of spending on technical consumer goods. The factors such as income decrease, low financial resources and the depreciation of the local currency also contributed to the negative performance of the sector last year. In turn, the majority of households did not see any visible price erosion for appliances in Romania in 2009, and probably this was the reason for an even more significant drop in sales in this sector, which amounted to 37.3% y-o-y.
The second most-affected technical consumer goods market in the Central and Eastern European (CEE) region was the Slovak one, whose value decreased by 23% y-o-y. The most substantial decline was reported in the consumer electronics segment, which was down by 34.7% y-o-y. The only growing sub-segments of the consumer electronics sector in Slovakia were Blu-ray players or memory card camcorders. However, their sales did not compensate for the shrinking turnover of the rest of the market.
While the Polish and Czech technical consumer goods markets also saw declines last year, they were much more modest than those experienced by the Romanian and Slovak markets. The market in Poland dropped by 11.5%, while in the Czech Republic, by 8%. In the former country the most substantial decline was found in the IT sector while in the latter the weakest sales were reported in the segments of photo equipment and consumer electronics.

Q4 2009 did not influence the whole year sales
Contrary to the hopes of the market players, the sales of technical consumer goods in the fourth quarter of 2009 did not manage to offset the negative balance of the first three quarters. Although the sales of technical consumer goods were, as anticipated, better in Q4 than in Q1-Q3 by dint of the increase in demand caused by the Christmas period, they were still lower on all markets than in the corresponding period of the previous year.
In the Czech Republic the Q4 sales results were the best of all 2009 and grew by 51.5% quarter on quarter. In turn, the lowest increase in sales due to the Christmas sales was found in Poland – 21% in comparison to the previous quarter of 2009. The biggest increases in sales on the Polish market in Q4 were recorded by personal grooming devices (small household appliances), namely hair styling appliances and electric toothbrushes. The slowdown, however, was observed in the espresso coffee machines market, which until now has been by far the most dynamically growing category.
Conversely, in the Czech Republic the positive trend in revenues was registered for major household appliances such as freezers, hobs (stove tops), microwave ovens and driers.
Despite the fact that the holiday season contributed to the growth of sales, the drop in the people’s purchasing power caused by the income decrease and by the low financial resources prompted the decrease of sales in value comparing with the same period of the last year in the CEE region.


Chances and threats for the technical consumer market in 2010
It is difficult to forecast the shape of the technical consumer goods market in the CEE in 2010.
We can expect improvement in the consumer electronics subsector thanks to the forthcoming FIFA World Cup 2010, which should boost the sales of TV sets. Also, the new law regulations, for example the rule regarding DVB-T in Poland, may positively influence the sales of electronic equipment retailers and manufacturers, according to Pawel Olszynka, Head IT & Telecoms Analyst of PMR Publications.
In terms of major household appliances, the year 2010 should not bring any fundamental changes in market trends. The market will need some time to rebuild after the major drops in 2009; therefore no significant increases in the sales are expected to take place.
On the other hand, the 2010 forecast for the IT market does not look optimistic. It is important to note that the IT market is heavily dependent on orders of companies and public institutions. Especially the latter cut costs related to IT or office equipment. It is therefore believed that it will take a little longer for the improvement of sales of the IT sector.



Paulina Burzawa
Business Editor
PMR Publications