You Can't Eat Market Share
By Steve Smith -- TWICE, 6/11/2001
This issue marks the unveiling of the TWICE Major Appliance Retail Registry for calendar year 2000, and it is rife with surprises and some confirmations of what many thought all along. On the top of the surprise list is the 1.5 percent retail sales increase from the previous year. After all the histrionics, and lost profit margins, concerning distribution changes, retail bankruptcies and the abandonment of major appliances by perennial No. 2, Circuit City, the industry was just chasing a mere 1.5 percent sales gain?
Well, there was more to it than that, obviously. Maybe it was this convergence thing, where some appliance manufacturers began to showcase refrigerators that are linked to the Web, but all of a sudden last year suppliers began to act like CE vendors and chase market share. The result? Weaker profits for vendors and some retailers.
Of course some might say, and rightfully so, that the sluggish economy during the second half hurt appliance sales, which was why manufacturers had to replace volume. Manufacturers would probably tell you they had to do these things because Circuit City took the rug out from under them and abandoned the industry with little or no warning last year. They had to sell to Lowe's, a chain that picked up 12.6 percent in sales and became the No. 2 retailer. Vendors had to sell to Home Depot, which now appears on the Registry for the first time with $150 million in sales and ranked at No. 10. (And the rankings of those two home improvement chains in the top 10 is no surprise.)
Maybe some of that is true, but there are still plenty of regional and independent retailers out there that had good, profitable appliance sales last year. They could have done more if they didn't have to re-merchandise in the middle of the year so they wouldn't be selling the same ranges, refrigerators, etc., that some national newcomers who were selling white goods practically at cost.
To be fair the demise of Montgomery Ward, Heilig-Meyers and Roberds did not originate from the Appliance Follies of 2000. Their problems were of some duration, although the majaps upheaval didn't help.
The real surprise was something that was said to me more than once by regional and local retailers on my travels during the past year — "We could sell more appliances, and profitably too, if vendors would ship us more goods."
The well-placed regional retail giants and those feisty independents did not go away. They became healthier and stronger, because they learned how to profitably re-merchandise their appliance selection and got a nice piece of the business that Circuit City, Montgomery Ward and others left on the table.
Meanwhile, major appliance manufacturers in some cases are still licking their wounds. Maytag's announced purchase of Amana may be a case in point. Overall appliance manufacturers learned first hand an old bromide I originally heard a senior executive from Hitachi, Bob O'Neil, utter when discussing the CE business about 15 years ago: "You can't eat market share."
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