We highlight some key parts of Atradius’ Market Monitor report – focusing on consumer durables, non-food retail performance and outlook.
At first glance, the 2016 sales figures and turnover for consumer durables retailers seems pretty positive, with growth recorded – a trend that looks set to continue in 2017.
However, the context of this growth isn’t quite as reassuring. Margins remain tight, with fierce competition between bricks-and-mortar shops, as well as the impact of online stores with lower overheads and price match offers.
Against this pressurised backdrop, an ability to adapt speedily to market demands is key to the performance (and sometimes the survival) of even the most well-established of consumer durable retailers. For example, offering greater integration with online channels, such as a ‘click & collect’ options, as consumers demand increasingly flexible and convenient ways of shopping. However, not only do such changes require investment (and funding may be tricky for some) they also require organisational change, which can be even more challenging in some respects.
How are the key markets performing, globally? Here are some highlights:
- China’s retail industry has been booming, and with recorded growth in 2016, but it was at a somewhat slower rate than in 2014/2015. The country saw a sharp increase in online sales of consumer durables last year, and the outlook is generally positive thanks to the country’s vast population and government support for retailers – however the market is highly fragmented, and slower economic growth is forecast for coming years.
- France saw growth in all segments in 2016, including small and large appliances, furniture and consumer electronics. However, the consumer durables market is highly competitive with low profitability, owing to pressure on sales prices from an increasing number of online retailers. This fierce competition, combined with the high gearing of many businesses, and the political uncertainty around the 2017 Presidential Election, will largely offset the positives of improved consumer confidence and ongoing market consolidation.
- The Netherlands benefited from a continued rebound of the domestic economy in 2016, and with growing consumer confidence and increased growth there are positives for the future. However, price-sensitive consumers accustomed to offers and discounts, and increased foreign competition, mean that the business environment is likely to stay highly competitive and with low margins for the coming year.
- United Kingdom saw growth in the non-food retail sector in 2016, largely driven by consumer spending. Online sales have been particularly buoyant, which of course has put pressure on bricks-and-mortar shops, while the increase of the National Living Wage will also have a negative impact here. The weaker British pound and uncertainty around Brexit will affect both future investment spending and squeeze margins for retailers, while seasonal peaks and troughs will remain a factor, influenced by the vagaries of the British weather. Insolvencies are expected to increase in 2017.
- United States of America has good sales prospects, thanks to monetary policies which should support consumer credit and spending, while decreasing unemployment and an improving housing market will benefit the home products sector. A continued shift towards online shopping will add pressure to bricks-and-mortar stores on top of their fierce competition with each other, likely continuing the trend for store closures that was seen throughout 2016. Additionally, trade restrictions and Federal interest rate hikes will hamper growth in the consumer durables sector. Insolvencies are expected to increase in 2017.
For more detail on the 2016 performance and 2017 outlook for consumer durables in these territories, plus information on the markets in Germany, Poland, Hungary, India, Indonesia, Italy, Spain, Sweden and more, click here.
Atradius provides trade credit insurance, surety and collections services worldwide through a strategic presence in 50 countries. Atradius has access to credit information on 200 million companies worldwide. Its credit insurance, bonding and collections products help protect companies throughout the world from payment risks associated with selling products and services on trade credit. Atradius forms part of Grupo Catalana Occidente (GCO.MC), one of the leading insurers in Spain and worldwide in credit insurance.