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Sunday, 11 May 2014

Consumer Electronics Market in Germany

Consumer Electronics Market    in Germany-Dissertation Writing Help



Executive Summary


Consumer Electronics Remain A Sought After Market Category


Despite the economic turbulence in 2008, with inflation swinging from high to low in the second half of the year, consumer demand for electronic devices remained high in Germany, once again showing the country’s seemingly inexorable affinity for high tech gadgets. Although in volume terms growth was not as fast as in 2007, the value grew approximately twice as fast as a result of a further shift towards more expensive digital high tech electronics. This was especially evident in the TV sector, where high-priced HDTVs accounted for a much larger volume share than in the previous year.

Convergence Continues To Shape Sector Structures


Multifunctional electronic devices continued to be among the most sought-after products in 2008, putting increasing pressure on related, single-function sectors. Manufacturers continued to focus on innovations that would meet consumers’ demand for converging devices. Navigation systems were fitted with TV and Wi-Fi receivers; in-car media players had mobile phone adapters and GPS functions; digital TVs had Wi-Fi access; and mp3 players and smartphones were the new all-round talents, with such functions as personal training software including heart rate monitoring and stride sensors.

Drivers of Growth Are Hdtv and Mobile Content Devices


HDTVs were once again the winners of the home entertainment sector and consumers’ willingness to invest in an HD-ready TVs remained high despite the current lack of HDTV broadcasting in Germany. Also, strong in demand were portable devices that provide mobile access to online or stored content, most importantly laptops and portable multimedia players. Manufacturers focused on enhancing the mobility and technical features of these devices, adding Wi-Fi access to portable multimedia players and reducing the size and weight of laptops. Navigation systems were another sector that registered strong volume growth as a result of significantly falling unit prices and added-value features such as new live traffic alert systems or gas station finders.

Market Is Mature But Dynamic


Although the market for consumer electronics is comparatively mature in Germany, with scope for volume growth very restricted, structures continued to be dynamic in 2008, driven by fast innovation and replacement cycles. German consumers displayed a particular enthusiasm for replacing their analogue electronics with the newest digital technologies but even the more conventional digital devices such as CD players were affected by accelerated replacement habits. Germany’s thirst for the newest high tech was also evident in the fact that almost all of the top 20 players operate in the premium segment of consumer electronics.

Saturation Expected To Slowdown Volume Growth


While overall volume is expected to continue to grow steadily over the forecast period, it will see a significant slowdown in pace in comparison to the review period. As market experts believe, volume for recently introduced, popular digital products such as HDTVs will settle at a high level over the forecast period and thus not be able to produce such a fast growth as registered over the review period. Although consumer demand is expected to remain high, slower volume growth combined with significantly declining unit prices will have a negative impact on value sales.


Key Trends and Developments


Hd Continues To Advance


Compared to North America and South East Asia, where early versions of HDTV have been available since the 1990s, in Europe HDTV was introduced rather late, with HDTV sets first hitting the shelves of German retailers in 2001. Attempts to broadcast in HD quality have so far had few successes and were mostly discontinued. In 2004, a pan-European satellite TV programme called Euro1080 (now HD-1) was the first channel available in HD quality. In Germany, after some tests in 2004 and from 2005 onwards, private broadcaster ProSiebenSat.1 Media AG aired two HD programmes permanently. Pay-TV provider Premiere launched HD channels in 2006, in time for the football World Cup.

The two channels Pro7HD and Sat.1HD by ProSiebenSat.1 Media AG were discontinued in February 2008 and no plans have been announced to resume airing. At present, HD broadcasting is only available via subscription on pay-TV channel Premiere, and via two public channels, AnixeHD, launched in 2006, and ArteHD, launched in July 2008. In January 2008, Warner Bros. announced that they would discontinue publishing movies on HD-DVDs and use the Blu-ray format instead. This decision made a final stroke to the long-standing format question in favour of Blu-ray.

