Household Equipment Sector Report & Analysis

Hit by purchasing-power crisis

MEDIUM RISK FOR ENTERPRISES

Last Update: July 2024

Strengths & Weaknesses

Demographics and urbanization drive strong demand
Innovation in smart home devices
Some very strong niches (robotic appliances, health & wellness equipment, small kitchen appliances etc.)

Highly cyclical sector
Concentrated distribution networks (i.e. specialty retailers)
Equipment rate is high for a number of products (TV sets, kitchen appliances etc.)
Furniture segment is highly fragmented

Sector Overview

What to watch ?

Purchasing power crisis and households’ intention to make large purchases (e.g. appliances, furniture etc.) as well as their intention to buy housing
Real estate market developments (new residential buildings, volume of transactions etc.)
Interest rate and consumer credit flows
Prices of raw materials, especially metals

After a strong post-pandemic boom, thanks to pent-up demand, consumer electronics, appliances and furniture sales declined from 2022 onwards. The purchasing-power crisis along with the slow renewal of equipment meant that demand plummeted. Furthermore, the decline in transactions and new building in most real estate market also hit the sector.

Nevertheless, there are strong growth prospects for specific product categories such as smart home devices, robotics and health-related devices. AI and digital technologies could also allow some players to boost revenues through improved customer experience (e.g. virtual reality, hyper customization etc.).

Despite a challenging environment, consumer electronics companies posted an EBIDTA margin close to 9% in 2023 while firms in the furniture segment had an EBIDTA margin of 10%. Nevertheless, growth prospects are stronger for the electronics segment, which is poised to grow earnings per share by over +15% the next five years while growth should be closer to +10% for firms involved in furniture manufacturing.

Subsectors

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 the vast majority of demand.

Consumer electronics: audio and video equipment, computers, mobile phones etc. 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.

Household appliances: small appliances (home care, personal care, cooking aids…) and large appliances (refrigerators, ovens, dishwashers, washing machines…). Much like for 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 US.

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 US, still have a significant presence in the industry.

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