Home Appliance Chain Market

Market Overview

One of the key factors that drive the home appliances market is the expiration of the lifetime of existing appliances. Different appliances have different lifetimes, and the duration also varies on the basis of other factors such as the frequency of service. Mechanical or electrical failures, accidental impacts, ineffective operation, and wear and tear are some of the reasons that necessitate servicing. With today’s busy lifestyle, users are often unable to service appliances timely, which further decreases the lifespan.

In the present scenario, a majority of the households own refrigerators and washers. The average lifespan of a properly maintained refrigerator is estimated to be between 14 and 17 years, and that of a washer estimated to be approximately 14 years, be it a top-loader or front-loader. Users are thus compelled to replace the existing models with newer ones at the end of their lifespan. Manufacturers often offer attractive exchange deals to attract customers, further convincing the latter to replace old and worn-out appliances. Appliances are also often replaced before they are worn out due to lifestyle changes and the customer preference for advanced technologies.

Regional Analysis

North America is expected to dominate the global market during the forecast period due to a large number of vendors present in the region.

North America is a homogeneous and mature market with high product penetration and is significantly dominated by replacement products. Large household provides space for many household appliances, including large appliances. The North American market mainly consists of global manufactures. In 2018 January, the U.S government-imposed safeguard tariffs on imported washing machines, 20% on the first 1.2 million, whereas 50% on any more than that. This enactment paved the way for American manufacturers to increase their sales and profits. This triggered increased prices of the washing machines in the region. According to a research study by the Federal Reserve Board and the University of Chicago, safeguard tariffs increased the average washing machine price by about USD 86 per machine. Hence, the imported, as well as domestic washers, turned out to be expensive.

Home appliance manufacturers in Europe are developing cutting-edge technology to enable sustainable energy consumption and thereby contribute to the climate vision of the Paris Agreement. The European home appliance market is fragmented and characterized by varying consumer requirements amid countries and a large number of manufacturers, brands, and retailers. Price pressure in tandem with structural overcapacity prolonged the industry consolidation, with manufacturers targeting to achieve economies of scale. Most of the households in the region own home appliances; however, replacement demand for broken equipment, as well as the penchant for advanced models, is anticipated to boost the market growth. Since the lifetime of the majority of the home appliances is 10 years, manufacturers continue to introduce new technological innovations to encourage upgrades.

The home appliance sector in this region is witnessing significant growth, owing to the emerging retail sector, real estate, and housing demand, along with higher disposable income and changing lifestyles of the population. The notable players in the region, such as Videocon, LG, Haier, Godrej, and others, are markedly contributing to the regional market growth. India and China are the prominent economies stimulating market growth. Market Demand is increasing in tandem with the growing electrification of rural areas. The regional e-commerce sector is booming at a staggering rate, aiding the market growth. The home appliance sector has garnered substantial investments over the years. For instance, in October 2017, Flipkart launched a private consumer appliances label called Marq. In 2017 May, Havells acquired Lloyd consumer durables business.

Brazil represents 50% of the overall Latin American home appliances market. Argentina is one other key player in the region. Latin America is a lucrative marketplace for home appliances. The growth is primarily driven by the rising purchasing power of households, with demand concerning refrigerators, cookers and washing machines. The Latin America market is a consolidated marketplace. The two largest manufacturers Whirlpool and Electrolux account for approximately 70% of appliance sales in Brazil. In 2013, Electrolux acquired Chilean appliance manufacturer CTI. The acquisition made Electrolux one of the leading appliance manufacturers in Chile and the leading manufacturer of refrigerators and freezers in Argentina. The rapidly emerging middle class in Argentina and Brazil also engendered the demand for products belonging to the premium segment. Due to the high import duties and logistical costs, products sold in Latin America are produced domestically.

The Middle East home appliance industry is growing at a faster rate, owing to the rising income of the households. The countries such as the UAE, Qatar, Saudi Arabia, and others are the flourishing economies adopting home appliances extensively. The region conducts mega-events, which promote the sales of home appliances. The climate in the Middle East countries is mostly hot, and therefore, to preserve the perishable food products, refrigerators are deployed extensively. The growing tourism sector is also aiding the market growth. The hotels and resorts buy refrigerators, washing machines, and dishwashers in a bulk amount. Hypermarkets in the region hold the lion’s share of the home appliance sale in the UAE; however, the contribution of online sales is on the upward trajectory as more customers turn to digital devices to access products and services. The home appliance market in Africa is growing at a slower pace due to the limited access to electricity. It is estimated that only one of three people in Africa have electricity access. However, many efforts are underway to improve the living condition of the regional populace. Energy-efficient and high-quality appliances are essential for the growth of the African market.

Segmental Analysis

Based on the product, the market is segmented into refrigerators & freezers, washers & dryers, dishwashers, and others. Out of which refrigerators & freezers product segment holds the largest market value of USD 64,505 million in 2018, followed by washers & dryers.

