At the recent BrandSource national convention (see TWICE, Sept. 5, p. 1), the buying group called on industry veteran John Gates, Maytag's buying groups VP, to discuss the state of major appliance retailing.
While he did not discuss the proposed Whirlpool takeover of his company, Gates did contrast today's market with business conditions when he entered the industry in 1979. “Back then there were few worries because there were plenty of manufacturers, lots of retailers who knew product, and just about everyone made money” because margins were strong.
Today's consumers have changed, as well as the industry, Gates explained. “There are more stores, more choices, too much information and not enough knowledge” about major appliances.
The problems in the industry for retailers are diverse. “The big are getting bigger. Some products are becoming commodities, and many chains have poorly trained sales staffs. In many cases customers know more than retail sales people, but when they enter the store all they are sold is price.”
What has happened in many cases is that “margins are tougher and there is generally less profitability.”
Gates showed how the landscape is changing. “You have to take the 'e' out of e-commerce today because as more and more teens enter the marketplace they realize that this is just an offshoot of everyday retailing.” And he added that due to new technology “like cellphones, the Web and handheld computers, pricing is transparent” since consumers readily access pricing information.
Consumers are now “better educated, more diverse, they have less time to shop, and want more choices and good prices,” Gates noted. “The result is that they are quick to complain and sometimes slow to forgive.” For instance Gates said that according to studies done over the years, in 1980 consumers spent an average of 10 hours a week shopping, and now only devote about 2.9 hours a week to shopping, “which is why mall stores have been hurting in recent years.”
The good news for the industry and independent retailers in general is that during the past several years, “The core five major appliance categories are still growing,” Gates said. And he referred to the recent Stevenson Company survey (see TWICE, Sept. 5, p. 93) which showed that while the big are getting bigger, “as a group independents are also growing due to their knowledge of products and their customers ... [and] well-trained staffs.”
Some retailers have adopted the “'Fire the consumer' economic model, in which you keep loyal customers and ditch the rest. Why? The customers you keep are more lucrative.”
One of the demographic groups that independents should cultivate and keep is women, Gates said. “Women have become very, very informed about appliances, and mature women are more demanding customers.”
Gates also quoted the recent Consumer Reports survey (see TWICE, August 22, p. 1) showing that a retailer with a well-informed and well-trained sales force that is “price competitive and provides strong service” will thrive.
He noted that if that is an independent's core strengths, dealers should “stick with that sales strategy!”