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Abstract
EXECUTIVE SUMMARY
Another year of decline
The domestic electrical appliances market experienced another year of current value decline in 2005, mainly brought about by a fall in value sales of large electrical appliances, and a lesser decline for small kitchen appliances. Overall, volume sales performed slightly better, up 1%. As during every year of the review period, small electrical appliances saw a further increase in their share of the total domestic electrical appliances market in 2005.
Built-in appliances gain further share
Built-in appliances outperformed freestanding appliances in 2005, with only a slight decline in volume terms. Contributing factors include declining demand for freestanding dishwashers and freestanding cookers, while from a low base, built-in microwaves were particularly dynamic during 2005. The most important exception was refrigeration appliances, where freestanding appliances performed slightly better than built-in units.
Spending restraint and lower prices prevent growth
The lacklustre market performance is due to continued spending restraints among German consumers as a result of macroeconomic uncertainty and high unemployment. As a result, consumers delay replacement purchases preventing growth in a context of market saturation for most product types. In addition, value growth is hampered by intense price competition, both among manufacturers and retailers. Innovations in terms of design or added features often do not translate into additional value for manufacturers. However, some price increases were introduced in 2005 as a result of higher prices of raw materials and energy, and more are expected for 2006.
Competition intensifies as many leading players lose volume share
The majority of leading brands in the domestic electrical appliances market are traditional German brands, although not all are German-owned. Leading players in the large electrical appliances environment are Bosch-Siemens Hausgerate (BSH), AEG Hausgerate, Bauknecht Hausgerate, Liebherr-Hausgerate and Miele & Cie led large kitchen appliances, while leading players in small electrical appliances are Groupe SEB Deutschland, Braun and Philips. Miele & Cie also is also a strong player in small electrical appliances, although its presence is limited to vacuum cleaners. Stronger competition from emerging brands such as Samsung, Daewoo or LG, as well as private label products and cheap imports, resulted in volume share losses for many of the leading brands in 2005, especially in the areas of freestanding large kitchen appliances and small electrical appliances.
Sales expected to improve over forecast period
Sales of domestic electrical appliances are expected to improve over the forecast period, although this depends on an improvement in consumer confidence leading to increased spending. Furthermore, as the stock of old appliances increases, more replacement purchases may simply become necessary, without the option to postpone in the same way as during the review period. According to the ZVEI trade association, more than a third of the large appliance stock is older than 16 years, and 20% older than 20 years. A particular boost is expected for the second half of 2006 as an increase in the VAT rate of three percentage points to be implemented on 1 January 2007 could result in purchases being brought forward. However, this could also prove to be a short-lived boom, as a generally higher price level in 2007 could sour consumer mood, bringing about a renewed sales deterioration.
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