Master the 2023 European Tech and Durables market

Lately, regional and global crises are coalescing to create polycrisis in the market. Whether international geopolitics or natural disasters are threatening brand supply chains or driving up costs, or consumers’ shrinking budgets are changing how, when and where they spend: effects are being felt simultaneously. They’re also nuanced: with each country’s market and consumers responding differently.  

The war in Ukraine is existentially felt in bordering countries, such as Poland, but a mixed set of pressures including the war are sparking a rise in social insecurities, or worsening pre-existing ones, across the region. For example, France has seen ongoing strikes and protests since the beginning of 2023, against the government’s unpopular push to raise the national retirement age from 62 to 64. In addition, some European countries have implemented divisive government policies on sensitive issues such as immigration and the parental rights of same-sex couples — pushing already stressed consumers to the brink.

While T&D retailers and manufacturers can systematically prepare for the logistical-, or price-related challenges thrown up by disruptions such as the war in Ukraine, responding to holistic legislative changes that more generally affect consumer sentiment — and purchase behavior — is not as straightforward. Brands must carefully evaluate if, and how, to react towards socio-political shifts. However, there is an opportunity to build or maintain brand loyalty, for brands willing to compile, share and embody a “value catalog” that responds to the social moment (more on how brand behavior is critical to building trust with European consumers below).   

The COVID-19 pandemic was ground-zero for retailers, with consumers fundamentally changing their purchase behavior out of necessity. While offline channels are making a comeback, online shares remain high and are expected to remain steady, or even rise, in 2023.

The new familiarity with online channels has hybridized consumer path to purchase, and made tracking touchpoints even harder. To succeed, brands need omnichannel strategies that both address more complex journeys and continue to update brick-and-mortar stores to a broadened function — no longer just as utilitarian points of sale but as new experience hubs, where consumers can physically engage with the brand experience and products before a possible online purchase.

Key regional challenges to growth boil down to the decrease in consumers’ expendable income, and negative consumer sentiment — making them less willing to spend the money they have got, with GfK’s Q4 2022 Helicopter View Report sharing that T&D sales volume declined everywhere in the region except Poland, which only posted +1% growth.

One-third of people in Western Europe have switched from name brands to more affordable brands, and nearly half have postponed a purchase until the product was on sale. However, premium segments in Technical Consumer Goods remain crisis-resistant with approximately 80% of high-income consumers in Germany still buying as much technical equipment, such as household appliances, as they’ve planned.

With the regional Consumer Willingness to Buy index at -32.2 in March 2023 lower than it was during COVID-19 lockdowns, and inflation skyrocketing since 2020, retailers and manufacturers must find ways to earn consumers’ hard-won euros, and match their demand for innovation across segments with their real spending power.

Brands must now deliver promotions that cater to price-conscious consumers of every segment and foreground products and features that budget-squeezed consumers will find not only irresistible, but indispensable. 

Retailers and T&D manufacturers who plan to succeed across the European market must take regional outliers into account. While the European Union (EU) and European Economic Area (EEA) has a regulating effect on member-state economies, growth strategies must take the unique context of individual countries into account — especially regional outliers, which also typically fall outside of the EU. 

The United Kingdom (UK) is a key example. On top of the usual post-Brexit difficulties brands face — such as new trade regulations and tariffs — less stringent regulations have resulted in higher-than-average increases in energy prices that drives up the cost of production and distribution for brands while shrinking consumers’ disposable income.

A typically sheltered consumer now faces the unthinkable: war in Europe, which plunged the EU Consumer Index to lows not even seen at the height of the COVID-19 pandemic. While outliers and generational differences exist — the mood remains persistently less severe in Poland compared to the rest of the EU (e.g. -17.4 vs -20.6 in December 2022), and younger consumers across the region are quicker to purchase — the 2023 consumer is subdued, though resilient. Let’s take a closer look at how the continued fallout from the war, and an intensifying climate crisis, is set to shape consumer values and behaviors into 2023. 

No crisis in the last 20 years has dampened consumers’ appetite for premium products and features, and 2023’s mix of challenges is no different. Consumers remain willing to spend premium prices when justified by innovation, and backed by a trusted brand.

While high-income households unsurprisingly continue to fortify the premium segment in T&D, mid- to low-income earners have also adapted their view on premium purchases. 

The pandemic lockdowns catalyzed a behavioral shift, making consumers more comfortable with indulging in premium features or products in typically utilitarian domestic appliances. For example, consumers started to indulge themselves with increasing percentage of upgrades on working kitchen appliances, with 24% of Western European consumers upgrading a working Oven/Hob in 2022, and Laundry, Refrigerator and Kitchen premium segments all remaining a strong part of the market from 2020-2022. While there is a current uptick in consumers prioritizing refurbished or second-hand goods overall, premium still exerts a strong appeal overall.

