Electronic auction: sales fell and prices were retained by the crisis – 12/01/2019


The electronics are at the top, literally. Due to the sharp drop in sales, manufacturers, brands and retailers avoid transferring the devaluation of the peso and financial costs to prices, and point to liquidate stocks. A survey by AFARTE indicates that the average price of a television rose 24.7%, well below inflation (48%) and the increase of the dollar (101.4%). In the market they calculate that not sold more than 1 million units produced for the 2018 World Cup due to the crisis, rising rates and the loss of purchasing power of wages.

All electronic categories fell last year (refrigerators, washing machines, kitchens, cell phones, airplanes and computers), but retailers and manufacturers warn that most products, measured in dollars, are the cheapest in the region. "The current price of a handset today reflects a dollar value of $ 28"Alejandro Toscano, a senior executive at Whirlpool, says:" The shopping tour to Chile has been cut off, you can not see it any more, "says AFARTE President Federico Hellemeyer, referring to Argentines who, at US $ 20 , crossed the mountain range to destroy electronics and clothing.

Devaluation and rising rates have changed the landscape. Of all, the most affected categories are TV and computers. According to IDC, sales of PCs and laptops dropped nearly 50% last year (about 920,000 units). And this despite the 37% increase in the first quarter, says Lenovo CEO Juan Martin. "From then on, the fall deepened with the devaluations and the increase of the rates," he added. Similarly, the chief executive of the Chinese brand admits that the price of an average team rose 70%. "But in dollars it fell 20%", he clarified.

The exchange rate has a particular impact on information technology and mobile telephony. "PCs are all imported and mobile phones (which come mainly from Tierra del Fuego) are assembled from kits, in a process with very little added value," explained one source with a long history in the industry. Hence the high impact of price depreciation. Without going further, they were the two categories that increased the most in 2018.

However, in the industry, they argue that the lack of funding hurts more than the price increase. "Brands do not publish the price of the product, but the quota value"said Bruno Drobeta, Samsung's mobile director, while mobile sales fell less than the rest of the categories," the impact was less because they are not the first products that relegate the consumer, "added Drobeta. What fell hard is the average ticket.

The gunfight of the dollar in 2018, the year of the World Cup, paralyzed sales of televisions.

The gunfight of the dollar in 2018, the year of the World Cup, paralyzed sales of televisions.

A hot World Cup

The dollar's sharp jumps, rates, and inflation (loss of purchasing power) have left a bad stop in the entire value chain. The case of TVs is illustrative. For the World Cup, 3.5 million TVs were manufactured, slightly above the annual average. Due to the excess inventory, AFARTE (the fire terminal chamber) estimates to produce 2.2 million units this year. "The market got very hot with the World Cup and sales plummeted in June"Stressed Hellemeyer.

Faced with this recession, manufacturers, brands and commercial chains face the difficulty of transferring devaluation prices to products based on imported inputs. "The whole industry today works at a loss"In terms of prices, the executive gave an example of a 32-inch TV:" At the beginning of 2018, it cost an average of $ 382 and today, that same model is worth $ 196, "he said.

Along these lines, AFARTE has prepared a comparative report on TV brands and prices, which reveals the following. A smart 40 "from Samsung costs in Argentina US $ 364, in Chile, US $ 408 and in Brazil, US $ 498. A smart Philips of 43" is worth US $ 349 and in Brazil US $ 581. In this respect, Laffue was "We have a high-end model from LG that is cheaper in Argentina than in the Amazon, It's ridiculous, "he said.

Executives and manufacturers agree that market normalization may begin in April when stocks are cleared. "The price recovery will depend on the evolution of each category, but the accommodation will be very slow. Today the chains have a lot of products," says Luis Galli, CEO of the Fuengian Newsan group.

Like other market sources, Galli believes that there is three decisive factors for a change of trend, if the dollar stabilizes: "The level of fees (plots in installments), the purchasing power of wages and consumer confidence." Eduardo Echavarría, an analyst at GfK consulting firm, divided the year in two, "with a slight contraction in the first half of the year, then starting a slight recovery in the second, conditioned by the evolution of the real wage, the stability of the foreign exchange market and a reduction of the rate of interest ".

In the so-called white line (refrigerators, washing machines and kitchens), connoisseurs project a scenario similar to the 2009 crisis. "It was an election year, in the first half the dollar went from $ 3 to $ 5, the rate rose sharply and after the elections, the market has recovered, "says Laffue. And on the other hand, he admits that "demand in our industry is very elastic and, depending on context, falls and recovers quickly."

Ivan Purtic, product manager for Mabe (Patrick and General Electric), explains that the balances of 2018, product of the sudden crisis, "She is the mother of all problems". The senior executive shows that the market "does not validate a price increase equivalent to devaluation and companies, which have a huge stock, need to make money." According to Purtic, the devices today have a 20% lag in relation to the prices of the economy. "When we set the charts for this year, we see that retail prices are far below."

In industry, they try to find the positive side. Like others, Purtic advises buying now. "This is a good opportunity for consumers because they can take advantage of low prices."

Low air production

From Annabella Quiroga

Avoid a 20% drop in the production of air conditioners.

Avoid a 20% drop in the production of air conditioners.

For this year, more cautious estimates indicate that local production of air conditioners will fall by 20%. The collapse of sales in 2018 left factories and retailers with a high stock, so that although there is a slight recovery in consumption in 2019, production will be hit.

According to data from consultant GFK, last year sales fell by 16%. Based on this situation, AFARTE has a "very austere" estimate for this year's production. They argue that it will be between 800,000 and 850,000 units, a reduction of 15-20% compared to 2018.

From AFARTE they indicate that recantation has several causes. "The market may be showing some maturity over its peak in 2015, when output was 1.8 million units. The decline in purchasing power and the few financing options contribute to a share of pessimism."

Daniel Rosenfeld, director of BGH Consumer – a company that dominates 25% of the market between own brands and manufacturing for third parties – believes that this year the decrease in production will be even greater than that estimated by AFARTE. "The drop will be closer to 25% than 15%. It will be a market of more than 1 million partly fueled by the remaining stock of 2018"

Based in Tierra del Fuego, the national production share in the local market is more than 85%. The devaluation hits the industry hard, as 65% of its components are imported. "The appreciation of the dollar was more than 100% and the transfer to prices should have been at least 80% (counting the imported component plus the effect of local inflation) and did not reach 40%. brake consumption, there was no room to raise prices even further. " For Rosenfeld, "today we are in one of the best times in history to buy appliances, everything is extremely cheap in dollars, but at some point the industry will have to change prices and sales volume will fall."


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