Household appliances: the best first quarter for the Russian market in three years

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According to the data published by Gfk Temax, nearly RUB 347 billion was generated by the Russian technical consumer goods (TCG) market in the first quarter of 2014, exceeding the results of the previous three years and exceeding the Q1 2013 turnover by almost 3%. Such a positive start to the year creates optimism.

The technology market has been supported by stable demand for products in everyday use – major domestic appliances followed by consumer electronics and small domestic appliances. However, the main driver for TCG market growth was telecommunication (an increase of 16.9% versus Q1 2013), affected by changes in the consumption of Telecom devices. Sales of digital products related to computer consumption have maintained a negative trend since 2013.

Telecommunication: a successful year with dynamic development
The growth leader in all sectors surveyed in was the Telecom market with growth of 17% from Q1 2013 to Q1 2014, while demand has grown by less than 10%. The Q1 2014 result is even better than last year’s when demand for Telecom goods only grew by 5%. One of the reasons is that consumers had invested in up-to-date products against the background of currency exchange rates changes. Another reason is the growing demand for smartphones (an increase of 70% from Q1 2013 to Q1 2014), especially for cheap devices that cannibalize some parts of the feature phones market.

Small domestic appliances: stable demand supports positive trend
The SDA market preserved relatively stable sales compared to Q1 2013. Grooming devices took the leading position with growth of around 13%. The increase is driven also by a large demand for dental and hair care products. Household appliances also reflected positive dynamics through a positive growth in total sales of larger vacuum cleaners and irons. Kitchen appliances, affected mainly by a price drop of 4% showed a negative trend. However, groups such as kettles and coffee makers kept positive dynamics and thus contributed to the growth of this market.

Office equipment and consumables: stable structure
Office equipment sales declined by 15% compared to Q1 2013. Major trends, such as the long-term growth in the popularity of multifunctional devices over single function alternatives, the reshuffling in the consumer distribution channels and the CISS (continuous bulk-ink supply) introduction, remained valid for the first quarter of 2014. Consumables, on the other hand, showed an unusual decline compared to the printing market dynamics, although the demand is believed to be less vulnerable to market fluctuations due to its dependency on the installed base.

Major domestic appliances: prices are rising
Double-digit growth of the built-in market and modest single-digit growth in the freestanding categories resulted in a positive start to the year for the total MDA market. The average cost of major domestic appliances has increased by slightly more than 5% in Q1 2014 in comparison to Q1 2013. This was caused primarily by the weakening of the local currency in Russia. However, demand is heterogeneous from region to region. Thus, customers in northern and central parts are around 10% more active this year than in 2013, and rising prices seem to have no effect. The Urals, as one of the regions with negative growth, suffered from the sharpest price increase this year. Traditionally, built-in categories perform positively throughout the country, and this process is expected to continue in 2014 in light of the ongoing demand for possessions among the younger population.

Information Technology: remaining depressed
The IT market decreased compared to Q1 2013. The slowing in the growth of media-tablet sales did not overcome the lost demand for mobile and desktop computers. Sales of mobile computers were affected by decreased household spending. The average price of a mobile computer was around 10% higher in Q1 2014 compared to Q1 2013 – being higher than that for media-tablets. However, the sales of ultra-mobile computers rose by almost 30% compared to Q1 2013. Both the desktop computer and monitor sales values were below the Q1 2013 results by 30% and 20% respectively.

Photography: digital cameras, a spark of hope for the future
Demand for cameras in Q1 2014 was lower by 29%, with turnover going down by 22% compared to Q1 2013. Despite this, there are positive trends. Mirrorless cameras continue to gain in popularity and trust among Russian consumers. Retailers’ efforts, along with those of the vendors are paying off. The segment share rose above 6% in value terms in the first quarter of 2014. Compared with the first quarter of 2013, the segment is growing by 15% in value compared to the same period in 2014.

Consumer electronics: getting smart
The first quarter of 2014 shows an 8% growth in value for the Russian consumer electronics market compared to Q1 2013. Market growth was mainly driven by the Panel TV category with growth exceeding 10% in value, loudspeakers by more than 25% in value and the increased demand for set-top boxes over 25% in value. Consumers keep showing interest in Smart TV with an increase of 30% in value compared to Q1 2013, as the technology becomes more affordable. Average price has decreased by 3%.

A difficult year despite good economic conditions
The economic conditions for the Russian TCG market were, in general, relatively good but were inhibited by a fall in household spending. Households suffered increasing prices due to the euro exchange rate and budget cuts in the government sector. However, the ruble’s depreciation resulted in an unusually sharp decline in the euro/dollar value. Rising political uncertainty seems to be affecting the market as a whole, without targeting specific sectors.