Outlook (of the trend)


Analogue terrestrial TV ceased to be broadcast at the end of 2008, marking another step forward for digital TV. Analogue cable TV broadcasting is set to cease across Europe by 2012. Public broadcasting channels ARD and ZDF have announced plans to launch HD broadcasting in 2010, on the occasion of the Olympic Winter Games. Although no specific plans have been announced by private TV stations about a future provision of HD broadcasting, private channels are expected to follow ARD and ZDF’s example quickly. From 2010 onwards, the spreading of HD broadcasting is expected to happen at a fast pace until eventually, HD becomes the standard format.

Successor formats of HDTV have already been tried out in different contexts. QuadHDTV with quadruple pixel size (i.e. 3840x2160) was presented in 2006 and was supposed to be put to work for X-ray applications. Japanese TV channel NHK is testing a format called Ultra High Definition Video (UHDV), which displays a resolution of 7680x4320 pixels and up to 60 images per minute. Whilst UHDV is primarily aimed for TV broadcasting, it also closes the gap with digital cinema as HDTV does not have big enough a resolution as required by digital cinemas.

Current Impact


Sales of HDTVs have seen a fast volume growth over the review period and in 2008 more than 85% of all digital TVs sold were HD-Ready. The total number of German households owning an HD-ready TV set amounted to approximately 3 million in early 2008 and consumer willingness to invest in HDTVs or HD-related devices remained high.

Following the decision by Warner Bros to discontinue using HD-DVDs, Toshiba, the major manufacturer of HD-DVD players, announced that itwould stop producing HD-DVD Players and switch to Blu-ray players instead. Subsequently, the share of Blu-ray players in the HD hardware sector grew by over 90% in the first quarter of 2008 alone. According to a survey conducted by trade association BITKOM in June 2008, over 1.2 million households expressed the wish to buy an HD-receiver or set top box within 12 months, 871,847 households wanted to buy a Blu-ray player, 613,504 an HD recorder and 318,893 an HD camcorder.

Manufacturers responded to the strong consumer demand for HD devices with equivalent product innovations. HD resolution was implemented into almost all devices related to imaging as an added-value feature in 2007 and 2008, including computer screens, camcorders and digital cameras. Computers also saw the launch of integrated Blu-ray players.

Future impact


The start of HD broadcasting in 2010 is expected to bring about a further push for HDTVs and accelerate the trend towards larger, more expensive screens. Sales of HD-related peripheral devices are also expected to experience a boost from the switch to HD broadcasting. Especially HD set-top boxes have high volume growth prospects as most TV sets lack integrated receivers. The advance of HD will also have a positive effect on value sales of set-top boxes as it will bring unit prices up, especially when they feature integrated HD recorders. Set-top boxes are therefore among the only products that expect a unit price increase over the forecast period.

The HD trend is also expected to trigger a strong performance for all devices related to the Blu-ray format, which are expected to quickly move standard DVD devices off the market. By 2010, almost every second German household will be fitted with an HD-ready TV set but HD broadcasting will still be lagging behind. This means that for the majority of HDTV owners, the Blu-ray format will be the only way to enjoy high definition images.

The trend towards larger screens will have a particularly positive impact on sales of Blu-ray players as the high definition image quality is particularly eminent on screens larger than 37”. The Blu-ray disc is also expected to replace standard DVDs in the IT sector and integrated Blu-ray players will become a standard feature of all laptops and desktops with HD-ready screens.

Convergence, Mobility and Connectivity Trends Shape Market Sectors


Digitalisation has brought about three closely interrelated trends that have been shaping the market for consumer electronics over the review period. Electronic devices are not merely stand-alone devices anymore, they are either portable and multi-functional, or can be connected to the internet and/or linked with other digital electronic devices.

The convergence trend especially affects mobile phones and navigation systems, which are both seen to be at the centre of this trend by industry experts. Mobile phones are fitted with increasingly better digital cameras, mp3 players and internet access and are turning into multi-multifunctional, yet highly portable devices. Some mobile phones even include GPS services, therefore providing the same functionality of navigation systems, which in turn now often provide mobile phone functions such as dialling pads and phone book storage.

The mobility trend affects all portable devices and has seen recent product innovations including navigation systems with terrestrial TV receivers and mp4 players with Wi-Fi access, in the quest to provide consumers with mobile access to any kind of online or TV content. Laptops have become smaller and were fitted with stronger batteries to facilitate mobile use. Innovations included Apple’s MacBook Air and the so called netbooks – very small laptops now produced by almost every manufacturer of laptops. 

