Germany: There are always opportunities.
In a country like Germany, security is no joke. Despite the fact that the electronic security market in Germany is developing very slowly, the needs for the entire country with its high level of infrastructure are estimated at hundreds of millions. This money can only be spent on high-quality products and good service support.
Germany's economy is considered the third largest in the world and accounts for approximately one-fifth of the gross national product (GDP) of the entire European Union. According to American experts, Germany is the largest trading partner of the United States among European countries and the sixth country in terms of the volume of US goods exported. The German market economy largely corresponds to free market standards, but with a high level of government regulation and extensive social programs and protection of citizens' welfare.
The overall European electronic security equipment market (including Eastern Europe) is valued at $63 billion, of which $95 billion is video surveillance, $3 billion is access control and $65 billion is intrusion systems, according to a research report by Archana Rao, senior analyst for EMEA (Europe, Middle East and Africa) at Frost & Sullivan.
The annual growth in these market segments is 5% (30% for IP solutions), 7% and 3% respectively. «In Germany alone, the market for electronic security equipment is 0 million, of which 0 million is for video surveillance, 0 million for access control and 0 million for intruder alarms,» says Rao. «But the annual growth in relation to the European average is lower — only 3% (25% for IP solutions), 5.9% and 1.7% respectively.»
Tyco Fire & Security, known in Germany as ADT/Total Walther, and the ZVEI (German Electrical and Electronics Industry Association) have different opinions. «We estimate the video segment at 0 million and the security systems market at 0 million,» says Roland Billeter, CEO of Tyco Fire & Security. According to the ZVEI, the video surveillance market was worth 0 million in 2008, access control at 5 million and security alarms at 7 million.
According to Felix Schrimpf, EMEA Sales Support Manager at Bosch Security Systems: «Video surveillance accounts for 40% of total revenue.» IP solutions account for 24% of all Bosch systems sold this year.
The EU's largest market, Germany, is not easy to penetrate, especially for foreign companies without local German-speaking partners and service and support systems. «There is a demand for system-oriented solutions and well-developed support in the German market,» says Andrea Bergerhoff, Director of Sales EMEA at Honeywell Security & Data Collection. «That is why we only sell and work with well-known vendors and system integrators that have a proven track record in the local market.»
Growth Opportunities
For Bosch Security Systems, the top five European sales countries are Germany, Britain, France, Italy and Spain. «Bosch has been active in Germany, Austria and Switzerland for more than 100 years,» says Hanno Vogels, Vice President Sales Germany, Austria and Switzerland at Bosch Security Systems. «The German transport system is the most lucrative market today. The developed infrastructure of subways and airports requires major modernization and development of their security systems. Despite the current state of the global economy, Bosch is optimistic, as the need for basic security solutions remains unchanged. The vertical markets with great potential may change slightly, but Bosch will intelligently reallocate investments to support further growth.»Nice agrees with Bosch that the public transport sector offers the greatest potential, especially after several bus bomb threats and violent incidents on the metro. “The retail market is also growing, as shoplifting is on the rise due to the worsening economic climate,” says Tim Giles, EMEA Marketing Manager at Nice Systems. Other potential markets cited by Tyco and Bosch include banking, gaming, critical infrastructure, oil and gas pipelines, land and sea borders, urban video surveillance, manufacturing plants and commercial buildings. “School vandalism is also a concern,” says Fredi Reschke, Chairman of the Board of Management of FRS.
Needs
The companies that offer innovative solutions of high quality and modern style have the greatest success in the market. According to research by American experts, Germans are favorable to new and high-tech products.
For the German buyer, price is not always the deciding factor, which determines the demand for quality in the German market. The German market is decentralized and diverse. Tastes and interests can vary greatly in different areas. Successful marketing strategies take this fact into account in order to gain a foothold in the national market.
Germany has the highest level of Internet access among EU countries, which greatly helps to strengthen the position of IP security solutions.
