This past March, No. 1 majap maker Whirlpool promoted Mike Todman, senior VP/sales and marketing, to executive VP/Whirlpool North America, giving him full responsibility for the company's U.S. operations.
A native of the U.S. Virgin Islands and a graduate of Georgetown University, Todman joined the company in 1993, following stints at Price Waterhouse and Wang Laboratories. He quickly worked his way up the Whirlpool ranks, taking on increasingly larger assignments in finance, service, product management, and sales and marketing within the manufacturer's European and North American divisions.
Todman assumes the top operational spot during a turbulent time for the traditionally staid appliance industry. In the following exclusive interview, he offers his take on what's ailing white goods and on what tack Whirlpool will follow to navigate through the rough waters.
TWICE: Why is the major appliance business in a rut?
Mike Todman: The industry is in transition and there's a lot going on. Over the last two or three years we've experienced incredible growth, and it was bound to slow down. There's a tendency for consumers to delay big-ticket purchases in a soft economy. The slowdown in consumer spending caused inventory to work its way through more slowly.
TWICE: Where is the industry heading, from both a supply and retail perspective?
Todman: As we go through this transition there will be turmoil and change. We're seeing change in the distribution landscape as new [retail] players enter the field and older, established ones leave. This new landscape will have an impact on the survivors, who will have to develop distinct strategies. Some will take a value-added approach; others will take a different approach.
As for manufacturers, even in times of economic slowness, if we come out with unique new products, consumers will buy. Innovation is an important driver. Calypso has done exceptionally well during the economic slowdown. It has succeeded beyond expectations, yet sells for over $1,000.
TWICE: But the past year was also marked by deep price cuts to drive volume and market share.
Todman: This is a competitive industry, and discounting was aggressive last year. There was a rebalancing of retail distribution, and some of our competitors had erosion in market share. That was the spark. Also, Circuit City had some inventory reduction. But we saw less of that activity in the first quarter, and I think the general trend is that the industry has found a different equilibrium.
There will always be times when things sell competitively. Everyone's trying to capture the attention of the consumer. But all of us have strategies based on a value-added proposition, and that doesn't mean low price. Consumers will pay for value, so what's the need to compete on price? But if we don't offer differentiation, consumers will buy on price, and then we'll fall into that rut.
TWICE: What's your assessment of the retail playing field?
Todman: Well, you have some very strong people out there. Sears continues to strengthen, and Lowe's continues to perform well and is growing. Best Buy is also doing some great things now, as it repositions its appliance business.
TWICE: Does that repositioning include a shift of the inventory burden back to the manufacturer, a la Home Depot and GE?
Todman: Best Buy hasn't just come to us and said, "We want you to carry our inventory, we want to hand you any problems with inventory costs." We have had discussions based on a long-range partnership. We're asking each other, "How can we help manage the cost of carrying inventory? How do we make this good for both of our businesses and for the consumer?"
This also involves a better understanding of Best Buy's customer base, because they have a specific customer segment, as well as better forecasting and inventory management in order to have the right product on hand. But there's no transference of cost going on, and no one has put any increased pressure on us to do what GE does. Retailers know what we do and that we're successful at it.
TWICE: It sounds like Best Buy remains committed to appliances.
Todman: Absolutely. I'm convinced they're in this for the long haul. They're serious about it and are fixing issues of return on investment.
TWICE: You also mentioned Lowe's. They've become the No. 2 player in a very short time and have pledged to overtake Sears in five years. What are they doing right?
Todman: They have a very broad assortment, a dedicated sales team [for appliances] and they offer take-with convenience for the home remodeler. It's also easy to navigate through their stores.
TWICE: And what of the independent dealers?
Todman: A number of independents are doing well in this environment. You will always see some doing well, while others won't. I don't think they require any more special attention than any other trade partners. We've worked with the independents to find the right experience within their stores or to create a particular kind of display — to do something that makes sense for them. For example, we rolled out our KitchenAid full-working kitchen display at H.H. Gregg.
TWICE: What about offering channel-specific products?
Todman: I see no particular need to offer different products for different channels. The unit is only one piece of why customers make their purchases where they do. It's also a question of "Do you offer installation services? Will you service the unit after I take the appliance home?" It all comes down to how well a retailer is servicing the customer.
There are also different customers for different formats; one doesn't preclude another. Independents are local merchants that offer personal attention. Some customers prefer that environment.
TWICE: What role will e-commerce play at the retail level, if any?
Todman: It isn't growing at the rate people predicted and I don't think it will emerge as a strong sales channel. Purchasers want to kick the tires. But it will play a large role in how consumers gather data. It's important to give consumers information to make choices.