From the high cost of production to the withdrawal of buyers / How does the home appliance market come out of recession?

The increase in production costs and the decrease in the purchasing power of households have trapped the home appliance market in a cycle of high prices and stagnation; A cycle that makes it more difficult to buy new goods and drives consumers towards repair and used goods.

The increase in production costs, the fluctuation of prices and the decrease in purchasing power of households have caused the home appliance market to stagnate. Conditions that, in addition to reducing transactions, have also led consumers to repair and buy second-hand goods. Examining the three sides of sellers, producers and consumers in the case of Ambassador Arjan shows that getting out of this situation requires stability in policies, reducing production costs and strengthening the purchasing power of households.

From the three sides of sellers, producers, and consumers, he presented a picture of a market that is simultaneously faced with increasing production costs, fluctuating prices, and reducing the purchasing power of households. Examining these three sides shows that market stagnation is not only the result of price increases, but economic instability and more difficult purchasing conditions also play a role in its formation. In the last part of this case, the most important reasons for this situation and solutions to get out of the recession are examined, emphasizing the simultaneous support of production and consumers.

The increase in the price of home appliances is not the result of a specific factor, but a set of costs in the production and supply chain. The increase in the price of raw materials, exchange rate fluctuations, the cost of supplying parts, transportation, wages and other production costs have increased the finished price of products.

Although the home appliance industry has moved towards increasing domestication in recent years, some of the raw materials, parts and equipment needed are still affected by currency and trade conditions. For this reason, domestic production has not been spared from the increase in supply costs.

In such a situation, the increase in the finished price of products on the one hand and the limitation of purchasing power of households on the other hand, has widened the gap between the price of the product and the consumer's ability to pay; A gap that leads to a decrease in transactions and aggravation of stagnation in the market.

One of the main problems of the home appliance market, in addition to increasing prices, is the lack of stability and predictability. When the cost of supplying goods changes in short intervals, the seller is not faced with sufficient certainty to replace the sold goods at a certain cost, and the consumer also cannot decide with certainty when to buy.

In this situation, part of the customers postpone their purchases in the hope that future conditions will be clearer. This expectation, along with the reduction of purchasing power, puts pressure on the volume of transactions and reinforces the recession cycle. Therefore, the market issue is not only the level of prices; Rather, the inability of market activists and households to predict future conditions also affects their economic decisions.

changing consumer behavior; From buying new goods to repair and second hand

The increase in prices has not only reduced the volume of purchases, but has also changed the way consumers make decisions. Before buying a new product, many households consider options such as repairing an existing device or buying a used product to reduce their costs.

This behavior change is more important in the case of essential goods such as refrigerators and washing machines; Goods whose absence can disrupt the daily life of the household. In such a situation, repairing or buying a second-hand product becomes an alternative to buying a new product for some households.

This trend, on the one hand, shows the efforts of households to adapt to economic conditions, and on the other hand, it highlights the need to pay attention to consumer purchasing power in policies related to the household appliance industry.

installment purchase; A solution that faces obstacles

Decreasing purchasing power has increased the need for alternative payment methods, however, installment purchases also face limitations in inflationary conditions. A consumer who cannot pay in cash may switch to long-term purchase; But the seller also faces the concern that the amount received in the future will not provide the possibility to replace the sold goods in the conditions of fluctuating prices. On the other hand, the lack of wide access to credit and facilities according to the repayment ability of households prevents the conversion of part of the existing demand into real purchases.

As a result, the development of credit purchases can be one of the tools to help the market; Of course, provided that the mechanism is designed in such a way that it facilitates the consumer's access to the product and does not increase the financial pressure and sales risk for the suppliers.

What should be done to get the market out of recession?

Examining the challenges of the home appliances market shows that solving the problems in this field requires a series of coordinated measures and focusing only on the final sales price alone cannot provide the basis for the return of prosperity.

One of the main needs is transparency in the pricing chain so that it is clear how much the increase in the price of products comes from the cost of raw materials, parts, production, transportation and distribution. Transparency in this sector can help to more effectively monitor the market and more accurately identify factors that increase prices.

Along with that, supporting domestic production should be aimed at reducing production costs, facilitating the supply of raw materials and components, improving manufacturers' access to liquidity, and developing domestic component manufacturing capacity. Strengthening production can lead to sustainable improvement of the market when, in addition to maintaining the ability of companies to operate, it also provides the basis for the supply of goods at a price more appropriate to the purchasing power of the society.

On the other hand, the development of the credit purchase system with the participation of the banking network and the design of facilities according to the repayment ability of households can bring back part of the suspended demand to the market. However, lending to consumers should be followed along with controlling production costs and stabilizing the market so that increased demand does not lead to more price pressure.

Reform the supply chain instead of just controlling the price

The government's role in the home appliance market should not be limited to price control at the sales stage. Part of the problems of this market are formed in the initial stages of the chain, from the supply of raw materials and currency policies to production costs and access to financial resources, and without considering these factors, controlling the final price alone cannot solve the problems.

Establishing stability in economic policies, avoiding sudden decisions, facilitating producers' access to raw materials, supporting production financing and monitoring the supply and distribution chain, are among the measures that can help improve market conditions. In addition to these measures, the government can, in cooperation with the banking network and economic actors, provide the context for the development of credit purchase tools so that households who have a real need to purchase can find access to essential goods with more appropriate payment terms.

Meanwhile, supporting producers and consumers should not be considered as two conflicting goals. A policy that only emphasizes the reduction of selling prices, without considering the costs of production, may face restrictions on the supply and continuation of the activities of producers. On the other hand, production support can't lead to sustainable market prosperity regardless of households' purchasing power.

The continuation of the current conditions can make it difficult for more households to buy new goods and increase the share of repair and second-hand goods in meeting people's needs. In such a situation, the decrease in transactions is not only a problem for sellers, but it can also affect the continuation of the activity of manufacturers and the outlook of the home appliance industry.

The return of prosperity to this market needs more than anything a coordinated policy; A policy that simultaneously manages production costs, strengthens the purchasing power of households, and restores stability and predictability to the supply and distribution chain.

Finally, sustainable prosperity is formed when the producer can continue to operate at a manageable cost, and the consumer has enough power and confidence to buy. It will be possible to overcome the stagnation of the household appliance market not only by controlling prices, but also by creating a balance between production capacity, supply cost and purchasing power of households.