Across Europe people are spending a lot of time at home due to COVID-19. A big source of entertainment during this time has been the TV, so the question is how this will impact the market for such devices?
On one hand, people have been at home watching and streaming more TV than ever. On the other, there is a high degree of financial concern as a result of the pandemic, which might impact purchase behaviour. Kantar data reveals that this differs significantly by country.
While a quarter of people in Italy and Spain feel very concerned about their financial security (25% and 24% respective), this drops to 13% in France and 12% in Germany while only 10% of British consumers feel this way.
In the last two years, consumers have expected more and more from their TVs. As their expectations have increased, so has their willingness to spend more to get those needs met. TV manufacturers have seized on this opportunity to sell more premium & super premium TVs, with this combined spend tier showing growth of 13%. This compares to the mid-tier which grew at 4%, the high tier at 1%, while the low tier remained flat. The gap in quality between premium TVs and mid-range TVs has widened as people favour new technologies such as QLED (quantum dot), OLED (organic light-emitting diodes) or 8K screens. Brands such as Sony have focused on the super-premium end of the market in a bid to increase profitability. Generally, these are the higher income/older customer where 59% of Sony’s installed base is 45+ compared to 55% for the market average.
A key concern now for the super-premium sector is that sales have increasingly shifted to online due to the pandemic. Pre-pandemic, on average 62% of TVs were bought in store, but this figure is higher for premium brands such as Sony (69%) and LG (64%). Where people are spending higher amounts of money, the focus has previously been on viewing and trying out the product before making their decision and Sony’s purchase journey has been heavily reliant on store visits. 56% of Sony purchasers (12 months to Q1’20) visited a retail store in their purchase journey (9% above average) with 27% (4% above average) relying on sales-person advice. The brands focused on the premium sector need to find some creative solutions in place of a store visit to offer the experience and quality assurances their buyers need.
With such a reliance on the in-store experience Sony risks sales conversions dropping lower, and we know that price/value are more important via an online purchase as the sale is more commoditised and less based on the visually impressive in-store experience. Sony is notably weaker in sales through Amazon, with only 10% of sales, which is 5% below the market average. Having a strong online presence and strategy is now vital to the future growth of brands.
With the cost of a premium TV in the thousands compared to lower-end ones in the hundreds, the question is whether the premium end is going to be impacted more as a result of economic hardship. Sony, which has focused on the super-premium end of the market, might particularly struggle with this shift in the environment. It is is perceived as a quality brand, with 19% of owners citing this as an influence in their purchase decision, which is considerably higher than the other brands. However, only 13% consider the brand to be good value. The issue for Sony is that 26% of its current owners are nearing the end of their TV lifecycle. In the current financial context, there is a definite danger that, as they have lower loyalty than other brands (46%, compared to Samsung 65% and LG 51%), some people might switch out of the brand to one of its competitors.
The pandemic is a double-edged sword for the super-premium TV sector. On the one hand the role of the TV as a means of entertainment has become more important due to increased time at home. However, the stress on people’s finances and change of shopping channels will have an impact on the demand for new appliances. These are all issues that brands can meet through the ranges that they offer, payment terms and their communications around product benefits. As with so many things about the new normal, only time will tell how things will change, but being aware and prepared for the issues facing customers is vital for the brands that are to remain successful.