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Small Domestic Appliances: Inc Impact of COVID-19 - UK - December 2020
Overview
 
COVID-19 disruption since March 2020 has seen the online channel gain in importance, as just 39% of consumers purchased in-store in 2020, down sharply from 49% in the previous year. As a result, online-only retailers have strengthened their hold on the market, with 46% of consumers purchasing from them in the past year. This was driven by Amazon (40%) – a standout winner from the COVID-19 disruption as it extended its lead in the market. 

The market remained resilient, although growth slowed to 2.1% in 2020. However, alongside the fundamental shift in how consumers purchase appliances, this disruption has had a significant impact on the market. The announcement on 4 January 2021 of a national lockdown, is likely to see the continuation of the trends of the past year for, at least, the first few months of 2021. 

Perhaps the biggest fallout has been in the polarisation of demand. The unequal impact of disruption has divided the market into those limited to essential purchases and those upgrading. Importantly, in the latter, this has been buoyed by redirected spending from other non-essential sectors. Moving forward, the disproportionate impact of this disruption will continue to polarise demand, squeezing those in the middle of the market and suppressing potential spend.

Nonetheless, amid this new landscape, there was also an increase in new demand. Usage of small domestic appliances increased, and the focus on appliances grew with extended periods inside, with a shift to working from home and the uptake of new hobbies, for example baking and cooking. This shift in behaviours will continue to open up new opportunities for growth, particularly as a recovery in consumer confidence slowly returns. 

Key issues covered in this Report
●	The impact of COVID-19 on the small domestic appliances market.
●	How this disruption will change demand in the short, medium and long-term.
●	Opportunities for retailers amid this disruption and extended periods inside.
●	The future of the purchasing journey for small domestic appliances.
●	The growing role of online-only retailers.
●	The growing opportunity for wellbeing in the market.
●	How might the post-Brexit trade deal impact consumer spending.

COVID-19: market context
The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. As the case level rose, the government ordered the closure of non-essential stores on 20 March. 

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23 March. It was not until 15 June that non-essential stores were allowed to re-open, followed by pubs, restaurants, hotels and hairdressers on 4 July, and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a full month-long lockdown from 5 November, and Scotland introducing a new five-level system of coronavirus restrictions. 

In England, the lockdown ended on 2 December 2020, with the previous ‘three-tier system’ coming back into effect. The majority of the country was initially placed into at least tier 2; however, amid the identification of a new strain of coronavirus, which initial data suggests could be 70% more transmissible, a review on 19 December put much of London and the South East into a new ‘Tier 4’, in which rules will not be relaxed over Christmas. 

Despite these restrictions, however, case numbers continued to increase. All four UK nations tightened restrictions in January 2021, effectively leading to a full UK-wide lockdown. There is no defined end date for the lockdown, although the legislation regarding to the English lockdown that was presented to Parliament extends to 31 March.

The UK’s vaccination programme started on 8 December 2020, and with both the Pfizer-BioNTech and the Oxford-AstraZeneca vaccines licenced for use in the UK, the government aims to offer a vaccine to 15 million people by mid-February.

Impact of the January lockdown and the vaccination rollout
Much of this Report was prepared in December 2020, before the announcement of the January lockdown.

However, the content was reassessed and, where necessary, adjusted on 11 January, in order to ensure that our analysis and our forecast expectations still hold true. We have also reassessed the content in the light of the progress of the vaccine rollout, and the resolution of the Brexit negotiations.

Our core assumptions on the path of the pandemic had always included an expectation of severe disruption to markets and consumers’ lifestyles well into 2021, with a strong likelihood that the virus would still be with us even into 2022. Although the second wave of infections and subsequent lockdown puts us towards the negative end of our initial expectations, these developments are still broadly consistent with our previous assumptions.

Similarly, Mintel had factored in the likelihood that an effective vaccine would be available from early- to-mid 2021. The licensing of the Pfizer-BioNTech and Oxford-AstraZeneca vaccines puts us slightly ahead of that assumption, but the challenge associated with rolling out a new vaccination programme to millions of people means that our previous assumptions are still broadly consistent with the new reality.

Economic and other assumptions
Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its November 2020 Fiscal Sustainability Report. The scenario suggests that UK GDP will have fallen by 11.3% in 2020, recovering by 5.5% in 2021, and 6.6% in 2022. GDP isn’t expected to return to pre-COVID levels until the fourth quarter of 2022. The central scenario has unemployment peaking at 7.5% in Q2 2021.

The current uncertainty means that there is wide variation on the range of forecasts, however, and this is reflected in the OBR’s own scenarios. In its upside scenario, economic activity returns to pre-COVID-19 levels by Q4 2021. Its more negative scenario, by contrast, would mean that GDP doesn’t recover until Q3 2024.

The second wave of infections and subsequent lockdowns means that the short-term prospects for the country are consistent with the OBR’s negative scenario, but this needs to be balanced against the fact that the vaccine rollout is ahead of even the OBR’s central scenario. Medium- to long-term, then, we are still basing our forecasts and market analysis on the OBR’s central economic scenario.

Products covered in this Report
For the purposes of this Report, Mintel has used the following definitions: 

Small domestic appliances include the following:

●	vacuum cleaners
●	carpet cleaners
●	irons/handheld steamers
●	fans/heaters
●	air treatment appliances – purifiers, humidifiers, dehumidifiers, etc 
●	toasters
●	sandwich makers
●	deep fat fryers
●	bread makers
●	table-top/health grills including raclettes, barbecue-style grills
●	crêpe makers, etc
●	slow cookers
●	electric steamers/rice cookers
●	other electric table-top devices such as electric woks, plate warmers, mini-ovens, soup makers, jam makers, ice cream makers, etc
●	food preparation equipment – including food processors, handheld blenders, liquidisers, fixed-stand food mixers, handheld food mixers and mini-blenders/choppers
●	kettles – cordless or corded models, jug/coffee pot and traditional style and travel kettles
●	hot beverage makers – filter coffee machines, espresso/cappuccino makers, combination filter/espresso/cappuccino machines, coffee percolators and electric tea makers
●	electrical kitchen gadgets – juicers, electric can openers, carving knives, etc

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