The connectivity trend especially applies to in-home consumer electronics as it focuses on the connectivity of computer and home entertainment centre/TV. With HDTVs being the new must-have in Germany, a growing number of consumers are now interested in extending the scope of their TV’s functions by turning it into the centre of home entertainment. By connecting the TV to the computer, a whole new set of functions for the TV opens up, such as surfing the web, accessing music or video files stored on the computers hard disk, or watching slide shows of digital photos.

Current Impact


The convergence trend has had a large impact on the market as it is imposing pressure on all devices that are not multi-functional. Over the review period, sales of portable mp3 players were impacted by mp3 mobile phones, as well as by the competition from portable multimedia players. The impact of camera phones on digital cameras was not very noticeable yet as the quality of the mobile phone cameras is in most cases still lagging behind and therefore do not offer a real alternative to a regular digital camera.

Navigation systems have put pressure on in-car media players since their sales took off in 2006 and in-car media players have seen sales decline since then. The impact was worst in 2008 as navigation systems reached very high volume sales that year, resulting in volume declines of between 15-20% for in-car CD players and in-car DVD players.

Portable multimedia players benefited hugely from the convergence and mobility trend and saw volume sales grow significantly year-on-year since their introduction in Germany in 2005, again, much to the detriment of portable mp3 players. Laptops saw a very fast volume growth in 2008 and continued to put significant pressure on desktop PCs.

The connectivity trend brought about the innovation of a new set of devices designed to facilitate the connection between devices such as computers, external hard disks, TVs, audio systems and DVD players, and thus established an entire home network. Such home connectivity devices are offered by a number of major manufacturers of digital TVs and computers, for example, the Activity Media Centre by Fujitsu Siemens Digital Home.

Outlook


In an increasingly mobile society, convergence, connectivity and mobility are set to be at the centre of consumer demand over the forecast period. Manufacturers will further focus future product innovations on merging digital functions to extend connectivity to a broader range of electronic devices and to enhance the features of mobile appliances. Mobile TV, currently of very little in demand in Germany, is expected to gain in popularity over the forecast period and open up new areas of innovations and added-value features, such as enhanced screen quality on portable devices.

A further direction for product innovations will come from faster internet connections, both in the home and for mobile internet. According to industry experts, the maximum hypothetical speed for broadband internet connections could be up to ten times faster at the end of the review period than it was in 2008, where the maximum speed was 100,000 Kbit/s. The maximum speed of UMTS, which was 14,000 Kbit/s in the HSDPA Category 10 format in 2008, may more than double by 2010 and reach a speed of 36,000 Kbit/s.

Connectivity in the home is expected to be a further focus of product innovations and manufacturers are likely to put efforts into turning the entire home into a digital network controlled through remote controls, where digital content can be accessed wirelessly from any room in the house.

Future Impact


With the speed of the mobile internet advancing, consumers will be able to carry out more complex online tasks on-the-go. Mobile internet access will therefore play an increasingly important role for all mobile devices over the forecast period, enabling consumers to do their online shopping from anywhere or even to download music or video files directly onto their smart phones or portable multimedia players. Within mobile phones the share of smart phones – the ultimate convergence device – is expected to rise significantly over the forecast period. Mobile TV is likely to become a popular smart phone function and future innovations may include credit card functions, which enable the phone to act as an instant payment method in both online and real shops.

The convergence trend will increasingly impact sales of stand-alone devices and will also result in analogue consumer electronics being pushed off the market as these cannot be hooked up to digital media sources. Most analogue consumer electronics are expected to decline at a 40-50% volume CAGR over the forecast period. Digital consumer electronics will see devices merge and single-function appliances will be moved off the market. To give but a few examples, portable mp3 players will face growing competition from mp3 phones. Volume sales of laptops are expected to continue to increase over the forecast period, causing desktop PCs to decline by an almost 15% volume CAGR between 2008 and 2013.

