The Association of Home Appliance Manufacturers (AHAM) had much to celebrate during its 2002 Annual Member Meeting, held here earlier this month at the Saddlebrook Resort.
One cause for cheer was the 35th anniversary of the majap trade association, which was marked by the theme of the meeting, “Celebrating 35 Years of Leadership.”
In the last year alone, reminded AHAM president Joe McGuire, the group has successfully championed a federal tax credit for manufacturers of super efficient washers and refrigerators, which he called “a milestone of achievement.”
Other AHAM accomplishments included:
- The creation of a new standard for home connectivity;
- Joint research between AHAM’s Appliance Research Consortium and the Environmental Protection Agency that may lead to modified safety standards and global warming models;
- The defeat of a Texas legislative effort that would have established water use sales restrictions and labeling guidelines for washers sold within the state.
Spirits were also high in the wake of a six-month rebound in the white goods business, which follows nearly two years of factory shipment declines and costly price wars.
Leading the industry back, agreed members, is the consumer’s renewed focus on the home in the wake of the Sept. 11 attacks, plus a new generation of appealing, fully-featured appliances that are addressing shoppers’ functional and aesthetic needs.
The scope of the boomlet was gauged during an economic briefing led by former Sears economist Carolyn Scott of McCoy Scott & Co., who forecasted total unit growth of 4.6 percent for the full year.
To build on that momentum, guest speaker Mike London, executive VP/general merchandise manager of Best Buy, urged manufacturers to better attune themselves to the needs, wants and behaviors of Generation Y, a demanding and techno-savvy demographic that will ultimately succeed the Baby Boomers as the industry’s core customer.
“Staying the same isn’t an option,” he said. “But appliances have stayed relatively the same while others have reinvented themselves many times over. We have missed an opportunity to create demand.
“People want products that really zing, not just 24 more SKUs of white ranges,” London continued. “But appliances are still boring, and their usage is seen as a chore. Consumers see appliances as a need, rather than a want, and despite the investment in new technology, people see little technological innovation. We’re not getting credit for it. We have to use product technology and innovation to cut the lifecycle of a refrigerator to six or seven years.”
London noted that retailers are equally behind the curve. According to Best Buy research, only 29 percent of shoppers enjoy the major appliance shopping experience, compared to 50 percent for home audio and 55 percent for music CDs.
“Consumers enter appliance departments with less than exciting attitudes,” he said. “We also have to change how they’re merchandised and sold.”
Another merchant addressing the AHAM membership was Dale Pond, executive VP/merchandising for No. 2 majap retailer Lowe’s, who emphasized the importance of brands and brand integrity in the home improvement chain’s growth strategy. “Brands are like good friends,” he said. “We’ll go out of our way for it. If we trust it, we’ll drive out of the way to get it, and spend more on it.”
For that reason, Pond acknowledged that “Most of our time is spent selling vendors on exclusive brands, products or access to premium brands. We want channel exclusivity and proprietary products.” In return, Lowe’s promises to build equity in the brand, protect retail price integrity, devote resources to the brand, and “make sure you make more money with us.”
In order to increase margins without raising prices or de-specing products, Lowe’s embraces an “Up the Continuum Strategy” that shifts the mix away from opening price points toward the mid- to upper pricing tiers. By way of example, Pond pointed to gas grills, which “used to be driven by a tonnage mentality” at Lowe’s.
“All our energy and space was devoted to selling $99 gas grills,” he recalled. “We had rows and rows of assembled $99 grills, and a customer had to search for the $649 Weber,” which was boxed and hidden on a high shelf. Eventually, Lowe’s replaced the $99 grill with a better-made $119 model, and eliminated several lower middle-end items as well as its $3,000 top-of-the-market models. The result, he said, has been increases in unit sales, average unit selling prices, margins and market share. “We pull the customer up,” he explained.
Pond added that majaps now represent 11 percent of the Lowe’s merchandise mix, up from 8 percent in 2000. “Appliances have played a very big role in our success,” he said. “We’ve been in the category since we opened our first store in 1946, and it remains an important segment. We think of it as a natural extension of our business.”
Also at the meeting, AHAM honored several industry executives for their outstanding service and leadership. Receiving the prestigious Home Appliance Industry Leader Award (HAIL) were Whirlpool’s Dale Mayes, manager/network home devices, and Amway research associate Richard Roth, Ph.D.
Mayes earned his nod for his work on the Smart Appliance Task Force, which led to the completion of the first standard for connected home appliances within 18 months. Roth copped his kudos for leading the development and revision of the AHAM AC-1 standard for portable air cleaners and the associated Clean Air Delivery Rate Certification Program, the only performance measurement system for portable air cleaners.
Receiving the AHAM Distinguished Service Award for their industry contributions over the past several years were GE’s Evan Barrington, Whirlpool’s Bob Johnson and AHAM government relations counsel Chuck Samuels.
AHAM’s Chairman’s Award was presented to G. Thomas Castino, vice chairman of Underwriters Laboratories and former president/CEO for his 42 years of dedication and service to product safety and for his cooperation with the home appliance industry.