Consumer Electronics Market in the Netherlands-Dissertation Writing Help
Executive Summary
Navigation Systems Tip the Scale in Favour of 2007
When comparing
overall sales levels for consumer electronics to those of the previous year,
the numbers are virtually the same, with the exception of in-car consumer
electronics. The sales of navigation systems continued to show growth in 2007,
and this is why the value sales for the sector as a whole increased. Sales of
in-home and portable consumer electronics also remained stable at a high level,
although these overall figures hide some major shifts within these sectors.
Good Year for Television, But Not As Good As the Previous World Cup Year
After
exceptional sales in 2006, volume sales of televisions declined, which was not
surprising since the World Cup was a major influence on television sales and
there was no comparable major sporting event in 2007. This does not mean that
2007 was a bad year, however, and the shift from analogue to digital
televisions continued so that overall value sales again showed growth. Although
the unit prices of flat-screen televisions are coming under pressure, they are
still far more expensive than analogue models. Televisions have remained a
major driver of growth in value sales of consumer electronics in the
Netherlands.
Cameras Decline, But Maintain A Reasonable Level of Sales
After massive
growth during the review period, sales of cameras in the Netherlands stabilised
in 2007, and there were small declines in terms of both value and volume.
Although it is disappointing that this market is showing a decline, it is in
some ways remarkable that the camera sector continues to show such high sales
levels. Digital cameras continued to do well, as technological advances were
the main driver of sales in 2007. Many Dutch consumers are now upgrading their
old cameras to more sophisticated models, while cameras are also becoming more
attractive in terms of design. Compact cameras are becoming smaller, while
screens are getting larger. Dutch consumers appreciate these improved designs
and for many this is a reason to buy a new camera.
Car Navigation Saves the Day for In-car Consumer Electronics
The total in-car
consumer electronics sector in the Netherlands continued to show impressive
growth rates in 2007, but that is only part of the story, since all the growth
is attributable to navigation systems while sales of other in-car consumer
electronics products have remained under severe pressure. The Dutch have
embraced navigation systems, and more of them were converted to the use of
these devices in 2007. In-car audio, speakers and other in-car electronics
suffered further decline, as new cars have more electronics built in, which is
leading to a natural decline in the after-market for in-car electronics
products.
Television A Major Driver Behind Forecast Growth
The forecast for
consumer electronics over the period 2007–2012 is very positive. Sales of
televisions are one of the major drivers of growth. Digital televisions not
only contribute greatly to the overall growth of the sector but also lead to
growth in other sectors, since the purchase of a digital television often leads
to purchases of many other digital products for use together with the new set.
Growth in in-home consumer electronics will be a major determinant of the
overall growth of the consumer electronics market.
Key Trends and Developments
Improved Economic Conditions Have A Positive Effect on Consumer Confidence
Although the
downturn of 2003 was not particularly dramatic in terms of the economic
indicators, it was a pretty significant event to the average Dutch consumer. In
2007, the Dutch economy continued the recovery that began in the previous year,
so that the Dutch economy has recovered over the past two years. In 2003, real
GDP declined by 1%, while inflation was disturbingly high in the range of 4–5%,
but the economy then slowly got back on its feet. Unemployment remains a cause
for concern, however, as the unemployment rate has increased year on year since
2001.
Current impact
These adverse
economic conditions had a deep impact on the consumer electronics sector as a
whole, since they provided the conditions for the price war, in which Dutch
consumers became more price conscious and retailers more competitive. Following
the economic recovery in 2007, price became less of a concern to Dutch
consumers and they were once again willing to invest in quality and design. The
popularity of digital television sets for instance was boosted by the
improvement in economic conditions.
Outlook
After a low
point in 2003 with negative real GDP growth, the Dutch economy seems to have
turned the corner and most economic indicators are pointing in the right
direction. Average annual real GDP growth is expected to exceed 2% over the
forecast period, while inflation should also be curbed and is expected to
remain below 2%. High unemployment will remain the major problem facing the
Dutch economy, and unemployment is expected to rise further to reach 8% in
2010. High unemployment of course will mean that those affected will have
limited spending power.
Impact
The economic
recovery will have a positive impact on spending on consumer electronics over
the next forecast period. Consumers will be less price sensitive, which will
bring relief from the ongoing price war in the Dutch retail sector. This
increased consumer confidence will boost sales of larger electronics products
such as flat-screen televisions and laptops, as some consumer groups are now
beginning to replace their existing models, having postponed such purchases
during a period of economic uncertainty.
Increased
consumer confidence and the resulting greater willingness to invest in quality
and design should help to offset the effects of a number of negative factors,
such as increasing competition and the changing retail environment. For
manufacturers and retailers alike, this will create more room for added value
products.
