1. The Challenge: Introduction
Textile cleaning services, especially dry cleaning, have justified their role from a major technical argument: many clothes cannot be technically laundered at home, but only in dry cleaning. Clothing with a so-called “P” logo was hence the realm of the dry cleaning. This technical imperative has lost in importance, mainly since people buy and wear less formal apparel. Another argument in favour of textile cleaning services has been convenience. This argument is merely sociological since convenience is closely related to the division of tasks within the household, the presence of house staff, the size of the house and the budget. While textile care was cumbersome till 1970, the dramatic improvement till this day of home laundry machines has made it highly attractive.
The technical imperative for textile cleaning services is not enhanced. Recent social trends have made the “convenience argument” more relevant. These social trends are related to changing ageing, composition of households, emancipation of women, costs of housing and attitudes to products and services and ownership of durable consumer goods. The potential market size in Europe for textile care service based on the trends above will be estimated on the basis of aggregate data on clothing sales in 2012. The convenience approach needs to activate new frames of thinking by consumers. This frame shall have to be reinforced by the development of a new service proposition.
The ambition of this document is not to provide a conclusive, highly documented and calculated market analysis. It is rather a document with some evidence that needs to inspire and to invite to explore an approach to the consumer, based on the understanding of major societal shifts.
2. Demo-economic trends in Europe
The convenience argument for professional laundry is fuelled by three trends: 1) an ageing population, 2) crisis and the impact on disposable incomes and 3) the housing/mortgage crisis. These three factors may lead to a rearrangement of household economics, which in turn creates opportunities for convenience services.
Ageing is an important trend in Europe. It is however composed of several components. In the first place because of improved living styles and health care, people live longer. And more importantly they live longer in good health. The average in Europe is around 80 years with men having a live expectation around 78 years and women around 83 years. Western and Southern European countries have slightly higher life expectations and a smaller gender gap than Eastern Europe. But the gender gap is declining, mainly because of better working conditions and less smoking and drinking. The other major trend is that the period of life in illness is declining.
In the second place, in many countries the number of children is declining. The so-called fertility rate (number of living births per women) does stand in Europe at 1.6 children per family. Only in France and Ireland this rate is above replacement. Besides these countries only Scandinavia, Benelux and UK have fertility above average and close to replacement rate. Hence in all other countries the population is likely to shrink. As often studied, the fertility rate is highest in countries with adequate child care facilities and a fair gender balance. In countries with traditional family patterns, fertility is lower.
A third dimension of ageing is in the financial consequences. A smaller share of the population has to support financially a larger group. This has three consequences. In the first place people shall have to work longer. This means a postponement of retirement age, a sobering of early retirement schemes. The consequence of this trend is that grandparents are less disposed to take care for the grandkids. The second is that the age group between 25 – 65 years has to cover the costs of retirement. Fewer adults have to pay for retirement for more elders. Finally, care schemes for elders are sobered. While medical assistance remains covered by public services, home services have increasingly to be supplied by family or by commercial services.
2.2 Crisis and Consumption
The crisis has a major impact in Europe. Only few countries, such as Poland, have hardly felt the crisis that started in 2008. For some countries, most notably Spain and Greece the impact will be long felt. Many countries, for example Germany, have reacted swiftly to the crisis have reformed and are back on the path of growth. However the largest part of Europe has hardly reacted to the crisis. There are not yet back on the growth track.
For retail and services the most striking element of the crisis is the depressing level of consumer spending. This is not particular to a specific consumption category, most are affected. Spending on clothing has declined in most European countries with levels in 2014 20% to 30% lower than in 2008. This decline is stronger in value than in volume, hence consumer do not buy less items, but they buy cheaper items (shirts instead of suits) and at a lower cost. The decline is even stronger in home textiles, replacement of curtains and of bed-linen is slowed down.
The decline in consumption is only a symptom of a deeper crisis that is visible in three phenomena. Only the elders have experienced a decline in spending power as retirement schemes have been sobered and pension funds make lower returns. Rising unemployment is the major reason for declining incomes. In some countries unemployment has equally affected both young and old. But in Southern Europe youth unemployment is at very high levels. This has also forced many youngsters to live longer with their parents.
The real cause of the crisis is a too high level of debts of households. These debts where often linked to the acquisition of houses, and the value of houses is now often lower than the nominal value of loans engaged. When possible households save or use disposable income to reduce their debt level. The need to reschedule loans is even higher when one of the partners loses their jobs or when a relationship ends in divorce.
Most economists agree that the crisis is not over. Even in those countries with an economic recovery, the growth rates are likely to be between 1% and 2% a year. This is much lower than the growth rates between 1992 and 2008. We have to adjust to a new economy and a structurally lower growth rate.
2.3 Housing and Debt Crisis
The housing crisis demands a specific paragraph, as it has consequences on the composition and activities of households. Since 99% of textile care is performed in laundry machines at home, this is a relevant dimension. The housing market is in crisis in the majority of European countries. This crisis is characterised by a number of dimensions:
Over indebtedness and negative equity of many house owners
Inadequacy of offer and demand for young and old
Rigidity of the house market (both rental and owned)
It is important to understand the consequences for several population groups. For young professionals there is no affordable housing offer both in rental and ownership markets in the form of small cheap apartments. In addition with youth employment above 25% in most European countries those with or without income have no access to housing nor to mortgages. The consequence is that young professionals stay with their parents until far in their thirties.
The second group affected by the housing crisis is the vast group of working adults in the age of 30 – 60 year. Often they have bought expensive homes in the period from 1990 to 2008 based on the expectation of rising incomes. They have relied on mortgages to acquire homes and are often in a situation of negative equity since the value of homes having dropped below the sum borrowed. They can only sustain if the two partners stay together and do both work. This brings about stress, and both a lack of money and of time.
The elders are in a relatively comfortable position, but they have to accept to get lees value for their houses than they expected and even need to complement declining pension revenues. Hence they postpone moving to smaller houses, better adjusted to a senior life style. On the other hand, in Southern European countries it is often the case that their children live at home far after having completed education and even having formed their own family.
The consequence for laundering is that many households do not have access to home laundry, do not have time for home laundry or do not want to launder any longer (for themselves or for their kids). An interesting dimension is that having a washing machine causes indirect costs in the form of house surface and hence mortgage payment. This amounts to some 2m2 which at an average price of 5000 Euro/M2 and an interesting rate of 4% amounts to 400 Euro interest payments a year.
It should also be noticed that alternative housing forms emerge. In general is the demand in Western Europe shifting from large family houses to smaller housing forms for singles or couples. This is very noticeable in larger cities where smaller households prevail. However both younger and older home seekers are looking for housing forms where they can share facilities. This is both for cost reasons, in order to reduce the amount of square meters and for the quality of facilities. These facilities may be physical such as energy provision, storage, and indeed a laundry room, or it may be care functions from a housekeeper till in house medical support.
Table of contents
- The Challenge: introduction
- Demo-economic trends in Europe
- Crisis and consumption
- Housing and debt crisis
- Modern home economies
- Qualitative trends
- sharing economy
- Price and value consciousness
- Digital consumers
- Market potential
- Limitation of statistics
- Scenario based forecast
- Young professionals
- Modern families
- Activate the consumer
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