With smart and connected an accepted norm, the HA makers are moving toward offering models, which enhance the consumer’s lifestyle and make their lives convenient.
Electric household appliances market is expected to witness a significant growth owing to the rising disposable incomes of individuals. The increasing demand for air conditioners, refrigerators, and washing machines can be attributed to the improving living standards and increasing number of households across the country.
Major appliances, such as washing machines, refrigerators, and air conditioners, have continued to sustain robust demand due to the high consumer demand. As regional economies are advancing, consumers have started utilizing modernized devices and adopting technologies to improve the household. The low-level adoption is translating into an untapped potential for electric household appliances market players. Steady growth is predicted while rural regions are set to outdo the trends owing to the improving lifestyles and rising purchasing power.
Indian market landscape
India’s GDP per capita is poised to increase from USD 2041 in 2019 to USD 3273.85 in 2023. Maximum consumer spending is likely to occur in sectors like food, housing, consumer durables, and transport and communications. This increasing purchasing power coupled with higher penetration that is also being fuelled by e-Commerce continues to drive growth. The outcomes of the recent General Elections should continue to see infrastructure spends and step up in consumption-driving initiatives.
In the last few months, there has been an increase in customs duties for imports of consumer durables and few components. The government is expected to step up impetus for scaling up local manufacturing, and the industry is expecting to see many more global players to set up a local footprint for both products as well as components in the coming months. The regulatory environment continues to get more stringent with a 20-percent increase in energy regulations in refrigerators from January 2020, introduction of regulations in washing machines and microwaves along with increased focus on component-level regulations for air conditioner manufacturers. While the industry is expected to drive high resource efficiency, current standards are seen to be in sync with developed markets and high cost structure is prohibiting adoption of the same.
Key drivers. Some other trends that would have an impact on the industry are crisply listed in this year’s annual report of Whirlpool of India:
- A growing economy along with increasing social-media influence is creating higher aspiration levels for the fast-evolving Indian consumer. This is fuelling the desire to live life to the fullest when it comes to lifestyle choices and thus a higher demand for durables for convenience.
- Increasing exposure to global trends and lifestyle cues and a rise in working-age population is creating a larger base of consumers with increasing discretionary income. Easy financing schemes are fuelling shortened product replacement cycles with the will to trade-up for the right experience, changing the perception of durables as utility items rather than luxury possessions.
- E-commerce platforms continue to grow at a fast pace. They are fast becoming discovery platforms for products for consumers and one of the key influencers in the consumer decision journey. A lot of emphasis is being laid in ensuring positive user reviews and post-purchase service experience.
- The retail landscape continues to consolidate with partnerships between large offline and online players.
- Government initiatives behind affordable housing, national electrification, financial inclusion along with indirect benefits to bolster infrastructure are expected to continue.
- Companies are also focusing on increasing the use of environment-friendly components and reduce e-waste by promoting product recycling. Energy consumption is a huge focus area for the government and will continue to be regulated by government bodies. Energy consumption continues to get more expansive and stringent.
- Ease of access and affordable broadband spectrum is going to create a huge fillip in data-enabled experiences and personalization. Along with this, IoT-enabled appliances continue to be a focus area for all brands. Consumer trends, developing markets/segments over the next decade will move India from being an economy led by the bottom of the pyramid, to one led by the middle class. Up from about 50 percent of the households today, the middle-income group will become nearly 80 percent of the households and will drive about 75 percent of consumer spending. Higher income and a growing consumption culture will fuel the high-income bracket to spend more on essential categories like food, beverages, apparel, personal care, gadgets, transport, and housing. This growth will also be observed in an accelerated rate in semi-urban and rural markets. A high growth rate of internet penetration, aided by smartphones and low-cost data access in India, is influencing consumer behavior in terms of media consumption, shopping habits, and use of appliances. And, Young India is leading this changing consumption wave with their exhibition of willingness to spend and be highly discerning about what they perceive as best-in-class offerings in every consumption category. Innovation and focus on continuously launching new offerings to drive differentiation and creating value has become a norm for the industry. Thus, a robust innovation pipeline with a continued focus on developing new features and technology solutions to capture the consumer’s imagination and fuel the desire for enhanced experiences continues to be critical for organizations. The long-term growth opportunity in the Indian market continues to attract new players to the durables industry.