Demographic Developments Change the Consumer Landscape
The Dutch
population has been going through two major demographic changes over the past
few decades. First, as in most West European countries, the Dutch population is
ageing and the birth rate is in decline; almost 30% of the Dutch population, or
about 5 million people, are currently over the age of 50. Second, there have
been increases in the proportions of small and one-person households. This is
related to the ageing trend, as many older people are living alone, but younger
people are also living in small households or remaining single for longer.
These two major trends have changed Dutch society and therefore consumer habits
over recent decades.
Current impact
Generally
speaking, consumers' buying behaviour concerning consumer electronics tends to
differ depending on their age. Tastes and preferences change as people grow
older, and the lifestyles and preferences of older people change. Older
consumers tend to have higher incomes and also pay more attention to specific
details such as design.
The increase in
the number of one-person households has also had a considerable impact,
affecting for instance the number and type of products that are sold. If
households are smaller, there will also be more of them, and every household
will have at least a minimum number of consumer electronics products. This
demographic change has therefore had a positive effect on volume sales.
Outlook
It is unlikely
that there will be any major change in direction over the forecast period
concerning these two demographic trends. Birth rates will remain stagnant, and
little growth is expected during the next two decades. The Dutch population
will continue to age, with the proportion of those aged 50 or over expected to
reach 37% in the year 2015, demonstrating a clear greying of the population. As
a result, the observed major shifts will continue and the role of older
consumer groups in Dutch grocery retail will become increasingly important.
Future impact
The changing
demographics will certainly influence the development of the sector over the
forecast period. Older consumers and those living in smaller households will be
more interested in a more personal approach to consumer electronics. Instead of
enjoying the benefits of consumer electronics products in company with other
people, these consumers will choose portable devices which they can use to
indulge their personal tastes and preferences. Sectors such as portable
consumer electronics and laptops will therefore grow further, since these are
the technologies that enable consumers to get what they want, when they want
it.
Rapid Development of the Internet Impacts on Consumer Electronics Sector
Dutch ownership
of computers increased rapidly over the review period, and the Netherlands is
one of the top three countries in Europe in terms of access to Broadband, to
which more than 70% of households now have connections. The Internet is
therefore now a central technology in Dutch households, so that many consumers
now also use it as a source of entertainment. The Internet was initially used
mostly for sending and receiving emails and looking up practical information.
Now, however, with wireless Broadband connections, this technology is also used
to listen to music, watch movies and television series, and exchange photos and
home movies. This trend has also had an impact on most subsectors in consumer
electronics.
Current impact
In television,
for instance, this means that analogue models are now less popular because they
are less compatible with movies that can be downloaded in digital form. The
Internet has also increased the popularity of portable media players, which has
had an impact on audio players as many consumers choose to buy a high-end
portable player rather than a more static audio set. In computers, the impact
is obvious: today's consumer prefers the more flexible laptop as wireless
Broadband and the availability of wi-fi connections in public spaces enable it
to be used more easily to access the Internet.
Outlook
Although the
development of the Internet has been incredibly rapid over the review period,
it is unlikely to have reached its full potential. Over the forecast period,
wireless and rapid Internet connections will accelerate even more and will lead
to dramatic changes in the consumer electronics sector in the Netherlands. It
is also likely that the Netherlands will remain a relative front runner in
Europe, as the Dutch are very willing to embrace the Internet and mobile
technology.
It is of course
unlikely that the penetration of Broadband connections will increase much
further as it is already over 70%, but the speed of these connections will
certainly continue to increase, and the possibilities offered by Internet-based
technologies will therefore also expand further. Dutch consumers will also come
to expect that all consumer electronics products will be compatible with, and
able to interact with, the Internet.
Future impact
Most analogue
technologies will either disappear or become niche markets for enthusiasts. The
digital technologies are already mainstream in the Netherlands and this trend
will only accelerate over the forecast period. There will be a further shift
from static to portable, wireless digital consumer electronics products. Dutch
consumers are very interested in technology of this type as long as it is
practical and affordable. For instance, it is already possible to access the
Internet using a mobile phone, but this technology is still in the early stages
of development in the Netherlands. Rates for this service are dropping,
however, and most new mobile phones purchased over the next 2–3 years will
offer this facility.
There are many
other examples. The Internet will have a major impact, for instance, in the DVD
players and VCRs sector. It is likely that televisions will be connected
directly to the Internet, which will eliminate the need for a separate DVD
player or even a hard disk recorder. The Internet will also impact on the
development of portable products, as multimedia players will become even more
attractive. The increase in these players' memory capacity and the ease with
which various media may be downloaded from the Internet will increase their
popularity relative to analogue models and mp3 players.
