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Consumer Electronics Takes Off

Consumer electronics will see strong growth through 2010 thanks to low current penetration and expanded consumer credit.


Because of the highly-stratified distribution of income throughout Latin America, the availability of consumer credit plays a critical role in pushing up penetration of consumer electronics products. The emergence of a sustainable middle class is opening new credit opportunities and driving rapidly growing sales.

The Latin American markets are highly concentrated. The tier 1 countries – Mexico and Brazil – generate more than 65 percent of the region's $2.4 trillion GDP. Tier 2 countries (Argentina, Venezuela, Colombia and Chile) account for another 24 percent of GDP, while the remaining 11 percent is contributed by more than 16 tier 3 countries.

Sales of most consumer goods are proportionate to GDP, but electronics products are a special case in some countries.

Argentina already accounts for a greatly disproportionate electronics share, primarily as a result of that country's strong post-crisis rebound. Consumers in Brazil are following suit, with Mexico next in line to join the trend as the strong growth of consumer credit allows vendors to leverage the low level of initial penetration.

These three countries are all in the bottom tier of the global computer penetration pyramid, with less than 30 percent household penetration. As the trend spreads across the region, computer sales, for example, are expected to grow by between 4 percent and 8 percent annually from 2006 to 2010.


A sharp disparity in income distribution is a defining characteristic of Latin America. In countries such as Mexico, the upper class represents less than 10 percent of the population but controls more than half of the country's wealth.

With public policy initiatives having only a limited on the widening income gap, the surge of consumer credit from both banks and other financial organizations has been a key driver in enabling vertical mobility. As a result, the working middle class —  as defined by spending power —  is growing in Mexico for the first time since the early 1990s. The C and C+ socio-economic strata (SES) grew by 10 percent between 2003 and 2005.

Although consumer credit has always been available to some extent in Latin America, it was first introduced on a large scale in the late 1990s as retailers launched new payment plans to boost sales.

Quickly realizing the potential market, banks responded to competition from retailers by adjusting their credit policies and APRs beginning around 2002-03. Since then, consumer credit has been booming on every front. Banks have developed niche cards, have purchased retailer portfolios and have launched a wide array of interest-free payment plans. Aggressive promotions continue, many of them focused on consumer electronics and other luxury household items. Brazil and Mexico were the first economies to benefit from this boom, which has spread to the rest of the region.

Meanwhile, retailers have shifted their attention to the lower socio-economic groups by offering such schemes as tailored credits and installment plans. Stores such as Elektra, Femsa and Coppel have gone as far as creating their own banks to cater this market. One of their most successful initiatives is an installment plan with weekly payments, making consumer goods purchases more accessible. These channels are expected to continue growing as the principal means of tapping into the lower socio-economic segments.


With Mexico and Brazil beginning their credit booms around 2000, they hold a 3-to-5 year lead on the other leading Latin American economies. Consequently, they are expected to continue as the main drivers of the regional consumer electronics market through 2010, with other countries growing in importance as consumer credit expansion spreads.

Retailer credit will play a critical role in driving electronics sales to the lower socio-economic segments. Although price will also continue to be a key driver, financing options such as installment plans will drive penetration into these segments.

Meanwhile, banks and other credit card issuers that cater to working middle-class customers will continue to promote interest-free plans ranging from 6 to 24 months, regionwide.

Growing personal consumption resulting from expanding consumer credit will combine with the present low penetration of consumer electronics to drive very strong demand for those products throughout 2010. To remain competitive and grow market share in this environment, manufacturers will have to track evolving retailer dynamics closely and be ready for adopt new business models.

Guillaume Corpart Muller is InfoAmericas Regional Director for Mexico, Central America and the Caribbean. This article is republished with permission from Tendencias, the magazine of the InfoAmericas.

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