Consumer Electronics Market in Portugal-Dissertation Writing Help
Executive Summary
Crisis Winds Blow But Portugal Holds Ship
Although the
worldwide credit crisis has impacted negatively on consumer purchasing power
and the industry’s overall performance, the Portuguese market was able to
sustain moderate growth over the review period. Once again the portable
consumer electronics were considered the stars within the segment and they will
continue to thrive within the market, always looking out for the international
trends and new product developments. The in-home sector continues to gain from
replacement cycles on analogue products however, it is held back by failing to
produce enough dynamics in new products to cause a stir. The in-car segment
showed little change in performance due to a fall in-car sales.
Government Reaches To Help Drive Economy
A very important
measure by the Portuguese Government has been considered one of the key factors
in the Consumer Electronics industry, since it reached out to all branches of
consumer economics and helped soothe the market’s environment. This measure was
the lowering of VAT from 21% to 20%, which did constitute a degree of influence
in values as in the consumer’s perceived value on savings (the purchase of a
television for example could add up to a saving of 5 Euros on a 500 Euros
television for example).
Portable Brings the Consumer Electronics Industry To Life
In Portugal
portability continues to be one of the strongest factors for consumer
electronics growth, making laptops and portable media players the leaders in
terms of products, and largest contributors to the development of this sector.
Theses sectors enjoyed technological improvements and value added features with
the introduction of video playing into the media players which stimulated their
success. Similarly, laptops became more reliable and with longer lasting
batteries. The early introduction of portable computers in schools by the
Portuguese Government will also bare fruit in the future in this segment, as it
will raise the awareness on technology and raise consciousness on its utility.
A Global Knockout on National Companies
Only the
strongest companies have survived when faced with the giant Asian manufacturers
who have traditionally secured major market shares over the past few years. The
companies, mostly Korean and Japanese take advantage of their technological
knowhow, gaining points in both research and new product development, something
that national enterprises have failed to do. Another strong asset by these
foreign companies is their power to produce parts and components at a much
lower price and sometimes higher quality than most European ventures, making it
almost impossible for nationals to compete, leaving space for international
corporations to distribute their products in this market and develop further in
a fast growing environment.
Stormy Weathers To Call Consumers Closer To Home
The devastating
credit crisis that struck every sector across all industries during the
forecast period brought a gloomy cloud of uncertainty. With debt rising and a
lower expendable income, consumers will however spend more time in their homes
and in a close perimeter, meaning they will need to invest in comfort at an
affordable price. Instead of a vacation overseas, many seem to be investing in
in-home entertainment which could stimulate growth in related sectors like the
home cinema and audio segments.
The combination
of several segments in the Consumer Electronics segment will be a strong
advantage for those who which to thrive in this technologically advanced
market. Mobile Phones have developed from 1G to 3G and beyond in just a few
years offering a multitude of functions such as media player, gaming device,
news accessing, GPS and camera. Other innovations include digital cameras and
camcorders that allow wireless information transfer into computers or TV sets,
TV’s that incorporate hard drives, among many other developments that could
show us a path to a dynamic market in the future as we have done in the
past. The forecast period shows us a
market which may present limitless opportunities for growth and innovation.
Key Trends and Developments
A Brave New World for Distribution in Portugal
Distribution
channels in Portugal have been shifting over the years from mixed retailers
over to specialty stores that focus on the consumer’s needs for electronic
products and with further space to compare prices, shapes, colours and sizes
all under one roof. However, online retailing is making inroads as consumers
realise they can also do this from the comfort of their homes, with direct
access to prices, reviews from both users and merchants, lower prices and
delivery. Online distribution share has doubled from last year and it is
predicted to keep on rising.
Outlook (of the trend)
This trend is
likely to evolve even further since the confidence consumer’s once saved for
face to face salesmen, is now quickly being replaced by information gathered
from other online users regarding the products they wish to purchase. Likewise,
distributors are informing their audiences of the safety of online payments for
example, warranties and deliveries so that the purchaser feels safer and more
assured about pursuing this online venture.
Current Impact
This new trend
is developing so rapidly that some brands have already had their websites
translated into Portuguese and added purchasing possibilities online for the
national consumer. Even the large distribution chains that exist like Worten
for example are investing in their website in order to make it as simple as
possible for a sale to occur. Some subsectors like mobile phones for example
have gained a large customer base online, through programmes created by the operators
that attempt to drive audiences to their websites where they gain revenue not
only from the sales they make but also through the website’s own advertising.