Brand behavior counts more than ever, as consumers rely heavily on trust to drive purchase decisions. Our data shows that consumers of all ages prefer brands that appeal to their values, and Millennials and GenZ would specifically select one over another because it supports a cause they believe in — with nearly half agreeing to this statement, compared to 40% of Gen X and Boomers.

But authenticity is critical. Consumers can recognize false or unfulfilled brand promises and one misstep can cost dearly, even after years of brand building. According to GfK’s 2022 Consumer Life and Green Gauge Plus surveys, Boomers are more likely to stop trusting — and buying from — brands when they suspect unethical environmental business practices, or Greenwashing. Meanwhile, younger consumers are easily distanced from brands when they fail to tie messaging or channels, to contemporary trends, language, and platforms that regularly reiterate their values.

More than just communicating brand values, consumers want to see them realized in every brand interaction, product or service. With brands like Patagonia and Nike brave enough to threaten their profits by standing for their values (with Patagonia making sustainable decisions at the cost of their margins, and Nike polarizing their audience by directly confronting racism with their “For Once, Don’t Do It” campaign), stakes are high for others to do the same.

The global desire for all things sustainable is growing amongst consumers of all age groups, and is set to become a must-have trait for brands wanting to meet demand and wishing to avoid being banned from the European market within the coming years. 

Despite the current crises, sustainability remains one of the most important brand values for consumers, with more asking where and how their favorite products are produced, and finding circular economies more attractive. For example, after a slight dip in enthusiasm sparked by the cost-of-living crisis, Western European consumers have renewed their desire for eco-friendly products. Despite rising pressures, consumers still demand green products and sustainability from their favorite brands — while inflation quickly became the #1 social concern, climate change still remains one of the top 3 concerns in Europe.

When making a purchase, products that are both environmentally friendly and more cost-effective at the same time win the day. For example, a water-efficient washing machine, or a refrigerator that saves on electricity will keep consumer utilities bills lower while also being better for the planet.

Brands who can cater to this dual-function, are set to win big as 50% of the global population is expected to be eco-active by 2030. This segment has a projected FMCG worth of over €1 Billion by 2030, and may be valued at over €700 Billion in Technical Consumer Goods. For longer term success, brands must make room to participate in sustainability and the circular economy: building buy-backs, product-leases, robust repair programs and value-add services into their growth, brand and marketing strategies.

Consumers are used to spending regularly on Fast Moving Consumer Goods (FMCG), with the need for T&D purchases surfacing once every 2–7 years, depending on the category.

Despite a subdued mood, where consumers are cycling their T&D products less than usual, 2023 signals the start of a new buying cycle, with many looking to upgrade or replace purchases made before, or postponed during, the COVID-19 pandemic. Three key considerations can ensure T&D manufacturers and Retailers take full advantage.

New products need to be explained, and alternatives to existing ones need to convince consumers of their unique value — one reason why consumers have returned to offline shopping, contributing 64% of sales share (€41.5 Billion) in Germany alone.

But they’re not unique, according to Global Head of gfkconsult Retail, Michael Haas, who shares that “experiences are driving the entire European market and supporting the development of successful retail brands, building trust along the way. Moving into 2023 and beyond, T&D retailers and manufacturers must keep pace with brands like Dyson, Apple, and Bose, and engineer touchpoints that allow consumers to engage with products without pressure to purchase and offer consumers branded in-store experiences they can’t find elsewhere.”

Meanwhile, future-forward retailers across all categories continue to reframe themselves from product hard sellers to experience champions and embracing omnichannel strategies — prioritizing those that help consumers seamlessly transition between online and in-store experiences. This can be a lifeline for brick-and-mortar stores, which won’t disappear but must evolve to maintain their place in the new, physical buyers’ journey.

Currently the status quo holds that T&D manufacturers develop products that are either shared directly with consumers, or offered via Retailers. Meanwhile, retailers buy products and then find consumers who want them. This strategy is no longer effective.

The tougher climate is shrinking retailer diversity, and placing survivors under pressure. While smaller stores can thrive by focusing intensely on target shopper groups, and offering highly curated product ranges that limit their success to that sphere, even the biggest retailers face upheaval: needing to match consumers’ changing expectations of what it means to be in store, by offering innovative product demonstrations and experiences that redefine the concept of a showroom. 

In a climate where brand loyalty is eroding faster than ever, innovation matters.

Innovation and seasonal categories that show clear consumer benefit supported the YoY growth of Small Domestic Appliance (SDA) in Western Europe (+2%), while other categories decelerated. Notably, Asian brands dominated, for example: the robot vacuum cleaner segment has been overtaken by Chinese brands in just under 5 years. 

Clearly, established European T&D players can’t rely on their reputations and may be forced to look for new markets, as consumers no longer wait for their favorite brands to match offerings by new, more affordable and more innovative market entrants.

Unless established European brands can match the pace of innovation and price points being offered to the new consumer (without asking them to compromise on their eco-consciousness), the market is ripe for new brands to take hold.