CE Spend Down
Despite two consecutive months of interest rate holds, spending in quarter 2 2010, declined by 5.2 percent, according to research company GfK’s latest report.
Domestic appliances took the worst hit this quarter, but consumer electronics and IT also failed to deliver growth. Telecoms, however, enjoyed modest growth, thanks to the continuing popularity of smartphones.
Despite two consecutive months of interest rate holds, spending in quarter 2 2010, declined by 5.2 percent, according to research company GfK’s latest report.
Domestic appliances took the worst hit this quarter, but consumer electronics and IT also failed to deliver growth. Telecoms, however, enjoyed modest growth, thanks to the continuing popularity of smartphones.
Due to the buoyant smartphones category, the telecommunications sector was the only area to show growth compared to the same quarter last year.
While the value of traditional mobile phones fell 52 percent from Q2 2009, sales of smartphones more than compensated for the loss, with an increase of 92 percent. The revenue generated by smartphones in this quarter was almost three times greater than that of standard mobile phones.
For the first time in at least five years, the IT sector failed to achieve value growth, experiencing a decline of 1 percent in quarter 2, 2010, compared to the same period last year. Quarter 2 of 2009 was characterised by value growth, thanks in part to the government’s stimulus packages to Australian consumers – the effect of which could not have been replicated in 2010.
This year’s decline in value, however, has been exacerbated by strong price erosion in the dominant notebook PC market, which experienced its first ever value decline (-3 percent) in the history of the category.
Despite the performance of the IT sector as a whole, certain categories performed strongly in both units and value. With an average price decline of 25 percent, and the introduction of new technologies, the demand for storage devices continued to increase. This category grew by 23 percent in value and 62 percent in units.
Consumer electronics posted a year on year value decline of 8.3 percent this quarter; despite a relatively strong performance from the large flat panel TV market. Audio systems, camcorders, car navigation, MP3s and set-top boxes all experienced double-digit decline. Replicating the trends of the IT sector, consumer electronics suffered from the combination of a lack of government stimulus, and continuing average price declines.
Due largely to the additional demand created by the World Cup, the value of the flat panel TV market remained steady, although the unit growth of 40 percent illustrates the extent of the price erosion that took place during this period. The World Cup sparked another round of high-value give-aways by major manufacturers. Some of these were linked to a purchase of a 3D TV, although the availability of 3D was somewhat limited in the run-up to the World Cup.
All major domestic appliance categories experienced decline. While some discounting has taken place in these markets, the decline is more a reflection of the economic mood, rather than competitive retailer activity. Dryers experienced a sharp decrease of 22percent; partly a result of a drier than normal June across almost all of Australia, making it the continent’s fourth-driest June on record.
With interest rates back at a more ‘normal’ level, and a federal election due to dominate the third quarter, the negative sales trends of quarters 1 and 2 of 2010 are likely to continue into quarter 3. The continued introduction of new technologies, however, may help keep the decline to a minimum.
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