Manufacturers are slowly adapting to this trend within the Portuguese market,
using the approach and experience they gained from the introduction of this
trend in other countries.
New product
development has also gained some interesting points in its favour regarding the
online channel, using this tool to gather information on the opinions and views
of their audience and utilising them into key elements they can use on new
products. HP for example used that approach to market their lines of laptops
which are now customisable in look by applying different skins, many of them
user submitted. This benefits the whole Consumer Electronics sector, providing
it with the dynamics and user feedback it needs to thrive into the future, in
real time and in a more direct approach.
Future impact
The future
impact of this trend is one of great prospects for the future where both
consumer and manufacturer will gain: better communication, a larger scope of
products to be presented, new product development that will arise from a mixed
perspective, more information available that will enable a greater proximity to
brand and product, better updates for existing products and a more effective
costumer support and troubleshooting.
Websites also
serve as marketing portals and sometimes the first experience of a brand by a
potential customer. Therefore, web photos must be clear and large enough, and
straightforward and fast checkout processes that are time and patience
effective will be the key to future success. Future buyers will be more in tune
with new technology but time is always of the essence along with the eternal
issue of price. Manufacturers can expect this trend to be high in development
in the forecast period and prepare themselves to embrace the internet as a
viable way to merchant in Portugal. Furthermore, in the same way people prefer
to shop in facilities that offer a wide range of products and brands across all
sectors, so the online environment must also mimic this, creating spaces where
any product is reachable at the click of a button and ready to respond to
impulses.
Loans and Credit Cards Try To Appease Crisis and Raise Debt
Since the credit
crisis, credit and loyalty cards have turned into a useful way to purchase what
one needs at a time of need. Throughout the review period, consumer credit in
Portugal has gained further adepts in their attempt to diminish the effects of
the ongoing financial turmoil the country and the world are in. Furthermore
credit cards and small loans are now seen as investments in one’s personal well
being; enabling consumers to reach products that were many times out of their
range. This of course has affected the way retailers do business and many of
them have adopted agreements with credit institutions (like Credifin and
Cofidis) in order to provide easier access by the consumers, raising in its
turn an even bigger issue, the rising debt levels in Portuguese homes.
Current Impact
Although the
Consumer Credit trend has been benefiting the Consumer Electronics market in a
positive way by generating further revenue and higher sales, hence creating a
larger flow of goods and developing the inherent economy, it has caused people
to get deeper into debt making it more difficult for them to make repeat
purchases in the future in this market. The sectors that have been more
affected by this trend are usually those whose start up price is over the mark
of 500 Euros, such as computers, TVs and mobile phones.
The mobile
phones sector was able to create a greater stir in the market by using
different types of installments, embedded in the monthly charges consumers make
in calls, a smart way to avoid non-payments and debt. Although some sectors are
more directly implied with this trend (computers, hi-fi, etc), other sectors
with lower cost products also have to gain, because being able to lean on
credit gives consumers access to larger amounts to spend, or at least believe
they do.
Outlook
In terms of
evolution, when looking at the prospects of the future economy, it is likely to
evolve considerably in the forthcoming years, being that retailers with have to
further develop their relationship with credit institutions in order to provide
better service for their customers. The viability of this trend is as strong as
the need the consumer has for products that might sooth their spirit and be
useful to their comfort in troubled times. High cost products like digital TVs,
laptops, desktops and even mobile phones must be given even greater emphasis
when it comes to consumer credit and campaigns need to be more varied and
original in this sector, offering more opportunities for purchase without that
larger initial investment and high interest that is usually associated with
credit. The master plan should be to increase the customer base but with care
for their future prospects, helping them to build up a better life so that in
the future the industry can harvest the fruits of this investment into the consumer.
Future Impact
Although the
market has been behaving favourably up to this point, the fact is numbers for
the forecast period show such high levels of over-leverage it would be
impossible not to predict it to be a gloomy one for some of the followers of
this trend. This is the main issue for years to follow, how to sustain a
healthy growth environment within the credit scenario without cannibalising
future customers. One solution could be to grant credits based on further
research on a customer’s lifestyle for example, or enabling them to purchase in
longer interest free instalments. Creating other types of cards based on the
customer’s purchases, like loyalty cards but with a specific use in credits for
the future (in the same way hypermarkets are doing with food products). The
main concern for this idea is to know when the line has been drawn to far,
knowing when to stop and when to allow credit to be used, perhaps reinventing
the way families purchase their consumer electronics, and advising them early
to sustain sales further ahead. Innovation is the key to technology indeed, but
taking care of a customer is guaranteeing the industry’s future.