Video surveillance
According to Michael Zabler, Marketing Director of ABUS Security Center: «IP video is growing at least 50% per year in Germany. But on the other hand, the German user has a strong demand for reliability and great doubts about open systems.»
«Who is responsible if the system fails?» asks an industry representative. Analog systems are still better, according to the average integrator or installer. As a result, IP technology is applicable in no more than 20% of video surveillance systems.
Without a doubt, 5 years ago Germans wanted and were ready to buy high-quality and relatively expensive goods and solutions. Now people are feeling the impact of the crisis and prefer imported goods from Asia.
The features of demand are high-definition resolution, analytics and centralized management software that allows situational control with reference to a map and location.
Access control
In Germany, location tracking of employees is officially prohibited in certain industries (e.g. automotive). Access control and information management require advanced hardware solutions and software algorithms.
«Some customers ask for professional solutions that take into account hidden data depending on authorization levels,» says Nicole Huffer, vice president of marketing communications at SimonsVoss Technologies. «Sometimes even time or attendance data can only be obtained in the presence of a lawyer or by court order.»
Burn alarm
«Security systems are usually the first ones installed in a building,» says Andrea Bergerhoff, director of sales for EMEA at Honeywell Security & Data Collection. «And they are the ones that the police respond to best under German law.»
«Today, only 0.3% of German apartments and houses are equipped with an alarm system,» says Michael Zablera, Marketing Director of ABUS Security Center. «There is sufficient growth potential both in the residential sector and in the small and medium-sized enterprise sector. Depending on the insurance requirements, the buyer can choose from approved products in different price categories.»
One important detail is worth noting: the demand for wireless systems that do not require high installation costs, as well as for integrated fire alarm and access control solutions, has increased.
Challenges and Prospects
Despite the VAT increase in January 2007 from 16% to 19%, Germany's GDP grew by 2.5% in 2007. Consumer demand, sluggish for several years, began to pick up. The economy continued to strengthen on the back of exports, consumption and investment had been rising since 2006, and some compensation for the global economic slowdown was expected.
Despite the uncertainty in the financial markets, there was modest growth in early 2007 and a positive outlook for the future. The German economy continued to suffer from structural problems, including overregulation of the labor market, high tax rates, including on exports, and social security costs. As a result, the government recognized the need for reform and considered a number of initiatives. «Many observers consider this program a good start,» says one source, «but most believe that further reforms will be needed to improve Germany's competitiveness on the global market, and it will be difficult to reach a consensus on them given the upcoming elections in 2009.»
German companies, particularly in the automobile, chemical and high-tech industries, gradually began to increase their share of exports and earn good profits. But persistently high unemployment, especially long-term (more than a year), remained Germany's biggest political and economic problem. The economic growth that began in 2006 slowed down, which immediately led to even higher unemployment than had been seen since German reunification.
Germany has asked the EU Commission to reduce the administrative burden on the country and promote innovation in order to increase the competitiveness of the EEC member. Merkel's government has begun to talk about the need for administrative reforms in Germany, about bureaucratic problems in the country. The government, which has not yet been discredited, can guarantee good protection for local producers and suppliers.
Safety and environmental standards, which are not particularly different from other countries but are sometimes zealously applied, can make it difficult for foreign companies to enter the market. Companies interested in exporting to Germany should be aware of which German standards apply to their products – they need to have their products certified and approved. German standards are of particular relevance to exporters, since most standards in Europe are often based on those in Germany.
“The biggest challenge in promoting IP solutions is to familiarize and educate system integrators and installers with IP technology,” says Hanno Vogels, Vice President Sales Germany, Austria and Switzerland at Bosch Security Systems. “But we will improve this process with the training and workshops that have been held regularly over the past two years.” All major players will continue to work on preparing partners and educating end users.
Despite the challenges described above, Germany continues to be attractive in many areas and remains an important element of any smart export strategy to Europe.
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