Consumer Electronics Market in Hungary-Dissertation Writing Help
Executive Summary
Maturing Market
The consumer
electronics sector in Hungary is beginning to mature. After posting relatively
buoyant growth rates during the review period, it’s expected that sales over
the forecast period will slow significantly. Between 2008 and 2013, volume
sales of consumer electronics products are projected to grow at a CAGR of 1.7%
compared to a CAGR of over 5% between 2003 and 2008. As well, it’s projected
that value sales of consumer electronics products will actually begin to
decline after 2009.
Growing Demand for Digital Technology
Consumers are
increasingly demanding digital consumer electronics products, forcing
old-technology analogue products off store shelves. For example, during the
review period volume sales of analogue televisions declined at a CAGR of 16%,
and it’s projected that the products will disappear from the market altogether
by 2011. In contrast, volume sales of digital televisions increased
dramatically during the review period, growing at a CAGR of more than 129%, and
sales are projected to continue to grow over the forecast period. The same
analogue vs. digital trends can be seen in other in-home consumer electronics
product subsectors, with consumers increasingly discarding VCRs and cassette
decks and going digital. The same is true for products in the portable consumer
electronics sector, particularly cameras, camcorders and portable music
players.
New Products Keep the Market Lively
During the
review period, disposable incomes in Hungary increased, allowing many consumers
to buy products once considered by most to be expensive luxuries. As well,
average unit prices declined during the period, giving consumers added
purchasing benefits. As a result, Hungarian consumers could not buy enough
digital flat-panel TVs or new portable consumer electronics products, such as
portable multimedia players and laptop computers. The in-car sector also
experienced growth, driven in great part by sales of in-car navigation systems,
which grew at an impressive CAGR of more than 238% over the review period,
reaching more than 170,000 units in 2008.
Multinational Players Dominate the Hungarian Ce Market
International
consumer electronics brands like Samsung, Sony, Nokia, Philips and LG continued
to be the most significant players in the Hungarian market during the review
period. Because of their resources and product development and innovation
skills, these brands were not threatened by domestic players. Hungarian
consumers look to international brands to provide them high quality and value.
They’ve built strong brand images that they maintain through a wide range of
marketing and advertising campaigns, efforts that domestic companies cannot,
for the most part, afford.
Key Trends and Developments
Moderate Income Growth
Real income
levels have been rising in Hungary since the middle of the 1990s. This growth
was due, in part, to the country’s solid economic performance and stable
political situation. However, this has changed during the past two years. The
level of real income declined in 2007, although it could increase slightly in
2008. These trends largely determined the dynamics of consumption, as well,
including demand for consumer electronics products.
Following the
significant decline in the years after the transition, income levels for most
Hungarians improved continuously between 1997 and 2006. The rate of growth,
however, was quite different year to year. After growth of 6.3% growth in 2002,
real income per capita increased at a more moderate pace until 2006. In 2007,
it did not reach the level of the previous year, as real wages fell by nearly
5%.
Outlook
The policy of
economic adjustment introduced in Hungary in 2006 eased in the first half of
2008. However, the advent of the global financial crisis and currency
speculation against the Hungarian forint made the accelerated reduction of the
general government and balance of payment deficit inevitable. The deficit of
the general government in 2008 was around 3.3% of GDP.
Economic output
is expected to fall by 1% to 1.5% in 2009 due to only slight growth in external
demand and declines in internal demand.
If inflation
decline below 4%, Hungary will come close to the criteria needed for entry into
the Euro-zone. Thus, Hungary may enter the ERM-2 system in the near future.
After the approval of new fiscal rules and the 2009 budget, the government may
announce the date of introduction of the Euro, probably 2012. This commitment
would strengthen confidence in the Hungarian economy and the forint.
Current Impact
The consumer
electronics sector in Hungary benefited from rising disposable incomes during
the review period. Most of these products are related to entertainment, so they
can hardly be considered essential. Therefore, sales of these products
generally increase with increasing income levels. Low household penetration
rates for many products also grew significantly during the review period.
Strong consumer demand for digital televisions, portable multimedia players,
mobile phones, laptops and in-car navigation devices drove increased sales in
2008.
Future impact
If the economic
situation in Hungary remains relatively positive, it’s expected that sales of
consumer electronics products will continue to rise over the forecast period.