Economical Crisis Rebound
Economically
Portugal is facing a slower period, since in 2008 the growth rate was
positioned at 1.8% falling to 1.4% in 2009; however, estimates are now looking
at closer to 0.1% for 2009. Analysts consider this declining period a direct
repercussion of the international conjuncture, the persistent financial
markets’ disruptions, and the accentuated rise of the base products costs and
the previewed recession of the US market. Not all is bad news in Portugal,
being that there is a predicted GDP growth (by the Portuguese government) of
2.5% for 2009 in comparison to the 2.6% registered in 2008, mainly due to the
increase in prices for energy and food.
Despite steady GDP growth in 2006 and 2007, consumer spending remained
weak due to high household debt and interest rates increased in early 2007 and
even more through 2008.
Outlook
The government
has introduced a series of measures to increase budget revenues and cut
spending and has achieved its target of bringing the general government budget
deficit to below 3% of GDP in 2007 (at 2.6% of GDP). Although the pace of
budgetary consolidation is likely to slow in the run-up to the 2009 general
election, the deficit should continue to decline up to 2012. A few structural
reforms may be enacted in 2008, including measures to boost labour market
flexibility, including the VAT reduction which created some dynamics
economically. But the increase of fuels and interest rates in 2008 created a
black mark on the country’s evolution that may be hard to repair at this time.
"The prospects for the Portuguese economy for the period of 2008-2009 are
marked by a weak growth of economic activity in a context of worsening global
economic and financial setting," the central bank's outlook said.
Portugal's trade deficit widened in the first quarter of 2008, reaching €5.2bn,
up from €4bn a year earlier. The widening was attributable to export value
growth slowing more than the import bill. Later in the forecast period,
stronger employment growth should restore economic confidence, but public and
private debt and the need for a continued tight fiscal policy will remain
constraining factors. Comparing the rate of growth and inflation with the
historic figures, show that, this trend might be here to stay for the upcoming
years, in spite of the efforts shown by the government to surpass them.
Current Impact
The Portuguese
audience is becoming more cautious in their approach to shopping as the
national media feeds them a recession scenario on a daily basis, especially
with unemployment figures of around 7.6% for 2008 and raising to 8.2% in 2009.
The outcome of this trend is the direct impact on household incomes, since the
prices on products available in the market largely surpass the income capacity
of most families. The manufacturers now find it very hard to compete against
other EU countries due to their low labour costs and producing incentives
(incentives that the Portuguese economy has been trying to match but at a much
lower than expected level). The VAT decrease impacted the market directly and
helped stir the sector in these troubled times.
It cannot yet be
determined whether the crisis has had a massive impact on the consumer
electronics’ sector, since some analysts believe it actually drove people into
an induced purchase therapy, trying to better their lives by purchasing things.
The prices were of course reduced to help consumers with their purchasing
decision and retailers felt the need to adapt, presenting multi-functional
solutions for everyday needs (like mobile phones that serve a million purposes,
and laptops that have a wider range network and battery life).
Future Impact
Given the
available data it is easy to predict a smaller growth period in the Consumer
Electronics Sector over the next few years. The decline of the Portuguese
economy will limit the growth capacity of the industry in the forecast period
by limiting the purchasing power of families and the cost of the goods
available. Non-essential materials will suffer from this trend, but the
emphasis given on technology within the country will push consumers to high end
products in which case they will “save to get”. The prices have been influenced
by this trend and will continue to decrease to support the costumer’s needs.
This is an adapting period for better years to come, since this trend is
expected to dissipate in four to five years and the economy to become once
again open to growth and development.
In-car consumer
electronics will not be immune to this trend but as they experienced this
phenomenon earlier than the two other sectors, they are likely to adapt more
easily, nevertheless the trend towards lower unit prices is set to be
maintained. It is forecasted that the current-account deficit will fall from
9.8% of GDP in 2007 to 8.5% of GDP in 2009.
Lifestyles: Compensation Leisure
Social and
economic factors (like the financial crisis and unemployment rates) have
determined hard times for the Portuguese over the past few years. The stress
and claustrophobia of living in the big cities along with heavy pollution are
all factors driving people to seeking a better lifestyle and quality of life.
Travelling has become an expensive habit affordable only for a few, so many
people are focusing their attention on improving their homes and in spending
more time in them which could in turn boost the uptake of consumer electronics
in the forecast period.