Navigation systems will become much cheaper and consequently more widespread. Volume sales are expected to grow at an almost 12% CAGR over the forecast period. Standard functions of even the low-priced navigation systems will include integrated radios and mp3 players. Volume sales of in-car media players are, in turn, expected to suffer from the rising competition from navigation systems; the rate of decline will be fast, at a -25% volume CAGR between 2008 and 2013.

Internet Retailing To Slowly Change Distribution Patterns


In line with the fast growth of the internet and its user community, internet retailing has seen distribution shares grow continuously over the review period. In 2007, approximately 60-65% of Germans accessed the internet regularly. Over 70% of German households that owned computers accessed the internet via broadband connection, enjoying fast speeds and no time pressure when surfing. Over the past decade, online shops have increased, with most large high street retailers and even discounters now running online branches that offer the full range of products and services that are available in their real outlets. In addition to regular online shops, shopping platforms such as Amazon or eBay are facilitating vibrant sales from consumer to consumer. While for some market sectors like food and groceries, internet retailing is a comparatively recent and niche development in Germany, for consumer electronics it has been established and approved as a convenient and competitive distribution channel since the beginning of the review period.

Due to the internet’s nature as a communication platform, many review websites have started up, giving expert advice on every electronic device available on the market. Websites such as www.billiger.de, www.pricerunner.com or www.dealtime.com, which compare prices and show the cheapest retailer, and include shipment rates and customer reviews, make bargain hunting easy on the internet. Furthermore, users have found their own way of commenting on nearly everything, including electronic devices, through online discussions on forums and blogs.

Current Impact


A fast growing number of consumers regard internet retailing as a convenient and flexible way of home shopping. The fact that orders can be placed from anywhere in the world comes in handy for an increasingly mobile society. In consumer electronics, internet retailing saw shares more than double over the review period, to reach over 9% of total retail volume. For some sectors, especially smaller consumer electronics, which can be shipped more easily, these figures were even higher. For example, shares of DVD players and VCRs more than tripled to reach 9% in 2008, and portable consumer electronics hit almost 12% volume share.

Larger consumer electronics, such as flatscreen TVs, home cinema and speaker systems or desktop PCs, saw shares of internet sales grow more slowly due to the fact that many online retailers still charge considerable amounts for shipping large items. Furthermore, consumers still seem to prefer re-assuring face-to-face advice from shop assistants when it comes to making an in investment in items such as a large HDTV. In addition to shopping around in actual stores, taking a closer look at items and finding out cheapest offers, consumers now tend to make their purchasing decisions based on product insights gained from an extensive number of online reviews. This is imposing increasing pressure on retailers, who often provide expert advice but are left without a purchase as consumers then decide to order from a cheaper online retailer.

In addition, internet retailing is putting pressure on unit prices as it offers very competitive pricing due to the low operating costs involved. It is putting pressure especially on mail order companies as internet retailing displays a similar concept. In response, most mail order companies have successfully launched their own internet retailing segment, for example Quelle and Otto.

Outlook


The internet’s fast growth is set to continue over the forecast period, both in terms of websites on offer and in terms of the number of users. According to internet experts, the worldwide online population will increase at a 6.6% CAGR during the next few years, far outpacing the 1.1% CAGR for the planet's population as a whole. While in Germany, the number of users is already quite high and forecast growth is expected to be slower here, a positive impact will come from a further spread and improvement of broadband connections. The German government has announced plans to subsidise the installation of broadband access in rural areas, which have so far not been reached.

Improvement of the speed and quality of broadband connections in Germany will have a positive impact on internet retailing. A recent OECD prediction that by 2011 one third of the productivity growth in industrial nations will be derived from the advance of the broadband technology, is also likely to materialise in Germany as well. As an integral part of internet retailing, safety of personal details and online payment methods will be developed further. Payment operators such as ClickandBuy or PayPal will improve the reliability and convenience of their services and ensure that customers will not have to enter their bank or credit card details every time they shop online.

Future Impact


Over the forecast period, the share of internet retailing in consumer electronics is expected to grow significantly as the number of consumers familiar with internet applications will rise. The further spread of broadband connections will mean that consumers can browse online shops extensively without time pressure. Faster internet connections will give operators a chance to make the design and presentation of their online shops more appealing to potential customers and to run more noticeable marketing campaigns. Furthermore, under the improved conditions of a larger internet community and faster broadband connections, more operators are expected to enter internet retailing as it is a cost effective way of selling goods and has a high potential to reach a large audience.