On the other hand, as real income in the country will likely not increase
significantly over the forecast period, it’s expected that declining prices,
based on increased competition and the lower cost of technology, will drive
volume sales.
Consumer Debt on the Rise
Consumer credit
has been widely available in Hungary since 1995. The performance of the economy
continued to improve, resulting in increasing wages and salaries, and this
meant that an increasing number of consumers were able to meet the requirements
for obtaining credit from the country’s financial institutions.
Strong
competition among retailers and the high risk lending strategy among many of
the commercial banks allowed consumers to borrow significant amounts during the
review period.
The main form of
credit among Hungarian consumers is personal loans borrowed on debit accounts.
Due to the strong development of the financial services market, however, it is very
likely that other forms of credit will gain more significance in years to come.
Outlook
Many Hungarian
consumers have reached the maximum level of their credit capacity, and most
will find that, if that debt is not quickly repaid, they will not be able to
borrow much more over the forecast period.
This has been exacerbated in some ways by the recent credit crisis and
the recession that has affected many of the world’s economies.
Current Impact
During the
review period, the greater acceptance of consumer credit presented
opportunities for retailers. Many established alliances with financial
institutions in order to offer favourable financing to their customers and to
stimulate sales.
Overall, by end
of 2008 the threat of worldwide recession did not seem to affect consumer
credit habits in a significant way in Hungry. Many Hungarian consumers
continued to use credit, usually in order to buy more expensive products like
digital TVs.
Future Impact
The global
recession and the uncertain economic situation will have a negative influence
on the credit status of most Hungarian households. The huge amount of current
debt will block further borrowing.
Therefore, this purchasing tool will not see increased use in the near
future.
Hungarians Going Digital
During the
review period, digital technology products were introduced in many subsectors
of the Hungarian consumer electronics market. Among the first and, certainly,
among the most significant was the introduction of digital televisions. Hungary
is a TV-loving nation, and many Hungarians prefer to spend leisure time at home
watching the latest programmes or DVDs. Demand for digital broadcasting
continues to grow and, as the living standards of Hungarians rise, an
increasing number of consumers are willing to pay for better quality television
products. By 2008, digital televisions accounted for 86% of total television
value sales in Hungary.
The digital
trend was taken up quickly in the camera and camcorders subsectors during the
review period, as volume sales of digital cameras increased at a CAGR of more
than 17% and volume sales of digital camcorders increased by 26.6%. Sales of other portable digital products,
such as portable MP3 players and portable DVD players, also experienced
impressive growth over the review period.
Outlook
Digital
broadcasting has been available in Hungary since late 2008, and analogue
broadcasting will cease in 2012. This will ensure increased sales of digital
TVs over the next several years, particularly as unit prices decline. Antenna
Hungária, the country’s main broadcasting company, started the test digital
High Definition broadcasting in August 2008. Volume sales of High Definition
TVs (HDTVS) are projected to increase at a CAGR of nearly 25% over the forecast
period while value sales grew at a CAGR of 20.6%
Increasing
consumer demand for digital products pushed most analogue products off of
retailers’ shelves. Over the review period, volume sales of analogue cameras
declined in CAGR terms by nearly 69% while volume sales of analogue camcorders
declined by nearly 68%. Analogue televisions are expected to disappear from the
market by 2012.
Current Impact
The impact of
digital technology is possibly being felt most significantly in the portable
consumer electronics sector, where sales in 2008 grew by nearly 14% over prior
year. Hungarian consumers are increasingly demanding to communicate and be
entertained and informed on-the-go and manufacturers are seeking to satisfy
that demand through a wide range of mobile phones, portable MP3 players,
portable multimedia players and laptop computers.
Future Impact
Increasing and
continual consumer demand for digital products will drive sales in all
subsectors of the Hungarian consumer electronics market over the forecast period,
particularly as competition intensifies, driving units prices down. Digital
technology will allow manufacturers to launch a wide range of new products in
coming years, including devices with converged technologies.
The expansion of
digital and HD broadcasting is expected to drive consumer demand for digital
TVs. On the other hand, the subsector is beginning to show signs of maturing,
and it’s projected that both volume sales will begin to decline in 2011. Sales
of HDTVs, on the other hand, are expected to continue to grow over the forecast
period, reaching 380,000 units in 2013, representing value sales of HUF 113.3
billion.