Current Impact
This trend is
already influencing the market and the way people make their decisions when
purchasing several types of consumer electronics. Consumers are upgrading to
new technology, for example, computers that allow to them to download and store
videos and games faster and with greater quality, flat screen TVs with value
added features, MP3 players and better speakers for home cinema systems to
create surround systems. Leisure is the key issue and having the tools to have
a comfortable and stable daily life, which allows them to forget other troubles
and enjoy their leisure time, is a factor driving the psychology of the
consumer today. Market wise this trend is already impacting other sectors, for
instance a consumer is more likely to spend 500 Euros on a 3G multi-functional
mobile phone than on a oven or washing machine, thus demonstrating that basic
need items have taken a back stage in terms of consumer choices, when a few
years back they were a purchasing priority when getting a moving house for
example.
Outlook
Restructuring
the way people purchase is not something that happens overnight and this
scenario has been building up during the review period and will most likely
mature into the forecast period and beyond. Retailers have started noticing
this trend and this is reflected in the way manufacturers are marketing their
products. Advertisements now feature TVs, Mp3 players and desktops on the front
page, leaving dishwasher and ovens for the back pages of a brochure. The way
people pass their time is changing so rapidly even new-build homes for sale
have adapted in design offering surround sound with MP3 access, TV outlets in
the kitchen and even in bathrooms almost as standard.
Future Impact
This is a trend
that is expected to evolve in the forthcoming years throughout the forecast
period; or at least until there are signs of economic and social recovery. This
trend will of course impact the consumer electronics market in a positive way,
since it may be as necessary as the key to one’s home the purchase of these
kinds of products. Of course portability will still win points over static
equipment and the numbers show that laptops will outperform desktops and MP3
players over hi-fi. The real question is a trend that will affect the market as
a whole, instead of just a few sectors, where design and price prevail in
decision making and that will allow some segments to prevail longer, like the
once dying video sector, which could be slightly revived if manufacturers can
adapt their products to the online world, to new video formats in the same way
music products did over the last two decades (vinyl, tape, cd, disk, hard
drive).
Navigation
systems can also increment their usefulness by including other services that
allow people to better spend their time, like a schedule for a certain city’s
events and updated news information. Marketing plays a leading role when it
comes to shifting consumer’s interest and this trend should be used to better
format campaigns, focusing leisure and entertainment, instead of obligations
and crisis.
Connectivity and Convergence
Being connected
is a modern trend that has been developing for the past few years, along with
the growth of internet itself in households and out. Historically, laptops were
used for accessing email and the internet. However, with terrestrial and mobile
services for handheld devices becoming widespread and broadband wireless
connectivity (WiFi for example) becoming ever-present, mobile devices such as
cell phones, PDAs, and portable media players are being used to access audio,
video and data. Along with this trend another one comes to attention providing
the necessary tools for a fast moving lifestyle, using convergence to maximise
the use between data and media devices, in the long run demanding them to turn
into one.
Current Impact
The influence of
these trends on the consumer electronics sector is staged in the very basis of
new product development, where experts devise the best way to fashion products
that will make use of the internet to keep their users connected and multi-functional
to appease demand. These trends affect the market as a whole and end up
dividing the sectors into two distinct groups defined only by their
portability. Generations of consumer gadgets must handle both media and data on
the same platform. Such convergence is driving many traditional data-centric
companies such as Microsoft and Cisco to enter the consumer market, creating
fierce competition for traditional consumer brands. The manufacturers have been
responding positively to both consumer driven trends since they are also
creating an alternate market that thrives on updates and online developed
products for the items they sell (ie. music, software.)
Outlook
Future Impact
Rather than
evolving to it the future of some sectors of consumer electronics might depend
on these trends to remain in good health within the market. In the same way
camera manufacturers like Kodak and Nikon have embraced wireless trends and
connectivity by adding Wi-Fi capability to their lines of digital cameras and
camcorders, so should the manufacturers of DVD players and audio receivers, if
they expect to maintain themselves growing healthy in the future market.
Convergence between TVs and DVDs, mobile phones and navigation systems, Hi-Fi
products and desktops, all have to gain in mixing their abilities into shaping
something new for the future. There is room for growth with the disappearance
of so many obsolete segments and the impact throughout the forecast period is
measured in how many of these products are adapting to this trend. Sales and
marketing wise it will be much easier to approach and market a product which is
“connected” and make it viable for success.
New product development is the key to reshape the mould in which this
sector has been casted on for the past ten years.