The export business will be on a growth trajectory, with SAARC markets and Nepal being attractive destinations. Consumer services are an important considertaion for all the makers, and is often the differentiator. Systems and processes are regularly being strengthened, field service networks tightened, genuine spare parts in the after-sales market made easily available, and a home visit within 24–48 hours by highly trained and motivated service technicians ensured.
The global home appliances market in terms of revenue is estimated at USD 86,811 million in 2019. The segment is expected to show a revenue growth of 11.3 percent in 2020. The number of users is expected to amount to 1777.4 million by 2023 from 1133.9 million in 2019. As of the current year, user penetration has reached 15.4 percent in 2019 and is expected to hit 23.2 percent by 2023. The average revenue per user (ARPU) currently amounts to USD 76.56 and is gradually on the downslide. With a market volume of USD 29,183 million, the maximum revenue was generated in China, followed by USD 15,167 million in the US. UK, Japan, and Germany are also among the Top 5 revenue generators.
The global home appliances market is experiencing steady growth with the growing middle-class economy, improved disposable income levels in a number of countries, increase in labor costs, busier lifestyles, and the availability of a range of home appliances at competitive prices. With increasing digitization, consumers have become tech-savvy and have strong knowledge regarding the use and benefits of all modern appliances. The number of smart appliances introduced in the market has increased steadily since 2012. The emergence of smart homes is aiding the proliferation of smart appliances, which can be connected to the end-user’s smartphone and monitored remotely. Use of connectivity as a differentiating feature by manufacturers is on the rise. Wireless technologies like Wi-Fi, Bluetooth, and ZigBee can be used in or accessed by smartphones and tablets. But the inclusion of these technologies in home appliances (like air conditioners) is a means of product differentiation by manufacturers, that is enticing tech-savvy consumers. The improvement in network infrastructure has translated into better broadband and internet penetration. Therefore, consumers are increasingly opting for wireless and technologically advanced products, mostly for the convenience they offer.
Smart homes market
The smart homes market today is massive, and poised to grow. According to IHS, 98 million smart home devices worth roughly USD 10 billion dollars were sold in the United States in 2018, covering everything from home assistants and smart speakers to smart lightbulbs to internet-connected refrigerators. Analysts believe the market will grow considerably in coming years; IHS predicts 50 percent growth every year through 2021.
In developed countries, the demand for smart connected kitchen appliances are gaining traction owing to early technology adopters; however, these are still in the introduction phase, and it is expected to take three to four years for them to reach a log phase. However, the rise in consumer spending coupled with the introduction of technologically advanced models within the category are influencing the market.
The smart appliances market in Asia-Pacific is expected to grow at a rapid rate. Developed countries like Japan, Singapore, Hong Kong, and Indonesia are expected to register an increase in the sales of smart appliances, mostly owing to the rising energy and labor costs, high purchasing power of consumers, and greater awareness about smart cities and smart integrated appliances. China has the highest demand for conventional air conditioners, by volume, across the globe, owing to government policies that favor energy-saving appliances, a growing property market, and hot weather. The merger of Haier and GE appliances has given Haier an access to the latter’s smart appliance technology expertise, which will make it a strong player in China.
In fact, one out of four major home appliances shipped in Asia in 2018 included web-connectivity features. A strong increase in major home-appliances production in Asia, along with high-speed innovation processes and more competitive price strategies, are key reasons the smart home-appliances market is growing in the region.
Remotely controlling and managing appliances via a smartphone app is the main benefit offered by connected appliances. However, this added functionality is not always viewed as a benefit by appliances owners, especially when it comes to smart refrigerators, washing machines, clothes dryers, and dishwashers. The mobile apps for these devices have so far offered only limited features, like appliance status updates and the ability to cycle power on and off remotely. Despite this shortcoming, appliances makers are moving fast to implement features that will inspire and promote brand loyalty.
While these major home appliances face steep challenges in delivering connected products that add value for consumers, room air conditioners are the exception. Unlike refrigerators and washing machines, the smart functions of room air conditioners are linked to convenience, comfort and – a key sales motivator in Asia – health. Smart air conditioners now offer air-quality sensors, air purifiers, dehumidifier functions, and automatic air-filter cleaning, all with the goal of improving air quality and, by extension, the user’s health.
Connected ranges are expected to grow at a compound annual growth rate (CAGR) of 107.5 percent between 2018 and 2023. An important sales motivator for smart ranges is peace of mind – using the device’s remote management features, consumers can immediately see the status of their ranges and respond accordingly from afar.