• Refrigerators & Freezers:

The need to preserve perishable goods is imperative; hence, refrigerators are one of the widely used electronic appliances in every household around the world. The refrigeration industry plays a vital role in today’s global economy with significant contributions made in the health, food, energy, and environmental domains. In addition to household applications of refrigerators, it is extensively utilized in retail, healthcare, and other industries. In the healthcare industry, refrigeration preserves medicines and pharmaceuticals, primarily vaccines. New treatments, including cryosurgery or cryotherapy, were developed by virtue of ultra-low temperature technologies. Refrigeration is also exploited in various manufacturing industries, including food and beverage, chemical, mechanical engineering, plastic processing, and others.

• Washers and Dryers:

Washers and dryers are common consumer electronics goods found in every household. Busy life schedules and shortage of time for washing and cleaning purposes compel the populace to buy a washing machine. The modern populace has less time to engage in domestic work; as a result, the washing machine becomes an integral part of the home. In this competitive industry, reputed companies are extensively manufacturing washing machines with a gamut of features to cater to the diverse requirements of the customer. Nowadays, fully automatic washing machines are gaining traction, owing to its low-cost and higher disposable incomes. The washing machine industry is witnessing significant growth as newer households are purchasing washing machines, as well as a more significant number of households are replacing semi-automatic washing machines with fully automatic washing machines. Most customers favor washing machines that provide savings in electricity and water bills. The urban regions, on the other hand, exert emphasis on environmental concerns.

• Dishwashers:

Dishwashers are owned by 75% of the households in the U.S as well as in Europe, but it is adopted at a faster rate in Asia-Pacific. The automatic household dishwashers are more energy and water efficient than manual washing dishes. However, they are still counted as a luxury appliance by many customers, and the market penetration of these appliances is relatively low than other white goods. However, owing to the increasing disposable incomes and changing lifestyles, these appliances are exploring applications in many households in recent years. The developments made in dishwashing include minimum sound production in conjunction with the integration of sensors. In developing economies, companies are effectuating various awareness programs concerning the benefits of using dishwashers based on time, effectiveness, and hygiene. Companies are targeting the early adopters who are conscious of the health and environmental benefits of using a machine. The populace with modular kitchens is another target market.

Based on the price range, the market is segmented into low, medium, and high. From these segments, the medium price range segment holds the largest market value of USD 44,006 million in 2018, followed by a high and low-price range.

• Medium Price:

The medium price range is opted by most of the manufacturers as it effectively attracts customers as well as will boost the sales and revenue of the company. The medium price category considerably attracts medium income category customers who seek for the price, brand image, and special features of the product. The middle-class population is increasing around the globe, and it is estimated to propel the growth of this segment. According to the research study by the United Nations, urbanization in India is expected to reach 40% by 2030, and the number of people living in urban areas will increase by about 59 billion. Hence, the increasing income in tandem with the rising urbanization in the country is estimated to contribute significantly to the home appliance market.

• High Price:

High price ranges are largely targeted on premium customers. A high price is generally used to provide high-quality products, and thereby to establish a premium brand image. Moreover, this approach is typically used when the competition is significantly high, and the manufacturing company is about the quality of the product offered by them. Nowadays, most of the companies are entering the premium pricing category. LG targets premium customers with a series of home appliances. This is primarily implemented to increase the profit margins and to improve the contribution of high-end product sales to 50% from the current 30% of overall sales. At the starting phase, the prices of these products will be on the higher side and it will gradually decrease as volume picks up.

Based on the sales channel, the market is segmented into online and offline. From these segments, the offline segment holds the largest market value of USD 63,134 million in 2018, followed by an online sales channel.

• Offline:

Offline stores are the largest distribution channel with the highest market share. Notable manufacturers such as Whirlpool Corporation, IFB Industries Ltd., Samsung Electronics Co. Ltd., and LG Electronics Inc. have exclusive stores spanning various regions. Over the past few years, these companies are spending significantly in developing countries such as India, Thailand, and Taiwan for expanding distribution channels and open exclusive stores. For instance, in February 2015, Whirlpool Corporation, a leading washing machine manufacturer, announced to open a series of 15 showrooms across India with an investment worth more than USD 226 million by 2017. Moreover, customers are convinced by the offline purchase as they can ensure the product’s working condition and the salesperson guides them through various features and technicalities.

• Online:

In the digital era, online shopping of consumer goods is gaining momentum due to the convenience offered. With the increasing internet penetration, people are relying more on technology, and thereby, an apparent shift in the buying pattern is observed over the decade. It never occurred to most of the home appliance manufacturing companies that customers will shift toward online purchasing as it fails to offer a touch-and-feel experience of products in the stores. The online platform provides product comparisons based on price, with easy returns and timely delivery. Prominent companies are integrating various marketing strategies, including product advertisement and celebrity marketing, to gain maximum customer penetration. Online sales help companies to reach a more extensive customer base. Hence, manufacturers consider e-commerce as one of the crucial channels to operate in the market.