Buying Groups Foresee 2nd-Half Uptick For Majaps
By Alan Wolf and Steve Smith On Mar 7 2011 - 6:01am
NEW YORK —
The nation’s two largest buying groups,
BrandSource and Nationwide, are forecasting moderate
gains for major appliances in the second half of the year.
But that will follow a tepid first half as dealers face
tough year-over-year comparisons to the opening months
of 2010, when a federally funded and state-administered
majap rebate program artificially fueled sales.
Buying group executives believe revenue will be bolstered
in the second half by vendor price hikes, firmer
MAP policies, increased marketing, more finely tuned holiday
promotions and continued demand for mass premium
products, particularly in French-door refrigeration.
John White, major appliances VP for BrandSource, told
attendees at the group’s Orlando Summit last month that
business will pick up in the second half of 2011 following
tough first-half comparisons, and that overall, “We’ll have
a decent year.”
Adam Thomas, appliance marketing VP for the Nationwide
Marketing Group, anticipates industry growth of 2
percent to 3 percent this year, compared with 4 percent
in 2010. “There’s too much infrastructure,” he told TWICE
last month during the group’s PrimeTime! event in Las Vegas.
“The industry moved 48 million units in 2006 — this
year it may sell 39 million. There are more outlets for appliances
now, and it creates stress on the demand side.”
Business will also be impacted by Internet channel conflict
and narrow holiday sales opportunities, he said.
Both executives agreed that majaps have become more
promotionally driven around major holidays, but said it is
necessary for their groups to respond to low-price offers
from Sears and Home Depot with traffic-driving discounts
of their own. Home Depot in particular is a “promotional
leader” that is undermining marketplace margins, White
said, but, “We couldn’t afford not to participate” in a 2010
promotional calendar that ran through Black Friday.
Thomas said vendor promotions were “too broad and
too deep” last year, and that promotional activity will be
much more controlled in 2011, with discounts limited to
select models within manufacturers’ assortments. Nevertheless,
some 25 percent to 30 percent of all business
will be done in the 65 to 70 days that comprise the big
holiday windows, he said.
Thomas said last year’s stimulus subsidies plus Nationwide’s
strategic use of marketing funds helped it end the year
up 10 percent in unit shipments, compared with 4 percent for
the industry, implying market share gains. To compensate for
the government rebates, the group is budgeted to throw additional
marketing resources behind white goods, particularly
models that meet new and stiffer Energy Star standards.
BrandSource CEO Bob Lawrence said his group exceeded
industry volume by 1 percent and outpaced the
independent channel by 3 percent in 2010. This year
White believes “refrigeration will be a big winner again,”
but that laundry sales “will continue to lag” during 2011.
Thomas said French door configurations in particular
will be “quite robust,” commanding fully half of all refrigeration
dollars. The Nationwide exec is also bullish on highefficiency
top-load washers, which remain less price-sensitive
than front-load laundry products.
Nationwide is also staying focused on the mass premium
segment, where it claims a 60 percent share of the
market. Business there continues to improve, while the super-
premium tier, which was fueled by mortgage brokers,
Thomas said, has fallen by 50 percent to its historical 1
percent to 2 percent slice of the white-goods market.
Thomas is also optimistic about a new Whirlpool MAP
policy governing Internet sales that will be implemented
July 1. “They’re trying to put some sanity back into the
game,” he noted. “It’s not perfect, but will give us a little
more confidence that advertised prices are competitive.”
All pricing is expected to rise 8 percent to 10 percent the first
week of April, when manufacturers implement cost increases
to offset rising raw materials prices. Thomas said he
supports the price hikes, which are much needed
by vendors, “as long as they’re unilateral and across
all channels.” Whether the increases will stick and
at what level remains to be seen, however, as bigbox
chains have inventory through mid-May.
Thomas is less sanguine about smart-grid appliances,
which are still another year away from
launch. The products will likely be replacement
purchases rather than upgrades, do not represent
a major margin opportunity, and the utilities
have yet to agree on a common platform, he said.
On the competitive front, both groups cited
continuing weakness at Sears. The No. 1 majap
merchant is struggling, White said, with its
once 40 percent-plus market share eroded to
30 percent and its viability threatened by overall
financial weakness. Its private-label Kenmore
brand, while still the industry’s largest, has fallen
50 percent to a 15 percent share, Thomas
added, and Nationwide rejected offers to add
Kenmore to its assortment.
More troubling is talk of another Walmart test
of GE appliances, 11 years after a first pilot program
was pulled. Some reports suggest that a
20- to 30-store test is set to begin next month,
White said. Others place the trial in Texas,
where majaps will receive dedicated departments
rather than the front-of-the-store placement
of the earlier effort. But GE, said Thomas,
claims the project is now off the table.