Looking to the future, appliances manufacturers need to make sure the new smart functions they offer consumers actually result in a better user experience. That way, these features can be used to persuade consumers to buy smart appliances and actually connect them to the internet, after they bring them home.
A couple of years ago, when appliances makers announced that their washing machines, ovens, and dishwashers are smart and came with an app, is old news now. Smart appliances are now available from every brand, whether those capabilities are used or not is another story. Many flagship appliances on the market give the option of, say, starting or stopping a washing machine or checking the contents of the fridge while at the grocery store.
Now, the news is not whether the appliance is smart, but just how smart is it? The question is, now that appliances are smart, what other things will manufacturers bake into them? Answer: Lots of different things, like more Amazon Dash buttons, more voice assistant integration, and more smart home control overall.
Some fashionable trends gripping the consumer:
A world of color. Matte stainless steel was so last year. This year, major appliance makers are throwing a splash of color onto appliances. While stainless steel will always be an option for the traditionalists, those who are seeking a pop of color in the kitchen are seeing a rainbow. Think reds, vintage greens, and even champagne-colored fridges, mixers, and more. While we have already seen this trend to some extent with KitchenAid mixers, expect other appliances makers to follow suit.
Small appliances inside of big appliances. Remember the days when major appliances just did one thing, like wash the dishes or keep food cool? This year, we are seeing appliances that can do much more than that. For example, the Samsung Family Hub Fridge has a built-in LED screen that is essentially a computer. We have also seen fridges with flex drawers that you can set to either fridge or freezer. And then there are ovens with built-in air fryers. We expect to see and hear more about this trend of an appliance within an appliance.
Partnerships. This is not a new trend, but a continuing one. To keep pace with the evolving market, and to gain market share in this volatile market locally as well as globally, companies are strategizing and looking for mergers and acquisitions, joint ventures, technology tie-ups, and partnership opportunities within and outside the traditional supply-chain spectrum. They are collaborating more across allied businesses offering integrated services too.
IHS Markit forecasts further consolidation within the home appliances market, as key players in the appliances industry are looking to increase their corporate footprints into new territories and market segments. Major home appliances manufacturers will continue to relocate and expand their manufacturing facilities in new locations to gain share, increase cost efficiency, and get closer to addressable regional markets.
In one example, in June 2018, Hisense Group offered the winning bid to Gorenje. Hisense now owns 95 percent of Gorenje. From the point of view of global expansion, this deal facilitates the entry of both companies into new local and international markets. Hisense is now expanding into Western and Eastern Europe, while Gorenje is expanding in the Middle-East, Africa and Asia – including China, which boasts the world’s largest appliances unit-shipment volume. Chinese consumers are also increasingly willing to consider buying international brands. Launching Gorenje’s premium brand Asko in China could also be a good strategy, similar to the promotion of its AEG brand by Electrolux in China, in partnership with Midea Group. The North American presence of Hisense – along with Gorenje’s strategic distribution-level partnership with American premium appliances maker, Sub-Zero Group, to distribute Gorenje’s premium and high-end laundry and dishwasher brand Asko – will also help both these companies expand into the United States, which is a large appliances market, in terms of revenue. This acquisition deal will also speed up Gorenje’s projected plans of doubling its US sales by 2020, while continuing to grow stronger in Asia.
From a product portfolio perspective, Gorenje’s strengths in large cooking and dishwashing appliances complements Hisense’s strength in refrigeration, air-conditioning, and laundry appliances. From a cost efficiency point of view, Gorenje’s low-cost production and operational capabilities in key European markets will further help Hisense increase its footprint in Western and Eastern Europe. Hisense, with its low-cost production, distribution, and channel management in China and other key markets, will help Gorenje improve its market position in various markets in Asia-Pacific, the Middle-East, and Africa. Hisense enjoys a leading position in the development of connected appliances technology and also its advancements in the field of Industrial Revolution 4.0, which will bolster the technological know-how of Gorenje.
The home appliances market will continue to witness more consolidation, with more mergers, acquisitions, and tie-ups expected. These business deals will expand beyond appliances companies, into companies providing technological know-how, expertise and support for the home-automation segment, as well as across other allied companies and service areas. There is also growing interest from private-equity firms in acquiring home appliances and home-automation companies, which will serve to keep investments in the industry going strong over the next few years.