For the US Consumer Durable Goods industry, provide the top 10 challenges which this industry is facing now and/or in the future. What challenges are mentioned most with reference to this industry? Include a one-line summary for each challenge along with a fully-cited overview of it.
Hello and thank you for your request on the top 10 challenges for the consumer durable goods industry in the US. Consumer durable goods are expensive and infrequently purchased, which makes them dependent on economic conditions and consumer confidence. Consumer spending habits and preferences, as well as events within and outside the US, influence the growth of the industry. Below, you will find a deep dive into my findings.
1. INTEREST RATE
Interest Rates have a direct relation to consumer spending. A rise in the cost of borrowing will increase saving and reduce consumer purchases. Should the US Feds impose a hike in interest rate, spending on housing and vehicle purchases will be reduced.
2. DEMAND SLOWDOWN
Sales volume of consumer durable goods will suffer if demand unexpectedly slows and competition intensifies. Consumers hold off on spending until the stability of local and global events are ensured, which results in a fall in demand and purchases. High earners continue to spend, due to gains in the housing and equity markets. However, with a low consumer confidence, many middle-income consumers will reduce spending.
There is a strong risk of non payments when the economy is volatile. Payments take an average of 90 days, and non-payments will always pose a problem, particularly when the economic conditions are unstable.
The consumer durable retail sector continues to be poised by increased competition. Besides domestic competition, the rise of ecommerce and online purchases, have also provided consumers with various avenues for spending. Consumers are also able to purchase from offshore suppliers for cheaper costs.
5. TRADE RESTRICTIONS
Trade restrictions could influence the price of consumer durable goods. If the Trump Administration imposes trade restrictions, the price of imported consumer durable goods will increase. Consequently, consumers will spend less.
6. PROFIT PRESSURE
The consumer durable industry will face continued price and margin pressure. Globalization and a move to online transactions have made the consumer price driven in their decision making process. This has put additional pressure on companies to hit margin goals at the same time as offering a low price.
7. THE WORLD IN THE US MARKET
Global retailers could face challenges from the appreciation of USD against the Pound and Euro. The current uncertainty in the UK and Europe over Brexit and its ramifications is compounding this issue. The stronger currency could also impact tourist sales of consumer durable goods by making these items more expensive in relative terms, reducing sales.
8. SHIFT IN CUSTOMER SPENDING HABITS
Retailers are facing a shift in customer shopping habits and attitudes toward discretionary expenditures. They have responded by moving to omni-channel models in order to holistically serve customers across their online and brick-and-mortar presence.
9. FINANCIAL RUIN
The number of bankruptcy filings in 2016 by US retailers with at least USD 250 million in liabilities, nearly doubled from 2015 to 2016. With an oversupply of retail space in the US, as well as increased competition, more US retailers may close in 2017.
10. CHALLENGES IN SPECIFIC MARKET SEGMENTS
Electronics and toys retailers continue to face steep competition. In both segments, there is strong competition between online and brick-and-mortar retailers.
Consumer spending for consumer durable goods relies heavily on the economy and consumer sentiments. When there is economic and political uncertainty, consumers tend to hold back spending on such goods. The online and globalized competition also pose a threat to existing US companies in the industry.
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