World Power Tools - The Freedonia Group

Market Environment
The Market Environment Section
discusses key indicators that drive
demand for power tools, including
demographic and social trends and
Freedonia’s uniquely developed
macroeconomic indicators.
MARKET ENVIRONMENT
This information provides you with an
understanding and an analysis of the
climate in which the global power tools
industry operates and helps you build
your market strategy to sustain longterm
growth.
Power Tools Pricing Patterns
Prices of power tools vary across product types, from a few dollars for accessories
such as drill bits to hundreds of dollars for advanced items such as power drills.
Pricing also varies within product categories. For example, electric grinders can
SAMPLE PAGE
range anywhere from about $30 to over $150. On average, prices of tools are
expected to increase two percent annually through 2005. Advances will be limited
by continued pricing competition, especially in light of the consolidating
distribution channels in the industry. In addition, competition from lower cost
producing nations will continue to limit gains. However, these factors will be
offset somewhat by a changing product mix in favor of more powerful tools, and
rising raw material costs.
Maintaining established trends, the product mix of tools will continue to shift in
favor of higher-end, power products as professional users seek more reliable and
efficient capital equipment to improve profitability. The consumer market will
also shift somewhat in favor of more powerful and expensive tools, as do-ityourselfers
(DIYers) and hobbyists seek professional-grade equipment.
The ability of producers to develop higher-end, new technology for power tools
will enable pricing gains to continue through 2005. Professional users and avid
DIYers are often willing to pay a premium for improved performance. Opportunities
also exist for developers of more ergonomically designed products, which carry
a premium in the professional market. However, pricing is expected to become
increasingly competitive due to pressures from producers with low production
costs. Pricing growth in developed markets will also be slowed somewhat by
weakening demand, and by the consolidation of distribution channels to the retail
market. As the major chain home improvement outlets continue their supplantation
of small hardware stores, these chains are able to negotiate lower prices in
© Copyright by The Freedonia Group, Inc.
6
World Power Tools #1419
Freedonia Industry Study