Professional Documents
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SECTOR OVERVIEW
September , 2010
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Consumer Electronics & Home Appliances in Lebanon
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TABLE OF CONTENTS
6.1- Strengths 15
6.2- Weaknesses 15
6.3- Opportunities 15
6.4- Threats 15
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Consumer Electronics & Home Appliances in Lebanon
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• Air Conditioners
• Dishwashers
• Clothes dryers
• Drying cabinets
• Freezers
• Refrigerators
• Kitchen stoves
• Water heaters
• Washing machines
• Microwave oven
• Induction cookers
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Consumer Electronics & Home Appliances in Lebanon
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1
According to recent studies conducted by the Consumer Electronics Association
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Consumer Electronics & Home Appliances in Lebanon
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The state of the economy and its growth is a key indicator of the
consumer behavior and directly affect the household consumption,
trade in general and imports.
Against all odds, Lebanon benefited from the global financial crisis.
First, when the crisis erupted, customers lost confidence in the
world’s financial institutions and turned towards banks that did not
invest in complex financial instruments. Second, the crisis led
central banks across the globe to drastically decrease interest rates,
while stock markets were depressed, thus pushing investors to look
at higher returns elsewhere. Finally, Lebanon had already elected a
president in 2008 and was enjoying a period of politico-security
stability. The combination of the high differential in interest rates
between Lebanon and developed countries, the strength of its
banking sector, and the political stability, led to large capital inflows
to Lebanon in the aftermath of the crisis. These capital inflows put
downward pressure on interest rates and partly went to investment
in the real estate sector. However, economic growth in Lebanon was
and is still closely correlated with trends across the Middle East, as
services exports typically account for at least half of the small and
open economy's GDP.
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Consumer Electronics & Home Appliances in Lebanon
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a a a a b c c
2005 2006 2007 2008 2009 2010 2011
GDP
Nominal GDP (US$ m) 21,861 22,438 25,057 29,932 32,996 36,000 40,841
Real GDP growth (%) 1 0.6 7.5 9.3 6.9 6.2 5.8
Expenditure on GDP (% real change)
Private consumption -2.3 -2.1 6.6 9.5 7.1 5.9 6.2
Government consumption 2.9 2.6 4.5 8.6 5.1 2.1 3.9
Gross fixed investment 3.4 2.8 20.3 18 6 9.3 7.1
Population and income
Population (m) 4.1 4.1 4.2 4.2 4.2 4.3 4.3
GDP per head (US$ at PPP) 9,761 10,017 10,997 12,188 13,012 13,861 14,700
International reserves (US$ m)
Total international reserves 16,624 19,184 20,550 28,276 39,165 41,570 45,097
a
Actual, b EIU estimates, c EIU forecasts
Source: IMF, EIU, International Financial Statistics
We note that tourism, banking and construction will remain the key
drivers of growth. In fact the strong performance in these sectors is
the main reason behind official estimates that the economy
expanded by 6.9% in 2009, which was a record year for tourism,
with arrivals increasing by 64% year on year to 1.9m. Tourism may
indirectly support over one-quarter of the country's jobs and
generates much of the demand that supports the booming real
estate sector. Banking is vital to the economy and has also been
protected by strong inflows of deposits and interest income from
government debt. The main risks stem from the political and
security situation, which will also deter the long-term investment in
a broader range of economic activities that is required to ensure a
more balanced growth path.
Sovereign risk
Currency risk
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Consumer Electronics & Home Appliances in Lebanon
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Political risk
Lebanon has a massive public debt stock, which drives up the fiscal
deficit, and a large structural trade deficit, making it dependent on
volatile capital inflows.
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Consumer Electronics & Home Appliances in Lebanon
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The market is highly concentrated with the largest five key players
holding more than 60% of total sales;
28%
37%
12%
5%
8% 10%
Khoury Home Abed Tahan Hkayem BHV Home Line All Others
The above illustration shows that Khoury Home is taking the lead,
and is somehow out of the competition. This is confirmed by the
fact that Khoury Home was nominated the number one retailer in
the Levant.
2
According to the association of electronics importers in Lebanon
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According to the association of electronics importers in Lebanon
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Consumer Electronics & Home Appliances in Lebanon
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• 99%4 of all imported electronics and appliances are from the far
east.
16%
40%
14%
30%
4
According to the association of electronics importers in Lebanon
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According to the association of electronics importers in Lebanon
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Consumer Electronics & Home Appliances in Lebanon
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Consumer Electronics & Home Appliances in Lebanon
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Durable Goods 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Home Apllianeces 555 571 482 440 455 476 462 537 478 482 504
Electronics 194 207 198 192 216 204 216 252 217 209 255
Total 749 778 680 632 671 680 678 789 695 691 759
Total Domestic Consumption 21,393 21,832 22,105 22,418 22,943 24,698 26,460 28,816 28,885 29,213 32,521
% of Domestic Consumption 4% 4% 3% 3% 3% 3% 3% 3% 2% 2% 2%
Sources: Central Administration of Statistics
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Economist Intelligence Unit
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Consumer Electronics & Home Appliances in Lebanon
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The industry is renowned for its low margins and high volume
business model which can only bge supported by well established
network of showrooms.
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Consumer Electronics & Home Appliances in Lebanon
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Sales, delivery and after sales services are all handled by the retail
outlets and main show rooms.
Product Differentiation:
Large chain stores like Khoury Home, Hkayem and Tahan have
distinct advantage over the smaller stand alone stores as they can
demand good discounts suppliers. and forward the same to the
consumers.
Sales are highly concentrated with the large chain stores who
exhibit all brands. Consumers entering into large chain stores will
have a large choice of brands, products and price range. The
priority of sales team is to ensure that the consumer ends buying
from their store regardless of the brand.
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Consumer Electronics & Home Appliances in Lebanon
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There are few key players in the consumer electronic market, but as
they are part of big Lebanese business groups, they have a lot of
muscle power and hence the intensity of rivalry can be placed at a
mid to high level. Though factors such as high transport and
storage costs, lack of differentiation, large investments, and low
switching costs tend to intensify the rivalry, the fact that the market
is only at the nascent stage with promises of high growth rates of
10 to 15 % coupled with the diverse needs of customer groups, and
an untapped rural market; the existing players seem to be enjoying
a relatively low rivalry at large but a very acute one between each
other.
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Consumer Electronics & Home Appliances in Lebanon
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6- SWOT Analysis
6.1- Strengths
6.2- Weaknesses
6.3- Opportunities
6.4- Threats
• Imports duties
• Rapid product innovation and rapid transition from one
technology to another
• Significant time to market pressure
• Increase in applicable interest rates could affect the sales trend
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Consumer Electronics & Home Appliances in Lebanon
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Different risks are associated with the above three financing types,
however they are all risk adverse to the overall economy status.
Trade Finance
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Consumer Electronics & Home Appliances in Lebanon
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Consumer Finance
• Adequate guarantees
• Strict and well defined due diligence process
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