Highly Seasonal Sales
The Hungarian
consumer electronics market is highly seasonal, with a very large proportion of
sales, nearly 60%, occurring in the three months running up to Christmas. A few
big international sporting events, such as the Olympic Games and international
football cups, generate a second season in the TV subsectors, while camera and
camcorder sales rise at the beginning of the holiday season. The start of the
academic year creates an increased demand for laptops.
Manufacturers
and retailers have been working hard to extend the sales periods, with some
starting to offer discount promotions as early as November. In addition, the
number of post-Christmas sales is increasing among Hungarian retailers. Sales
in May, when high-school graduation takes place, also play an important role in
the Hungarian retail landscape. This is attributable to the fact that many sales
of consumer electronics products are gift purchases.
Outlook
This seasonal
sales trend in the Hungarian retail market is not expected to change
significantly over the forecast period. Despite efforts by manufacturers and
retailers, consumer purchasing habits do not change quickly.
Over the long
term, however, it’s expected that efforts to spread consumer electronics sales
more evenly throughout the year will be successful, particularly as disposable
incomes begin to rise again and as unit prices decline. It’s expected that
purchasing consumer electronics will be considered less of a major financial
decision for Hungarian consumers in the future, and they won’t have to wait for
special occasions to buy these products.
Current Impact
Consumer electronics
players in the Hungarian market now have to ensure that their products are
positioned correctly in order to take best advantage of the seasonal sales
cycle. This has contributed to growth across the range of retail distribution
channels, including not only consumer electronics specialists but hypermarkets
and supermarkets, which can offer consumers a wide selection of products.
Future Impact
Over the
forecast period, it’s expected that the Christmas season will remain the most
important sales period in the Hungarian retail calendar. Players will continue
to focus their sales strategies on those three months at the end of the year,
often offering a wide range of discounts to increase volume sales. On the other
hand, retailers must be careful in their sales planning and make sure that they
don’t “train” consumers to postpone purchases of more expensive consumer
electronics products while waiting for discount sales. This will become less of
an issue later in the forecast period as unit prices decline.
Intensified Competition Drives Price Cuts
Over the past
two decades, an increasing number of international companies entered the
growing Hungarian consumer electronics market, attracted by the market’s
dynamic growth, driven by rising disposable incomes and overall economic
stability. As a result, competition in the market has increased dramatically,
leading many companies to attempt to grab market share by competing on price.
During the review period, the average unit price of a consumer electronics product
declined, going from HUF 53,855 in 2003 to HUF 51,248 in 2008. Declines in some
subsectors have been dramatic. In 2003, the average unit price of a digital TV
was HUF 703,612; in 2008, that price had declined by nearly 50% to HUF 355,369.
Outlook
Overall, the
average unit price for consumer electronics products is projected to continue
to decline steadily over the forecast period, reaching HUF 46,412 in 2013.
Value sales are expected to decline by 0.3% in CAGR terms while volume sales
are expected to grow slightly, at a CAGR of 1.7%.
To maintain
share in a maturing market, players will be required to invest in a wide range
of marketing and promotion efforts. Of course, one of the most effective ways
to stimulate volumes sales is price discounting, and it’s expected that this
will increase over the forecast period.
Current Impact
Expenditure on
advertising and promotions in the Hungarian consumer electronics sector is
increasing, as manufacturers and retailers attempt to lure consumers away from
competing brands and products in order to increase market share. The direct
impact of these efforts is the continuation of declining average unit prices in
all sectors of the consumer electronics market. As a result, consumers will
benefit but the profit margins of both manufacturers and retailers will be
under intense pressure.
Future Impact
Competition in
the Hungarian consumer electronics market is not expected to decrease over the
forecast period. In fact, with new product launches and increasing labour
productivity, the competition is expected to continue to intensify, putting
further pressure on product prices.
Prices in some
subsectors are expected to decline more dramatically than prices in others. The
average unit price of laptops, for example, was HUF 153,308 in 2008. By 2013,
that price is projected to be HUF 105,500, a decline of 31%. In 2008, the
average unit price of an HDTV was HUF 352,670. This is expected to decline by
more than 15% over the forecast period, reaching HUF 298,072 in 2013.
On the other
hand, to maintain profits and to avoid the rapid commoditisation of the
consumer electronics market, manufacturers are expected to focus their efforts
on product development and the launch of new products that, initially, are
higher priced.