Saver payment methods will convince more consumers to do their shopping online. Retailers will put effort into enhancing their customer services, for example through removing delivery costs or running special offers. Some operators may even work towards closing their high street branches and focusing their entire business on internet retailing. This is particularly likely for operators such as Quelle, where high street outlets are more a complementary addition to their online shops. Internet sales will especially rise for smaller electronic devices and portable consumer electronics as these can be shipped more easily. For the larger consumer electronics such as flat screen TVs or desktop computers, consumers may still prefer to purchase these in outlets to avoid shipping cost if applicable.

On the other hand, expert, in-person advice for the purchase of high-priced devices may continue to work against internet retailing, especially when the purchase involves building-in or setting up complicated devices, such as home connectivity centres or high-end navigation systems.

Falling Unit Prices Continue To Impact Market


Over the review period, many sectors of consumer electronics were impacted by falling unit prices as a result of fierce competition between manufacturers, price pressure from large retailer chains interested in running special promotions as often as possible, growing share of competitively priced internet retailing, and as a result of lower consumer demand for some analogue and less sought after digital products. Particularly affected were analogue consumer electronics, which are set to vanish from the market, such as VCRs, which saw unit price declines by over 30% in absolute terms over the review period, and analogue TVs, the unit price of which declined by over 50%.

New technologies also saw unit prices decline as their novelty factor wore off and they became more widespread. Unit prices for HDTVs fell by almost 15% between 2003 and 2008, and for other digital TVs, which had previously been dominated by the very expensive plasma TVs, prices fell by over 50%.

Other subsectors with noteworthy declines were found within portable consumer electronics. Laptops experienced unit price falls of over 30% between 2003 and 2008 but the largest decline was registered by navigation systems, whose unit prices fell by over 75% over the review period.

Current Impact


Unit price declines have had a particularly negative impact on all subsectors that have witnessed strong volume decline, accelerating value sale declines over the review period. For analogue consumer electronics, this resulted in products moving off the market at increased pace, making it less attractive for market players to continue operating in these sectors.

For HDTVs, falling unit prices helped to trigger higher volume sales and make this product group more popular and widespread. Value sales for HDTVs were not affected negatively by falling unit prices as these were evened out by high volume sales. For other digital TVs, however, falling unit prices did not trigger significant volume growth and instead resulted in significant value declines in 2007 and 2008.

Unit price declines for laptops triggered fast volume growth, especially in 2008, which again resulted in significant value growth. As they became more affordable, laptops grew in popularity over the review period and have been imposing significant pressure on desktop computers as the price difference between them has lessened.

Navigation systems saw very fast volume growth due to the falling unit prices over the review period, which, for most parts, also resulted in significant value growth. However, manufacturers have started to feel the pressure from declining unit prices and already in 2008, value sales were impacted negatively.

Outlook


Price competition between manufacturers and other market players is not expected to lessen in the near future and as a result, unit prices for many subsectors of consumer electronics are expected to continue to decrease over the forecast period. The growing share of internet retailing will do its bit, as will the large retailers, which are likely to continue to run special promotions to attract bargain-hunting German consumers.

For HDTVs, unit prices are expected to decline significantly slower than over the review period, to reach a value only 6% lower in 2013 than in 2008. Other digital TVs will see unit prices decline by over 40% between 2008 and 2013.

Unit prices for laptops will decrease by almost 20% over the forecast period. Unit prices for navigation systems will continue to see a very fast decline to 50% less of their 2008 value by the end of the forecast period.

Future Impact


HDTVs, which were already very high in demand in 2008, are expected to reach volume saturation by 2010 and see volume sales decline thereafter. Falling unit prices will put additional pressure on manufacturers of HDTVs.

Other digital TVs are forecast to continue to see a fall in popularity given that HDTV is expected to be the standard format of the future. Declining unit prices for other digital TVs will therefore not be able to trigger volume sales but instead will result in significant value losses, making it less attractive for market players to operate in this segment.

