The epidemic affected manufacturers of household appliances. Part of the global supply chain is not yet back to normal, and rising freight costs and raw material prices have added to the puzzle. Autumn will see an increase in the prices of some household appliances – this is announced by Grzegorz Wachowicz, Director of Trade and Marketing at RTV Euro AGD.
- In total, many electronics stores have been closed for more than a quarter of the year during the pandemic
- The decrease in the supply of equipment is already evident. – I think we will see it more clearly, for example in inflation, at the end of the year – says Grzegorz Wachowicz, Director of RTV Euro AGD Network
- The expert declares that we are facing significant price increases for household appliances of up to 20%. – It has already been announced by the producers, so in the next two months it will be visible on the market – he says
- More such information can be found on the home page of Onet.pl
How was 2020 for RTV EURO AGD?
Grzegorz Wachowicz, Director of Trade and Marketing at RTV EURO AGD: In general, very difficult and stressful, especially for the team, because it was a very tense year and many unknowns. We had to deal with the sudden shutdown phenomenon. For us, as a retail company, information about the limited performance of fixed stores was of great commercial importance. In total, for more than a quarter of the year, most of our facilities have been closed. However, for years we have developed an omnichannel model, and focus heavily on e-commerce and hotline phone sales. So we focused on how to use online and perhaps make up for the shortage in traditional stores. We wanted to conduct operations in such a way as to defend the highest possible percentage of sales through online trading.
Despite the limitations, last year turned out to be surprisingly good in terms of sales, the market eventually grew by more than ten percent.. However, we grew twice as fast as the market, and the company’s revenue exceeded 10 billion PLN for the first time in history. Despite initial concerns, consumer behavior has moved in a direction that was previously very difficult to predict.
We were all locked inside our homes and suddenly we started looking closely at our homes and thus started renovating them and buying equipment. There was also distance learning and work, which had a very big impact on the demand for computers and accessories. The year 2020 saw sudden increases in the market. But it was also a serious test to validate our strategy and operating model, and our setup in e-commerce and logistics.. We passed this test very well, as evidenced by increasing our market share and strengthening our leadership position. But it was undoubtedly a very difficult year, full of turmoil and uncertainty, because the closings were different, they mattered to the shops in malls and outside in different ways. It happened that we closed most of our branches, and at the same time our competition may be open. There was a lot of imbalance in the market, yet we had such good results.
How much to increase the share of e-commerce in commerce?
We do not provide such data directly for many reasons. The definition of e-commerce is not that clear. Currently, we have full penetration of two, including the hotline, and up to three sales channels. Online ordering, but actual offline order fulfillment and sales – can this be considered e-commerce? Was the order placed in a traditional store with our consultant, but through the online system that he has at his disposal, e-commerce or stationery? The division into online and offline retail is already an anachronism. What we are dealing with today and what will be the future of trading is a comprehensive channel. Currently, there are a lot of different schemes and paths of purchase, both online and stationary stores are a very important element not only for shopping, but also for decision-making.. Therefore, giving numbers directly and comparing them is very difficult.
In addition, last year’s customers had no choice but to use e-commerce due to the closure of traditional stores, so this traffic flowed online naturally. So, we can’t talk about changing behaviors, because we simply haven’t had a chance for other buying behaviours. We must also remember that there have been different waves of the epidemic. There was a moment when traditional stores were open, but there were fewer consumers because they were afraid to visit the mall and leave the house. The entire past year is an anomaly. However, we don’t know what the future holds and it may turn out to be a sharp turn in one direction.
What trends can be observed in the industry?
For now, I won’t be inclined to identify trends. If the reason is that the epidemic situation is still unstable, in some ways we cannot go back to normal from previous years. On the supply side, there are many changes: increases in steel, microchip and shipping prices, rising production costs and shortages of some components reduce supply.
For all the time, the situation, mainly in Asia, where a significant part of electronic equipment and household appliances is produced, remains unstable, for example, some factories are closed due to mass vaccinations being carried out there.. We are certainly feeling the effects of this instability. Supply constraints are already visible and I think we will see it more clearly, for example in inflation, towards the end of the year.
At the moment we are also dealing with rolling and sometimes even jumping prices of hardware due to the fact that manufacturers are chasing higher costs. At the moment, we are facing huge increases in the price of household appliancesAnd up to 20 percent. It has already been announced by the producers, so it will be visible on the market in the next couple of months. That’s really a lot we also hear from our suppliers, for example from the IT industry, about restrictions on equipment supply for the fourth quarter of the year. This means that there will not be many products that the market needs.
