The absence of government stimuli and the effect of four interest rate rises in the past six months have finally had an impact on technical consumer goods spending. Compared to the same period last year, when these markets were enjoying double-digit growth, spending in the first quarter (Q1) 2010 declined by 1.6 per cent, according to Gfk Temax research.
Domestic appliances took the worst hit this quarter, but consumer electronics also failed to deliver growth. IT and telecoms, however, enjoyed modest growth thanks to the all-important ‘back to school’ period.
A mixed quarter for the value sales of notebooks led to a modest overall growth for the IT sector of 5.6 per cent. January ‘back to school’ sales were strong with a growth of 11.6 per cent on January 2009. Value sales in March, however, showed the first year on year decline for notebooks (-4.1 per cent) since the launch of the category. With 60 per cent of all notebooks sold, selling for under $1000 in the first quarter, it is no wonder that retailers are struggling to maintain value growth from this category.
Conversely, desktop PCs performed consistently well with a quarter growth of 15 per cent thanks to the gaining popularity of all-in-one models. With a considerably higher average price than other form factors, all-in-ones now account for 36 per cent of all desktops sold.
Growth has returned to the telecoms sector (which now accounts for 16 per cent of total spend) after a disappointing fourth quarter in 2009. Traditional mobile handsets continued their steep decline (-45 per cent compared to Q1 2009), but the 149 per cent growth in spend on smartphones was more than enough to counteract the decrease, resulting in a 3.9 per cent gain for the sector overall.
Consumer electronics posted a year on year decline of 2.2 per cent this quarter. Bucking the overall trend was the dominant flat panel TV category, with a modest three per cent growth. This value trend disguises the enormous 38 per cent unit growth, indicating that consumers are still benefiting from price competition and attractive promotions. This will no doubt continue into the run-up to the Football World Cup in South Africa this June.
Another category that continues to grow strongly is set-top boxes (+38 per cent), thanks to ongoing awareness campaigns for the digital switchover and the benefits of high definition.
All other consumer electronics categories, however, experienced double-digit decline. MP3 sales are being impacted by the growth of smartphones with MP3 capability, DVD recorders are being replaced by high definition set-top boxes with in-built hard drives (despite the growth of blu-ray models), audio systems continue their long-term decline and the value of car navigation continues to suffer from the commoditisation of this market.
Certain categories continued to perform strongly. Australians’ love of coffee and a focus on convenience and design led to a 23 per cent quarterly increase for hot beverage makers. Meanwhile, the wave of popularity for cooking shows have driven the increased value sales of food preparation categories.
Cooking was the only major domestic appliance category to experience any growth (four per cent), while refrigeration, washing machines and dishwashers experienced decline. While some discounting has taken place in these markets, the decline is more a reflection of the economic mood rather than competitive retailer activity.
The extent to which the government stimulus packages, coupled with extremely low interest rates, affected 2009’s consumer splurge on technical goods seems to have been underestimated. Despite the increasing ‘must-have’ nature of technical goods, it is unlikely that spend in the second quarter will be able to surpass that of 2009, particularly as retailers continue to battle it out with pricing and promotional activity. Renewed nervousness regarding the global economy will also play its part.
With the upcoming World Cup, coinciding with the take-up of new TV technologies (3D, LED, IPTV), there is cause for some optimism. Historically, such events have provided a strong boost to the technical markets, with retailers enjoying increased footfall and the benefits of increased advertising.