Laptops are expected to rise significantly in popularity as manufacturers will focus their product innovations on making them more powerful, more versatile and smaller. Volume sales will, however, grow at much slower pace over the forecast period than seen over the review period as sales are expected to reach near saturation. This will mean that unit price declines will put increasing pressure on value sales, cutting profit margins of market players and taking the added value off innovations

For navigation systems, significantly declining unit prices already started to have a negative impact on value sales in 2008 and are forecast to continue to do so over almost the entire forecast period. In a sector where consumers expect fast innovation cycles and continuously enhanced services, declining unit prices will put significant pressure on manufacturers.

EU Legislation for Greener Consumer Electronics


The Restriction of Hazardous Substances Directive or RoHS took effect on 1 July 2006 and restricts the use of six hazardous materials, among them lead, mercury and cadmium, in the production of various types of electronic and electrical equipment. The effort to reduce hazardous materials in electronics is motivated in part to address the global issue of consumer electronics waste. As newer technology arrives at an ever increasing rate, consumers are discarding their obsolete products at a quicker rate than ever. This waste ends up in landfills and in countries such as China to be "recycled".

To combat this, the EU released the Waste Electrical and Electronic Equipment Directive (WEEE Directive), which became European Law in February 2003, setting collection, recycling and recovery targets for all types of electrical goods. The directive imposes the responsibility for the disposal of waste electrical and electronic equipment on the manufacturers, who are required to establish an infrastructure for collecting WEEE from private households free of charge. Also, the companies are compelled to use the collected waste in an ecologically-friendly manner, either by ecological disposal or by reuse/refurbishment of the collected WEEE.

Current Impact


In 2008, only about a third of electrical and electronic waste was reported to be treated in line with these laws and the other two thirds was going to landfill and potentially to sub-standard treatment sites in or outside the European Union. Apart from losing out on valuable secondary raw materials, this is especially worrying since inadequately treated products pose major environmental and health risks. Moreover, many electrical and electronic products not complying with the substance restrictions have been found in the EU.

To comply with these legislations, most manufacturers have banned all hazardous substances from their production and have launched a recycling programme that allows for the free return of all branded products. Dell is showing particular green concern through an additional programme that accepts any make or model of computer or computer peripherals. Some manufacturers have further realised the marketing potential of promoting a greener image, especially in the eco-friendly German society, and have started to show their own initiatives. Dell is running a campaign called ‘Plant a Tree for Me’, meaning that the company will make a donation to sustainably managed reforestation projects when customers tick the ‘Plant a Tree for Me’ option with their orders.

Outlook


In December 2008, the European Commission proposed revised laws on recycling and the use of hazardous substances in electrical and electronic equipment. The revised directives would set a new binding target for the collection of electrical and electronic equipment and renew the list of hazardous substances.

In regards to climate change, the EU has proposed a regulation reducing standby energy consumption of household and consumer electronics. Depending on the functionality of the device the regulation sets a maximum allowed power consumption for standby of either 1 or 2 Watts for the year 2010. As of 2013, the admissible power consumption level will be lowered to 0.5 Watt or 1 Watt, which is close to the levels that can be achieved with the best available technology. The regulation will reduce today's standby electricity consumption in the EU - approximately 50 TWh per year - by 73% by 2020. These savings are equal to Denmark's yearly electricity consumption and would lead to approximately 14 Mt CO2 emission savings per year.

Future Impact


Green concerns will be of growing importance for manufacturers, not only as a result of pressure from legislation but also as a result of growing consumer awareness. Energy efficiency will play a vital role in future product innovations as it is directly related to carbon emissions and climate change, a topic that is set to be in the focus of environmental concerns. In light of rising costs for electricity, energy efficiency – a topic already very big in Germany when it comes to household electrical appliances and light bulbs – will also become a unique selling point for consumer electronics devices, as consumers will be applying their eco- and energy-consciousness to much used devices such as TVs and computers.

Fujitsu Siemens has already announced that its laptops comply with the new regulation about stand-by energy usage and other manufacturers are likely to follow quickly. Philips will launch the first energy saving 42” HDTV in the US in 2009. Samsung presented an eco-friendly mobile phone in July 2008, which features an external body made from corn. The phone will initially be only available in Korea.