Non-traditional Retail Channels Becoming More Important
The emergence of
retailers outside the traditional retail channels, in particular in small
electrical appliances, remains an important issue. The arrival of German retail
giant Media Markt has made Dutch consumers highly sensitive to price. The
increased importance of retailers from outside the traditional retail channels
has had also a major influence on market conditions.
Current impact
Non-traditional
channels such as discount drugstores and DIY stores are heavily promoting
domestic electrical appliances. The Internet is playing an increasingly
important role. The world-wide web is now used not only to compare products and
prices, but also increasingly to make purchases directly on line. These new
developments have had an immediate impact on the Dutch consumer electronics
sector, in particular through their negative effect on average prices. Although
the Dutch have been more inclined to increase their spending after the recovery
of the Dutch economy, this increased competition between the various channels
has not helped to add value to the sector.
Outlook
The shake-out
among Dutch durable goods retailers has weeded out the weaker players such as
smaller chains and small independent retailers, but the shift from traditional
retailers to new players and alternative channels probably still has some way
to go. Alternative channels such as DIY retailers, food discounters and
drugstores have found that offering extreme deals on specially selected
domestic appliances can bring a lot of traffic into their stores. This
therefore remains an important weapon for these retailers.
The Internet has
not reached its full potential, and a lot is to be expected from this new
channel. Dutch consumers are rapidly increasing their online spending and the
increased professionalism of online retailers has increased consumer
confidence. The number of units sold on line will therefore continue to
increase, and competition amongst various types of retailers will remain
fierce.
Future impact
Together with
the arrival of new players such as Media Markt and BCC, and increasing sales
through alternative channels such as DIY retailers, food discounters and
drugstores, the Internet is a major factor that has affected every part of the
market. Many consumers now use product comparison sites to compare prices on
line, and the resulting increase in transparency of prices has increased
pressure on retailers to offer the lowest prices. Moreover, consumers are now
better informed before they step into the store, and they are prepared to
negotiate and insist on a discount.
All these new
developments have had a major influence on the Dutch retail sector and many
traditional retail chains have found it hard to compete. As a result, the
retail sector has experienced a shake-out, and some chains have had to close a
number of outlets or have gone out of business altogether. Manufacturers of
consumer appliances will therefore have to negotiate with traditional retailers
that enjoy greater buying power as the smaller players are pushed out of the
market. For online retailers, price will be the most important issue because of
the transparency of the market, so manufacturers will also have to be creative
in dealing with these new players.
Blurring of Sectors in Consumer Electronics
It is
increasingly difficult to distinguish clearly between the different consumer
electronics sectors as many products now incorporate functionalities from other
sectors. Mobile phones incorporate mp3 players and digital cameras; PDAs are
starting to resemble small laptops and some are even equipped with navigational
software; digital cameras now have many features of camcorders; and multimedia
players now offer video, which has an effect on the development of in-home
entertainment products. The dividing lines between all sectors are now becoming
increasingly blurred and it is difficult to tell where one sector ends and
another begins.
Current impact
There are many
examples of how the various sectors are struggling to cope with new
technological developments in other sectors. In most cases the more
"static" technologies are losing out to more mobile or portable
technologies. For instance, VCRs and DVD players are losing volume and value
sales, while portable DVD and multimedia players are showing some of the
highest growth rates. The same is true for camcorders, whose sales have come
under pressure from the competition from mobile phones and digital cameras
despite increased interest in small videos and clips.
Outlook
This blurring of
the sectors is likely to continue, as manufacturers of portable consumer
electronics in particular will seek to integrate as many functions as they
possibly can. This is particularly relevant to sectors such as digital cameras,
portable multimedia players and mobile phones. These sectors have already
achieved most of their potential for volume growth, and manufacturers will now
try to convince their current customers to increase their replacement
frequency. This is best achieved by seducing them with cool new features, which
are an important tool for persuading consumers to replace their old consumer
electronic devices with new ones.
Future impact
These ongoing
trends are forcing manufacturers to be proactive and change their strategy in
order to deal with competition from all sectors. For instance, TomTom, the
major player in Dutch navigation systems, is currently putting a lot of energy
into the development of its navigational software. TomTom recognises that its
popular systems may soon face competition from other types of product, such as
mobile phones and PDAs. By becoming a major player in both systems and
software, however, it can partner with manufacturers from other sectors to
improve its position. This shows that it is possible for a manufacturer to
anticipate the competition from other sectors and manoeuvre into a position
from which it can benefit from the blurring of sectors rather than becoming a
victim of new market circumstances.
