The UK consumer electronics (CE) retail market generated £19.2 billion (€21.3bn) in 2018, with further growth of 4 per cent expected this year, even with the economic uncertainty surrounding Brexit, according to a forthcoming report from Futuresource Consulting.
“The UK CE market is based around ten major product categories,” says Jack Wetherill, Principle Analyst at Futuresource Consulting. “It’s a mature market, with high penetration rates for established goods, and consumers keen to explore the leading edge of new technologies. Within the categories, there are products at many different stages in their lifecycles, and the competitive and synergetic forces that come into play can be intense.”
Across all product categories, 122 million units were shipped last year, a decrease of around one million units when compared to 2017. However, 2019 will see the CE market remain robust, and although volume will continue to marginally decline, value will grow as consumers look towards premium products and nascent technologies.
“Trends towards online and multi-channel or ‘click and collect’ retail models are continuing to reduce high street footfall, which can play a large part in bundling and upsell opportunities,” says Stephen Mears, Research Analyst at Futuresource Consulting. “Online now accounts for 25 per cent of all CE retail volumes in the UK, with multi-channel methods taking a further 37 per cent. Physical retail accounts for the remaining 48 per cent and is on a downward trajectory across all categories. Nevertheless, there are reasons for retailers to remain optimistic, particularly as there is a general consumer preference to physically interact with CE products prior to purchase. With the right multi-channel strategies, retailers can use this to their advantage.”
Drilling down into the categories, Futuresource expects newer technologies, such as wearables, OLED TVs, true-wireless headphones, smart speakers, and next generation games consoles to experience significant growth in both volume and value terms. These products will contribute an increasing amount to the CE market across the coming years, with newer, innovative products generating a value CAGR of 6.5 per cent for 2018 to 2022.
In contrast, a number of categories continue to experience decline, such as home video, imaging, tablets and storage. As a whole, declining product markets will decrease in value by a CAGR of 7.8 per cent for 2018 to 2022.
While the outlook for the CE market in relation to Brexit is reasonably optimistic, given its maturity and size relative to other areas of consumer spending, Britain’s exit from the European Union will still have an influence on market dynamics.
“We expect products that enhance the home will continue to grow,” says Wetherill. “The last economic shock experienced in the UK, the 2008 recession, saw products such as DVD players and TVs gain in volume and value terms, as people pivoted their discretionary spending towards improving the leisure-time experience in the home. A Brexit-based economic shock is likely to have a similar impact on consumer electronics, with some products withstanding the likely downturn in consumer spending, and even enjoying some moderate growth. Mature CE markets which are highly saturated rely on replacement sales, and so are seeing some volume decline in line with market expectations, but Brexit will not overly exacerbate this trend.”
Vendors, distributors and retailers face a situation in which they may be tempted to stockpile CE goods, in the hope of avoiding any immediate tariffs on imports in the event of a disorderly no-deal exit from the EU; furthermore increased customs checks could likely slow down the supply chain. All of this will come at an increased cost to vendors, most of which will be passed down the value chain all the way to consumers. The value of the CE market may be nominally growing, but in real terms some of this value will be due to currency and price fluctuations as the market adjusts to Brexit.
Futuresource forecasts show that this dynamic interplay will result in overall market volume declines of 1.1 per cent in 2019, but value growth of 4.1 per cent.