An industry at nearly $30 billion in retail sales, up from $25 billion only five years ago, is one to be envied these days. Exciting product innovations (Samsung’s Family Hub, connected appliances), new finishes (black stainless), and aggressive pricing and promotions are all contributing to make retailers happy. Well, happy is relative, but some were noticeably upbeat in conversations as this year’s TWICE Top 50 Major Appliance Retailers Report was compiled.
While the growth is not equally shared, continued losses from Sears and the recent death of hhregg are driving more and more people to the likes of Lowe’s, Home Depot, Best Buy and strong regional stores like P.C. Richard & Son, Nebraska Furniture Mart, BrandsMart USA and others. Heck, it’s been so good for the past few years, JCPenney decided to rejoin the party after a prolonged absence.
The top five in our list garner nearly three-quarters of all dollars spent on majaps, but nowhere in those five is that pesky Amazon. However, the Bezos battle star has set its sights on white goods, as well as furniture. It’s going to be interesting to watch how well Amazon can enter this segment given the way consumers shop appliances.
See Also: 11 Dealers Leading The Appliance Charge
Those retailers that have thrived in recent years are the ones that know how to provide the right product mix along with the appropriate selling model and a satisfying customer experience. Margins are still tight on appliances, whereas furniture and mattresses continue to provide the profits retailers need to shore up other sales floor categories. Floor diversification at these retailers is not new, but it has been notable in its importance for survival in recent years.
Retailers have good reason to be cautiously optimistic given the outlook for appliances. Product innovations and a continually improving housing market are signaling even brighter days may be coming. One of the biggest drivers of new appliance purchases is moving to a new home, and the improving housing market is driving increased sales. Single-family housing starts have been on a steady upward trend over the past five years, most recently reaching over 1.2 million on annual rate, and existing home sales reached a 5.57 million annual rate in April.
Household formations are also starting to increase, most notably among younger adults, yet formations are still lagging considering the growth in population. And while housing starts are still behind what they were in the early 2000s, and are not expected to reach the wild days before the big correction, there is a lot of upside potential. Brighter days are ahead.
In recent conversations with architects and home builders about which product categories have been most innovative, the most frequent answer was appliances. Another anecdotal example of how the appliance industry is driving innovation: A friend recounted an exchange between himself and another friend, both of whom had recently purchased new refrigerators. They were so enamored with the features and design that they talked about them at length. His take: “We talked about our refrigerators with the kind of passion that used to be reserved for women.” Now that’s innovation!
Bob Tancula, a 21-year veteran of TWICE market research partner The Stevenson Company, is the principal analyst behind TWICE’s Top Retailer reports and is founder and principal of Senex, which provides research for product development, trend mapping and market simulation.