Spending and inflation

  • After a steep fall of 9% in electrical goods spend in 2013, we estimate consumer spend on the category contracted by a further 0.6% in 2014 to €9.7 billion (incl. VAT).

  • Deflation gripped the Spanish electrical goods market once again in 2014, with double digit figures recorded on photographic, computing and telephone/fax equipment.

Figure 1: Spain: Spending on electrical goods as % of all consumer spending, 2009-14
[graphic: image 1]
Source: INE/Mintel
  • Spain is experiencing deflation across the board and that is worrying for the recovery. Electrical products have seen above average levels of deflation.

Figure 2: Spain: Harmonised indices of consumer prices: Annual % change, January-December 2014
[graphic: image 2]
Source: Eurostat © European Union, 2014

Channels of distribution

  • Overall, the specialists took around 60% of electrical goods spending in 2014, we estimate.

  • Mixed goods retailers (primarily El Corte Inglés) are the next largest channel with 15%.

  • The food retailers and home shopping operators (mostly internet pureplayers and direct sellers) each captured 9%.

Sector size and forecast

  • Specialist electricals retailers’ sales were close to €5.2bn (excluding VAT) in 2014, we estimate.

  • The sector has been significantly weakened by the recession and sales have fallen by a massive 26% since 2009.

  • Nevertheless the specialists staged a comeback of sorts in 2013 with sales contracting at a slower rate than the electricals market as a whole.

  • But the prospects for all but the strongest players look poor. Many have already failed, and competition has increased from non-specialists, most notably the internet pureplayers but also El Corte Inglés and the hypermarkets.

  • With only a modest economic recovery in prospect we think that electrical specialists’ sales will continue to fall over the next five years, albeit at a much slower pace than the recent past now that the weakest players have been flushed out of the market.

Leading specialists – Financials and outlets

  • There are some signs of optimism in the electricals sector with the leading multiples – Media Markt, Fnac and Worten all opening a handful of new stores in 2014.

  • Worten has also unveiled a new store format designed to provide customers with a more interactive in-store experience and link them more closely to digital options while Media Markt and Fnac are to test smaller proximity stores.

  • Miró also managed to cling on, emerging from a liquidation process in 2011 and again in 2014.

  • These companies have survived the recession, and will doubtless have incurred some heavy losses. But they are well placed to capitalise on any market recovery and are starting to invest in new multichannel initiatives.

  • Information on the voluntary groups is sketchy, but all the indications are that their decline in sales was even greater than the multiples during the recession. Expert appears to have emerged the strongest of them, posting sales growth of 6.7% in 2014 following bankruptcy or closure of many of its smallest, weaker stores which had been holding back overall progress.

Figure 3: Spain: Leading specialists, market shares, 2014
[graphic: image 3]
NB: Based on total spending on electrical goods
Source: Mintel

Online

  • Around 57% of internet users have bought electrical goods through this channel in the last year according to our consumer research (see The Consumer: Where They Shop).

  • Some 17.2% of electricals sales went online in 2014, we estimate – around €1.7bn, including VAT.

  • Our consumer research shows that, in terms of online electricals shopping, more people buy from Amazon than any other retailer and we think it is now the market leader ahead of El Corte Inglés group.

  • Amazon, ECI and eBay are the most visited websites run by retail generalists while Apple and Media Markt are the most visited online shops among the consumer electronics specialists.

The consumer – Where they shop

  • Some 87% of internet users had bought an electrical product in the last 12 months.

  • Buying levels have increased by five percentage points compared to a year earlier, with most retailers posting higher levels.

  • Media Markt remains the clear market leader but Amazon has jumped in to third place (of any individual retailer) and has closed the gap significantly on El Corte Inglés.

Figure 4: Spain: Where they bought electrical goods in last 12 months, online versus in-store, January 2015
Base: 2,000 internet users aged 16+
[graphic: image 4]
* including telecoms or computer specialist
Source: GMI/Mintel

The consumer – Attitudes towards electricals shopping

  • Consumers show a strong engagement in multi-channel issues and initiatives.

  • Two-thirds of internet users agree they prefer to shop from retailers that have stores and an online shop and similar numbers would like pureplayers to open stores they can visit.

  • Similar numbers would also like to see more choice of delivery options from their online orders.

  • But consumers are sceptical about offers and deals with almost two-thirds agreeing they are not always genuine discounts, while over 50% agree that most retailers offer similar prices.

  • Creating points of difference has become more challenging in the electrical goods market but after-sales service appears to be one area that still matters to a lot of people. New ways of payment also appeal to many eg. in instalments, through a mobile app.

Figure 5: Spain: Most important factors in choosing the retailer for electrical goods, January 2015
Base: 1,740 internet users 16+ who have bought electrical/electronic products in-store or online/catalogue in the past 12 months
[graphic: image 5]
Source: Lightspeed GMI/Mintel

What we think

At this stage the threat of deflation does not appear to be derailing spending and economic recovery but it certainly has the potential to do so, particularly given the broader eurozone slowdown. Moreover, although the European Central bank unveiled a minimum €1.1 trillion Quantitative Easing boost to start in March 2015 this can only ever be part of the eurozone’s economic solution. On the other hand although it would be wrong to be too optimistic yet, the country is showing signs of a recovery. Emerging from a deep recession in 2013Spain has become one of the fastest growing economies in the eurozone at present and output expanded for the fifth quarter in a row in the third quarter of 2014.

The electrical goods market has been hit very badly but the specialists sector is emerging stronger for the loss of its weakest players. We expect to see further consolidation, and leading operators, like Media Markt, Worten and Fnac, are stepping up their investment in existing and new stores to reflect the needs of a multichannel marketplace.

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