Industry stakeholders are increasingly debating between sustainability and technology leadership strategies in the appliances market. As margins continue to shrink, leadership in either category is critical to maintain continued competitiveness. In this briefing, we will debate the merits of both approaches and find a potential path to sustained growth and profitability for companies.
This report comes in PPT.
Sustainability is no longer an option for companies if they want continued access to markets. Many countries are mandating that manufacturers comply with carbon mandates. For example, the EU’s Carbon Border Adjustment Mechanism (CBAM), coming into force in 2026, will require importers to the EU to purchase certificates to cover the cost of their emissions at the same level as EU manufacturers.
For appliance manufacturers, typical operating profit margins range from 1-15%. This is typical for hardware companies. Service companies typically have margins ranging from 20-30%. For example, while Apple’s profit margin for its hardware products is an industry leading 35.4%, as announced in the June 2023 quarter, its margin for services was almost double at 70.5%. Clearly, servitisation is the key to improved profitability.
Consumers love a feel-good story, especially if it alleviates any guilt they have while shopping. Many consumers have a vague understanding of how the purchase and use of appliances affects the environment. It is up to appliance marketers to then position their products as being good for the environment. This messaging is relatable and resonates with consumers.
Market leadership is an opportunity for premiumisation
Manufacturers have been looking at market leadership as a premiumisation opportunity for the longest time. In general, European companies through sustainability leadership and Asian companies through technological leadership. However, the question is, does it need to be so clear-cut? Why not allow technological leadership to enable sustainability outcomes and therefore market leadership?
A consumer’s lifestyle revolves around being the centre of their digital lives. Consumers want everything customised to their requirements. Similarly, for appliances, this will involve personalising diets, grocery shopping, wash loads and new cooking recipes, enhancing the appliance user experience. These new experiences will elevate a manufacturer’s relationship with its customers.
Consumer Appliances is the aggregation of major appliances and small appliances. Major appliances are an aggregate of the following categories: refrigeration appliances, home laundry appliances, dishwashers, large cooking appliances and microwaves. Small appliances are an aggregation of the following categories: food preparation appliances, small cooking appliances, vacuum cleaners, irons, personal care appliances, heating appliances and air treatment appliances.
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