Wholesale bypass has become increasingly popular, hurting industry revenue and profit
New York, NY (PRWEB) January 08, 2014
In the five years to 2013, declining household wealth and rising unemployment resulted in lower disposable income levels. With less money available, US consumers cut back on purchases of discretionary items, including consumer electronics (e.g. TVs and stereos) and home appliances (e.g. washers and dryers). Retailers subsequently experienced revenue declines, which led to business closures and a reduction in inventory levels. As a result, revenue in the TV and Appliance Wholesaling industry suffered from falling demand, as these wholesalers predominantly sell to small, medium and large retailers. Despite tough conditions, demand recovered with improvements in the economy and industry revenue in 2010. Rising consumer spending and healthy demand from downstream retailers is expected to increase industry revenue in 2013. However, these more recent gains were not enough to offset earlier losses; as a result, industry revenue is expected to decrease slightly at an annualized rate in the five years to 2013.
According to IBISWorld Industry Analyst Stephen Morea, “in addition to weakened downstream demand, wholesale bypass further decreased industry revenue.” In the five years to 2013, large retailers increasingly purchased televisions and appliances directly from manufacturers, which lowered prices for retailers and eliminated the wholesaler's role as a middleman. This external competition led to pricing pressures and a decline in industry revenue, as retailers terminated their supply contracts with television and appliance wholesalers. In addition, lower profit margins as a result of lower prices forced some wholesalers to exit the industry. Due to these factors, “the number of enterprises is expected to decline at an annualized rate over the five-year period,” says Morea.
The TV and Appliance Wholesaling industry exhibits low market share concentration. IBISWorld estimates that the largest players (including General Electric, Electrolux Group and Almo Corporation) each account for less than 1.0% of total industry revenue in 2013 (see IBISWorld report 42362 for major player market shares). The majority of the businesses in the industry are privately owned and have been successfully supplying the local retail demand in their communities. Additionally, led by growing downstream demand, the wholesaling industry is forecast to experience growth in the five years to 2018. Improving disposable incomes and consumer spending will encourage the purchase of more household electronics and appliances. In addition, technological developments, especially in regards to TVs, will likely encourage consumers to update older appliances. This will support demand as retailers turn to wholesalers to replenish their inventories. Over the next five years, industry revenue is projected to increase at an average annual rate.
For more information, visit IBISWorld’s TV & Appliance Wholesaling in the US industry report page.
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IBISWorld industry Report Key Topics
Operators in the TV & Appliance Wholesaling industry wholesale a range of electric household appliances such as refrigerators and washing machines as well as consumer electronics like TVs, DVD players and stereo systems. Goods are purchased from domestic and international manufacturers and then sold to mass merchandisers, department stores, home improvement stores and other appliance retailers.
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