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GE’s McDermott Outlines White-Goods Strategies

Independent retailers have provided superior sales expertise, merchandising savvy and excellent service during this boom period for major appliances, and GE wants to do more business with them.

That was the message of Michael McDermott, merchandising GM for GE Appliances, who spoke at the MARTA Cooperative of America buying group meeting, held here recently (TWICE, March 7, p. 1).

In his presentation to MARTA dealers, McDermott also outlined recent industry trends, advantages that GE and its brands bring to the market, and how independents effectively compete against national chains.

Quoting the Association of Home Appliance Manufacturers’ (AHAM) statistics for core categories, McDermott said that during the past five years sales have been up 38 percent and over 10 years have increased 80 percent, while last-year sales were up a substantial 8.3 percent.

Describing 2004 as a “very strong year for appliances,” McDermott said core major-appliance sales should continue at the same rate during the first quarter, “but we expect [industry] sales to be softer in the second half” vs. a “record year for the industry.”

Higher prices for raw materials, “oil being one of them as well as steel,” will continue, McDermott noted. Higher interest rates will also contribute to the pressure on pricing, he said, but at GE, “We continue to emphasize production efficiencies to keep any raw material inflation to a minimum.”

The GE executive cited four trends that were outlined by the 2003 book “Trading Up: The New American Luxury” by Michael J. Silverstein and Neil Fiske, which shows how dramatic growth continues in the major appliance business:

  • Aging baby boomers who are retiring have more discretionary dollars to spend than any generation before them;
  • Couples are marrying later and having fewer children, which enables them to have more cash to buy “more wants and needs”;
  • More women are in the workplace and have more spending power than ever before, as well as being the decision-maker when buying appliances;
  • And all consumers are more informed than ever before. Through the use of the Internet, along with other tools, they are more sophisticated in knowing what they want in feature benefits.

Because consumers know more about products, features, design and price, they are focusing in on the types of models they really want or really can afford. The result, according to McDermott, is that the white-goods market is now “polarized between going upscale and the low end. The middle is disappearing.”

Of course he noted that the middle “is still 50 percent of the market, but it is shrinking. The mix is going to the high end, due to new technology and designs, and the low end. The long-term trend for the middle is down.”

Again, McDermott cited Silverstein and Fiske, saying, “A ‘new luxury’ category is growing, and the mass market is not going away. Premium brands like GE’s Profile, Williams-Sonoma, Polo and others are benefiting. Consumers need to see real benefits and we are positioned to handle this trend.”

He outlined GE’s four brands this way: Hotpoint is “entry level. GE is mass market. Profile is in this ‘new luxury’ area, and Monogram is the top 2 percent of the market.” He noted, “The ‘new luxury’ category consists of premium products and features for a more engaging experience. Luxury emphasizes [custom design] and exclusionary pricing.”

McDermott claimed in his presentation that GE is the No. 1 preferred brand in major appliances and that the company’s emphasis on new technology, improved design and a growing number of new product introductions over the years has helped re-enforce that leadership position.

“During 2005 we are introducing 126 new products, which is a major increase over past years,” he said, noting the following product introduction numbers since the beginning of the decade: 2000, 64 products; 2001, 70; 2002, 80; 2003, 94; and 2004, 120.

GE’s emphasis on “more dependable appliances” has been multifaceted over the past several years, emphasizing new technology, features and design. The result has been that “We are now receiving awards and recognition, such as consumer surveys which show that the most dependable washers, top mount, large format refrigerators and ranges from GE are the most reliable,” McDermott said.

As for independent retailers, their role in the industry, and what role they play with GE, McDermott said, “Independent retail is something we are focusing on. That is a significant piece of our customer base. We want retailers who can describe [and] demonstrate products. At most independent retail stores consumers can expect to receive good sales help and complete customer care.”

He added that GE has historically “focused on growing the independent business. Independent dealers do the best job of providing the consumer experience on the selling floor. They can show how their kitchen will look when completed. Like test-driving a car or having a walk-through at a home you are looking at, a major appliance is a major purchase. Some retailers don’t see the need to test-drive customers. Independents do and perform the best job of explaining and serving consumers.”