Power tools constitute a global and growing $70 billion business, to which you can typically add another $20 billion for accessories such as drill bits, saw blades, coated and bonded abrasives, and other items that are a typical part of power tool usage.
The Electric Power Tools Market
Before considering the outlook for the business, it makes sense to understand its scope. The market’s prime customers are professional craftsmen, followed by users in the automotive, shipbuilding, aerospace, and alternative energy industries. These categories account for about 70% to 75% of users, with the remainder coming from the do-it-yourself (DIY) market, which is significant only in North America, Europe, Australia, and New Zealand. In Asia, Latin America, and Africa, due to the lower cost of labour, professional craftsmen dominate the market. In the accessory space, the professional market accounts for about 85% to 90% of the total because the tools are used much more intensively than in the DIY market.
Experts estimate that in 2020 the Asia-Pacific region accounted for about 35% of the total global market for power tools, with North America accounting for about 32%, Europe about 29%, and the rest of the world a little over 4%. The U.S. is the single biggest market, with about 29% of the world’s total, followed by China with 20% to 22%, Germany with 8% to 10%, and France and the U.K. with around 4% to 5% each. [Ed. note: These estimations are drawn from different sources as well as our Network Member’s professional experience in the space.]
Historically, the compound annual growth rate of the business has been between 4% and 5%, with emerging countries — including India and China — growing somewhat faster. While the final numbers are not yet in, 2021 looks to have been an exceptionally good year for the industry, with growth in the double digits.
Players in the Power Tool Market
The power tool business is highly concentrated. The largest player in both professional and DIY tools in 2021 is TTI, a Hong Kong-based company. Number two is Stanley Black & Decker, a U.S. company, then Bosch, from Germany. Probably number four is Japan’s Makita, followed by Hilti, which is based in Liechtenstein.
The main sales channel for power tools and accessories are home centres and specialized retailers as well as the online channel. Hilti uses a direct-sales approach, but that is an exception rather than the rule. About 25% to 30% of products are sold online, with a higher share in DIY than in professional.
On the Nature of Power Tools
As far as the tools themselves, about 70% are electrically powered, and that share is growing. Trends favour cordless power over corded as the performance of lithium-ion batteries improves. Those batteries are becoming more efficient, more powerful, and more affordable. Along with this change, there has been a widespread shift to brushless motors, which use less energy and provide more power. Currently, about 20% of tools are pneumatic and the remainder fuel-powered, but both those segments are shrinking as the advantages of battery power win out.
Slightly more than one-third of the total power tool market consists of outdoor power equipment, the largest share of which are lawnmowers, followed by chain saws, then blowers, tillers, and cultivators. Demand for those products is strong. This segment is also seeing the same strong shift to electrical-powered equipment as the rest of the market due to increasingly strict environmental regulations for fuel-powered tools.
Many power tool companies — including Stanley, TTI, Makita, and Bosch — are active in the outdoor power equipment space, and there are specialists, like Sweden’s Husqvarna, which is not in other power tool segments but is a strong player in outdoor power equipment, and Stihl, a Germany-based company. In the outdoor market, the DIY share is higher than the professional share vis-à-vis tools, and North America represents an even greater market share (40% to 45%), with Europe at 28% and Asia-Pacific at about 20% but having the highest growth rate.
The Road Ahead for Electric Power Tools
The fundamentals for growth appear strong. Construction is the main driver of power tool usage, and in many parts of the world construction is booming. In addition, government infrastructure spending is high, disposable incomes are relatively good, and manual labour is continually being replaced with power tools.
One trend to watch involves battery platforms. Batteries have become a key aspect in the brand decision and purchase process since once users select a brand, they tend to buy tools for different applications from the same brand to cross-use the batteries and loading stations they already have. But what’s starting to emerge in Europe are lithium-ion battery platform alliances for 18-volt tool families. This means that alliance members have agreed on a standard so that the same batteries can be used with power tool products from different brands and manufacturers. Making power supply universal could increase the market for everyone.
About Bernhard Schuster
Before acting as independent Senior Advisor, Bernhard Schuster spent more than 35 years with the Bosch Group in the Power Tool, Safety, and Security as well as Domestic Appliance divisions. Before starting his independent consulting firm, BSAdvisory International, he served as Executive Vice President, Global Sales and Marketing at Bosch Safety and Security Systems (2012 to 2019) and as Senior Vice President at Bosch Power Tool Accessories (2005 to 2012). He held management positions in the U.K., Brazil, and Switzerland for several years besides working in Germany.
This article is adapted from the GLG teleconference “Electric Power Tools and Accessories in Europe.” If you would like to speak with experts like Bernhard Schuster, or any of our approximately 1 million Network Members, please contact us.