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It may not go down as a record summer for room air conditioner sales, but thanks to a hot, sticky July, dealers, distributors and manufacturers say they will end the season with little or no inventory, and that's fine by them.
Indeed, filling demand, coming out clean and making a little money in the process is the ultimate hat trick in this seasonal business, where guesswork and weather patterns play as big a role as planning and promotions.
Despite a cool start to the season, torrid temperatures and high humidity blanketed most of the nation beginning around the July 4th holiday, depleting stockpiles and sending some retailers — particularly the large national chains — scurrying for fill-in supplies.
While this year's AC sales volume won't set any records, it still stands head and shoulders above the previous summer, when unseasonably cool climes stifled much of the business. According to the Association of Home Appliance Manufacturers (AHAM), factory shipments were already up 22.3 percent in June over the prior year period to some 987,000 units, while year-to-date sales were up 2.3 percent over the same six months in 2001.
Vendors confirmed the heady numbers. "Business is good," observed Shariff Kan, VP/merchandising for Haier America. "Even though the season started later than normal, we've had very good weather, and people are scrambling. This year we should come out clean."
Haier, whose ACs were hailed in the August issue of Consumer Reports, maintains a reserve supply for regular customers who sell out early, which this year included Best Buy. That came as no surprise to Warren Mann, executive director of the MARTA Cooperative of America, who said the national chains closed the books on room air early.
"The season started with a little bit of heat, which created sales, then it cooled. That cool weather got the national chains worried because they wanted to be out of AC inventory by June 30," he said. "If they aren't, they don't have anywhere to store it."
The pattern, he noted, played right into the hands of independent dealers. "By July 1 they had no product. But we do, so we can make some money. Just about all of our inventories are gone." Similarly, Mann observed some price pressure prior to July 1, with 5,000-Btu units retailing for as low as $124 at the nationals. "But after that it was OK."
Bob Lawrence, executive director of the Brand Source/Associated Volume Buyers buying group, even heard reports of $99 price points for 5,000-Btu machines. But by and large, he reported, pricing has held up. "We haven't had many complaints."
A bigger concern for Brand Source is supply. "Where business has been good, inventories are tight," Lawrence said, citing "excellent air conditioner sales" in the upper Midwest and the Northeast. "Since AC manufacturers don't have much more inventory, we have been shifting inventory around to those retailers that need it."
Similarly, Bill Trawick, executive director of the NATM Buying Corp., is seeing "great sell-through" among his member dealers. "The season didn't start well, but surprisingly there was a lot of heat in July. Right now Florida is getting very busy."
Indeed, Southern Florida NATM dealer BrandsMart U.S.A. is finally making up for lost time following 31 days of rain. "May was tremendous, a big success for us, but we got killed by the rain in June, which was the wettest in 60 years," said appliance VP Randy Johnson. Still, Johnson plans to sell 50,000 ACs by season's end, only 1,000 units below last year's total. "Last year the business didn't come until August," he added, "but it always comes."
For P.C. Richard & Son, the biggest independent majap dealer and fifth largest overall, the pre-season begins in late March, early April. Director and general merchandise manager Doug Kelly follows a buy-and-hold strategy, which ensures sufficient supplies long after his national competitors run dry.
"We take it in and hold it," Kelly said. "People who bought in advance are in a good position. Those who relied on just-in-time deliveries, like the nationals, are out."
To underscore the point, Kelly recounted last summer's unusually cool July. "A lot of retailers got skittish and turned back shipments," he recalled. But the dog days returned by August, and many chains were caught with their supplies down. "If they're willing to take a little risk, the regionals can maneuver," he said. "The nationals don't."
Nevertheless, the national chains, particularly the home improvement pair of Lowe's and The Home Depot, are still making their presence felt in room air. "The home centers are getting more of the business," confirmed Marty Friedman, president of Eastern Marketing Corp., an East Coast distributor of high-end white goods. "It used to be more of a major appliance dealer business. People wanted special installation. Now, they can install it themselves, and the home centers have it all stocked up and ready to go."
Still, the nationals can't sell what they don't have. As Friedman related, "One dealer told me he did great on July 3rd, but did even better on July 4th because by then Best Buy was out of inventory."
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.