Stores Accumulating Inventory as Sales Fall off a Cliff
Samsung Electronics and LG Electronics recorded an earnings surprise in the first quarter, but from the second quarter, COVID-19 is expected to weigh heavily on them. A drastic reduction in consumption and a long-term closure of domestic and international distribution outlets are expected to lead to the worst market slump.
Consumption is falling off a cliff in the home electronics industry. Home appliance stores are accumulating inventory as goods are not sold, which in turn leads to a reduction in production.
The European and North American markets are in worse situations. Samsung Electronics has not yet opened Samsung King’s Cross, a brand experience hall in the hip King’s Cross area of London which was shuttered in March. Other experience halls in the United States, Germany, France, and Japan are in a similar situation for the second consecutive month. In addition, sales channels such as large retail outlets in North America and Europe still remain closed, leaving Korean companies with no sales outlets available.
In particular, the TV market where large sports events such as the Euro 2020 and the Tokyo Olympics have been stopped or postponed is expected to record minus growth. Worldwide TV shipments are expected to decrease 8.7 percent to 203.50 million units in 2020 from 222.91 million units in 2019, market research company Omnia said in a recent global TV market report. In the case of OLED TVs led by LG Electronics, an initial forecast of shipments of 4.5 million units was revised down to 3.5 million units. In the first place, Omnia had expected shipments of QLED TVs led by Samsung Electronics to reach 8.54 million units but changed it to 8.13 units.
The market focus is on the third quarter. However, it is difficult to make a clear judgment on a recovery in the third quarter, so uncertainties are a problem. International events scheduled for this fall also may be cancelled due to the uncertainties. The IFA, Europe's largest consumer electronics exhibition, to be held in Berlin, Germany in September, has not yet announced its plans to hold the event.
However, since the COVID-19 outbreak, positive changes have also been made in some parts of the home appliance industry. Home electronics producers are diversifying their sales channels by increasing the proportion of online sales, veering away from much dependence on offline sales. In addition, household appliances that manage hygiene such as clothes managers and dryers are also in the spotlight.
Samsung Electronics and LG Electronics are strengthening their online marketing in the United States and Europe where offline sales account for 60 to 70 percent. They are looking for a breakthrough by increasing non-face-to-face contacts with consumers who have been trying to avoid face-to-face contacts since the COVID-19 crisis such as increasing product ads on overseas YouTube channels.