2021 has been defined by the challenge of historic supply chain issues, while also demonstrating some of the strongest consumer demand on record. These dual forces have resulted in 2021 presenting a very unusual picture for the Home Audio market, with demand being brought forward to earlier quarters, and away from the holiday season.
We are seeing the early signs of a shift away from the standard of ‘just in time’ manufacturing and supply logistics, towards a new model of ‘just in case’. The fundamental difference being that in the pre-pandemic landscape, the industry aimed to have as little excess inventory and delivery times as possible – essentially matching supply with demand on as close to a one-to-one basis as possible.
The new model for businesses – that of ‘just in case’ logistics – aims to boost supply beyond what is immediately required of demand. For the Home Audio market, this means shoring up inventory of key components, such as wireless modules and speakers, as well as peripheral materials, including packaging and wrapping, alongside extending lead times to secure stock. The focus turns away from logistical agility and instead towards maximising capacity.
Looking at the present arrangement of freight shipping, it is clear how this has been especially vulnerable to the shocks seen throughout the Covid-19 pandemic. Of particular importance was the widespread consumer shift towards spending on goods, rather than services. This trend has remained strong even as many hospitality and experience services resume normal operation.
While such a spike of demand in normal times would have easily been absorbed by the supply chain, the lack of labour availability to process shipments – even as the supply chain’s capacity to deliver increased – resulted in bottlenecks at a handful of key ports. Another key development is that with larger orders facing deliveries over longer timeframes, manufacturers are extending product lifecycles and streamlining their device catalogues.
With reduced logistical agility to deploy products, we have seen the Home Audio market refrain from debuting new product ranges, with many more brands choosing instead to refresh and update existing models.
Due to these contingency measures, most leading brands in Home Audio have been able to maintain a stable brand share in volume terms. However, technology companies, with their already streamlined product ranges of smart speakers, benefitted the most from these challenges. Futuresource’s recently published Home Audio Quarterly Tracker found that Google and Amazon posted respectively a three and two percentage point increase year-on-year for their smart speaker value brand shares in Q4 2021.
Futuresource research has also shown that the industry is now sustaining a much larger total addressable market for home audio products, having stabilised the impressive 9% annual growth of 2020, with a further 3% added on top of historical large volumes. This brings the sum to 202m units across wireless speakers, soundbars and hi-fi systems at the end of 2021.
The main point of interest, however, has been with respect to value growth, which posted an impressive 15% increase for the full year of 2021 against 2020. These two data trends reflect the most striking aspects of the wider developments around the global supply chain, with consumers demonstrating both a willingness to bring their typical holiday purchases forward to earlier parts of the year, while also remaining undeterred by higher prices and the comparative lack of promotional activity.
Consumers and industry alike are both keenly aware of the impact of a compromised supply chain, and are adapting their behaviour accordingly. More people are buying than before, but they are buying less frequently – and they are buying better when they do come to the market.
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