At the start of the pandemic in particular, there was a lot of talk about disrupting the supply chain. How was that from a salesperson’s point of view?
At the start of the pandemic, it was of paramount importance how well we had managed the handling of goods and orders from suppliers thus far. Retail is largely dependent on operations. What the customer finally sees in the store are products, the quantities of which are planned a few months in advance. We were well prepared, because when we heard the first reports from China, we responded to larger requests already in November and December 2019. We went through the first period of the epidemic in terms of stockpiling without any disruptions.
The huge increase in demand for laptops, literally from week to week, caused problems with their availability in the market. But our customers were guaranteed continuity of purchases, although last year was marked by a disruption in deliveries. Supply chain disruption manifested itself in the fact that after selling a particular product, we had to wait a week or two for the next delivery.
We have done quite well compared to the rest of the market, but it is the result of the work that has been put into proper sales planning, building of predictive models and inventory management in previous years.. In November and December 2019, we put together different scenarios, one of which was close to reality. But we didn’t expect much lockdownowAnyway, no one assumed such a scenario.
Is the trend of buying electronics still going on?
Demand is still higher than it was in 2019. We can see consumers reacting to the shutdowns. I think we tend to make up for last year’s difficulties in some way. We are looking, for example, for entertainment equipment, such as games, larger-diameter television, and audio, but also products that relieve us from routine daily tasks, such as small or large household appliances, and that can be managed remotely thanks to the Internet connection..
It seems to me that, despite everything, there are some inflationary fears among consumers, because the demand for all kinds of durable goods – from apartments to cars and various types of equipment. There is no jump here compared to the previous year, but surprisingly Demand is still very highAlthough, of course, different products are needed in different months. Recently, for example for everything related to travel and entertainment – from power banks, cameras or accessories.
Interestingly, now the Poles are more likely to purchase high-quality products, equipment with more advanced functions. These are not the times when the cheapest products were selling in bulk. At the moment, the consumer perceives, deduces, knows what he needs, and really needs more and more interesting equipment.
There is a lot of talk about the fourth wave. Does the company have a scenario for that and a possible next shutdown?
After last year’s experience, the answer to this question is that we should always have such a scenario. In the past year, some of the shutdowns have been really surprising to us and completely incomprehensible. So we must take this risk and possibility into account now. Of course, we don’t know how the epidemic situation will change. There is talk of a fourth wave now, but we can also imagine a scenario in which the type of virus would be much more serious. If the infection rate goes up, I don’t think any politician would risk doing a shutdown. These are known to be difficult decisions. What’s happening with inflation is also very worrying, and in that context we may not really be able to close out various market segments..
We hear voices that inflation is under control, but if we think about it more, in my opinion there is no such thing as keeping inflation under control. Governments have no actual influence on some inflationary factors, as they are part of the trade aspect. The scale of government debt is unprecedented, at levels comparable to those of World War II. We have tremendous inflationary pressure and it will likely continue to grow. I think those elements are really going to be taken into account in all kinds of decisions, especially towards the end of the year.
As a company, we already have several scenarios for the coming months. However, the most important is the foundations on which the company is built, and speaking of the foundations, I also think about the team. This past year has been successful for our team, who have been able to bring out a lot of ideas, commitment and determination in this challenging situation. But there is also another dimension to this success. Last year we did a great job, we didn’t use government subsidies, we focused on self-sufficiency. What do we have in return? As of this year, we still have to pay 1.4 percent. trade tax.
What does this tax mean for the company?
In our market segment, there are very low net profit margins – at the 3% level. Now, by an administrative decision, we need 1.4 percent, that is, 50 percent. Pay this margin to the tax office. And this has serious consequences: it means a decrease in investments, as well as in personnel, and a slowing of the pace of development, even in terms of technology. Moreover, the regulations are designed in such a way that they are not covered by all large entities. Our competitors do not pay business taxes due to a different structure, because the regulations treat capital groups in a certain way. We are in fact the only large entity in the electronics and home appliances industry to pay tribute to this honor. Interestingly, it was not paid by foreign entities either, which also benefited from the help of their own governments last year. This, of course, creates an imbalance in the market.
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