Household appliances manufacturers’ revenues are growing along with costs

Russian manufacturers of refrigerators, washing machines and other equipment at the end of 2023 increased their revenue two to three times. However, the profits of many players are declining due to increased advertising costs and rising marketplace commissions. The latter account for up to 35% of equipment sales. Experts believe that in 2024, companies will have to raise prices to maintain profitability. Market participants themselves admit that they are beginning to lose competition to Chinese and Turkish brands, including due to the consequences of sanctions, and talk about the need for state support. Retailers advise suppliers to start by localizing production in the country.

The Russian manufacturer of household appliances Kuppersberg told Kommersant that at the end of 2023 the company received record revenue – more than 9 billion rubles, almost three times more than in 2022. In total, about 400 thousand units of equipment were sold. The company attributes the growth to the opening of new stores and expansion of the assortment, but clarifies that 35% of sales came from marketplaces. Kuppersberg did not disclose its net profit figure.

The founder of the Smart Solutions group (which includes the Jacky’s household appliances brand), Huseyn Imanov, talks about doubling revenue in 2023, to 3.4 billion rubles. According to the businessman, in 2024 revenue will increase by another 30%.

At the same time, Mr. Imanov believes that a number of manufacturers’ incomes may begin to fall due to competition, rising advertising costs and marketplace commissions: “Mostly small brands of household appliances sell their equipment through marketplaces. However, due to the high demand for placement, sites began to significantly raise advertising prices, which ultimately affects profits.”

Ozon notes that sellers independently manage both the cost of goods and the share of marketing expenses: “The average share of advertising expenses of electronics sellers traditionally remains lower than in most other categories on the marketplace.”

Against the backdrop of the departure of the former leaders of the household appliances market, consumer demand has reoriented towards Chinese, Turkish and Russian brands (see Kommersant, November 18, 2022). At the beginning of 2023, more than 20% of the TV segment was occupied by Russian retailers’ own brands (see “Kommersant” dated March 20, 2023). The revenue of the frozen production facilities of Bosch, LG and Samsung in the Russian Federation was halved (see “Kommersant” dated May 31, 2023).

Total revenue from sales of large household appliances in the Russian Federation increased by 11.9% in 2023, and small ones by 21.4%, says Holodilnik.ru commercial director Alexey Pogudalov, without specifying absolute values.

Mr. Pogudalov believes that Russian vendors will be able to occupy a “significant share in the domestic market,” but for its growth it is necessary to begin localizing production within the country: “The volume of consumption of embedded equipment in Russia has long allowed this to be done.” According to his estimates, in 2024 the market for large and small household appliances will grow by another 10–15% in monetary terms due to inflation and a recovery in consumer demand.

A representative of the Redmond household appliances brand notes that new vendors entering the Russian market are finding it increasingly difficult to compete with the Chinese and Turkish brands that have become stronger in the Russian Federation over the past two years. According to him, for domestic brands “state assistance would be useful, which could consist of a ban on parallel imports of goods from departed vendors.”

A Weissgauf representative also announced a doubling of revenue in 2023, without providing absolute figures. However, he is convinced that in 2024 the revenue of domestic manufacturers will decrease due to rising costs: “Against the background of inflation and rising exchange rates, domestic brands have already raised prices for their products, which in some segments have become more expensive than their Chinese and Turkish counterparts.”

The situation, the company adds, is complicated by the fact that Russian manufacturers, due to sanctions pressure, “are forced to create shell companies to place custom production in Chinese and Turkish factories, which also reduces profits.”

Timofey Kornev