After a year in which strong air conditioner sales boosted most appliance stores’ profits, major appliance manufacturers and retailers alike are optimistic about the next 12 months.
Despite consumers’ Y2K trepidation, uncertainties about the impact of the Internet on the white-goods business, and the inescapable reality that every AC season is subject to the vagaries of the weather, suppliers and appliance dealers say 2000 is likely to continue a healthy upward sales trend for major appliances. Contributing to this year’s predicted appliance gains, they indicated, should be a strong economy, high levels of consumer confidence, a boom in home remodeling and renovation, and a wave of new majaps technology to lure customers into the stores.
In addition to room air conditioners, refrigeration products – particularly side-by-sides – emerged as the sales stars of 1999. Ranges also did well in sales to consumers, producing double-digit increases for several retail chains.
On the manufacturer side, a sampling of suppliers told TWICE they were pleasantly surprised by the strength of 1999’s appliance business, and anticipate a healthy performance in 2000. They noted that retail sell-through remained strong even during the fourth quarter, traditionally a period when majaps take a back seat to more gift-oriented merchandise.
After initially expecting industry appliance sales to be relatively flat in 1999, Maytag execs were pleasantly surprised with the strength of the category, according to Kent Baker, VP of strategic marketing. “Our forecasts as recently as early fall were somewhat conservative, but the industry has operated at a high level of sales even through the fourth quarter, and industry sales wound up much stronger than we had imagined early in the year,” Baker said. “Economic trends are getting more positive for appliances, and consumer attitudes seem to be excellent right now.”
Baker said Maytag had particular success last year in laundry and cooking appliances, with the one-two punch of its Neptune washer and Gemini two-oven range producing strong sales. The company has new products coming in all its categories throughout this year, continuing Maytag’s “innovation” strategy, he said.
Jim Campbell, VP of sales and distribution for GE Appliances, also credited a “robust” fourth quarter for appliance sales with helping the white-goods business finish 1999 on a high note. “Many times we expect to see a slowdown in sales in the fourth quarter, but our dealers all reported significant sales toward the end of the year,” he said.
Sales stars for GE last year were air conditioners, the company’s new electric range models and the new Triton dishwasher, according to Campbell. “New technology gives retailers something to talk about, and offers some excitement for the category,” he noted. “We’ve seen a big push for new products in the industry in the last couple of years, producing a real `wow’ factor. It’s exciting, and it’s good for everybody – the manufacturer, the retailer and the consumer.”
Looking ahead to the coming year, however, Campbell said GE’s economists do not expect the kind of appliance growth the industry saw in 1999. “They’re asking, `How long can it continue?’ – but I hope they’re wrong.”
And what lessons do these suppliers think retailers have learned in the 1990s that will help them succeed in the coming decade?
Maytag’s Baker said innovation and change have been the key concepts for the appliance business in the past 10 years. “This industry has been a very slow-growth, price-focused, somewhat commodity-driven business,” he explained. “But retailers have now learned they can sell innovation, and can increase the average ring at the cash register by talking about new products and features.”
In addition, Baker noted, “retailers have learned that the industry is not static from a channel standpoint. Until recently the appliance business has been slow at channel consolidation and at finding new venues to sell its products. Recent distribution changes surprised some people and enlightened them, and the channels may change more in the next decade. Retailers have had to learn to work with change, because that change will continue,” he said.
GE’s Campbell added, “I think retailers have learned they need to continue to sell value and service as primary focal points – that’s what the consumer is looking for. I also think they’ve learned that brand names are more important than ever. Consumers will always seek out strong brands, as we’ve seen in this and other industries.”
Finally, Campbell noted the continuing trend toward step-up products. “Even in a slight business slowdown, consumers presented with features whose benefits have been explained will spend the extra money to fulfill their needs,” he said. “The challenge for the retailer is to present and demonstrate those features and benefits.”
As for the retailers themselves, several chain execs contacted by TWICE said appliances continue to be a profitable bright spot in their overall sales pictures. Few regional chains went as far as the newly renamed Tops Home Appliances. The chain dropped consumer electronics products completely to focus on mid- to high-end major appliances and housewares, several retailers told TWICE their appliance business – particularly the strong A/C season – provided a needed boost to their companies’ bottom lines.
“We had an excellent year for refrigerator and range sales, and dishwashers were strong toward the end of the year,” said Doug Colbert, appliance VP of the New Jersey-based American Appliance chain. “But air conditioners were probably our best category of the year.”
As for this year’s prospects, “I see no real indication that things will slow down,” Colbert told TWICE. “I think our appliance business in 2000 will be pretty good – exactly how good has to do with interest rates and the general feeling of the buying public. It’s an election year, after all, and you never quite know what that will bring to the economy.”
Also taking a positive view of prospects for 2000 is Paul Rosa, president of the five-unit Rosa Home Stores operation in Buffalo, N.Y.
Rosa spent much of 1999 converting his stores from 12,000-square-foot locations to 40,000-square-foot superstores, with the fourth conversion completed just before Thanksgiving. The store renovations and the increased advertising they generated helped contribute to double-digit sales gains in cooking appliances and dishwashers last year, Rosa said. Refrigerators, particularly side-by-sides, and air conditioners were also very strong, both helped by unrelenting summer heat.
“I think 2000 will be another good year,” Rosa predicted. “Although of course the air conditioner business is heat-driven, we’ll get some sales from consumers who may have panicked about not being able to buy in 1999, although we scoured the country to keep up with demand.”
To help boost sales in other appliance areas, Rosa is considering expanding his stores’ inventory by adding several high-end lines. He is also eyeing possible sites for stores outside the Buffalo market, he told TWICE.
Ken Beckley, executive VP of Indianapolis-based H.H. Gregg, said the chain had a strong year in almost all appliance categories, with refrigeration (especially freezers), laundry appliances and air conditioners the 1999 standouts; dishwashers also showed a sales surge late in the year, he added.
A key factor contributing to the sales boost was a flood of new-store openings for H.H. Gregg; between the end of February and the end of October the chain added 15 locations – most in Cincinnati and Columbus, Ohio – bringing its total store count to 33. However, comparable-store sales for the firm’s existing locations were up strongly as well, Beckley said.
This year, he anticipates comp-store increases in the 2 percent-6 percent range as the new stores enter their second year, he noted. Appliance sales in particular will benefit from the chain’s successful effort to increase its builder business, Beckley said.
At Utah-based R.C. Willey, VP Steve Child noted ’99 sales strength in refrigerators and laundry appliances, and in new-technology cooking products. In addition, the chain did surprisingly well in upscale gas grills. “We raised our average price point in that area by $400,” he said. “That seems to be an untapped market for us.”
Child said he expects slightly slower appliance growth in 2000, primarily because Utah’s population expansion has tailed off from what it was six or seven years ago. To help compensate, the chain opened its first Idaho location, in Boise, early in October, and will move into the Nevada market this year, he told TWICE.
Child said R.C. Willey also plans to focus on market segments that have the most potential for growth, such as upscale appliances. “A lot of Baby Boomers are moving, buying second homes or remodeling, and because of that we’re seeing a spurt in higher-end appliances,” Child noted. “That has helped propel our outdoor grill business, and it should carry over to other appliances products.”