Major Appliances: The Year In Review, Part II

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If change came fast and furious to the major appliance industry during the first six months of 2000 (see TWICE, June 26, p. 42), the pace would only quicken during the final six months of the year.

For some, the industry shifts came in the form of good news. In July, TWICE issued its Major Appliance Retail Registry, placing Sears, Circuit City, Lowe's, Best Buy and Montgomery Ward in the top five dealer positions for 1999. (Home Depot, whose white-goods volume was in flux during a 900-store rollout, was represented on the Registry solely by its Expo stores this year.)

Leveraging the top majap spot, Sears' new president/CEO Alan J. Lacy gave a nod to major appliances in November when he announced plans to use the company's peerless major appliance business as the blueprint for improving the performance of its lagging retail operation.

Speaking in New York before analysts and corporate investors in his first public address as successor to the outgoing Arthur Martinez, Lacy acknowledged that the retail chain's sales, earnings and image had grown tired, and that majaps might provide the road map to enhanced profitability.

"With breadth, depth, the offer of all major brands plus the one private brand, Kenmore, a knowledgeable sales staff, as well as being part of Sears online, we have a $5 billion business," he said.

In other Sears news, the retailer began selling branded replacement parts for its Kenmore line of home appliances in 50 dealer stores in September, with plans to expand to all 760 stores by early 2001. The company also made the line available at its Part & Repair centers and through the PartsDirect section of

In some cases, however, majaps didn't fair well in the second half of 2000.

Room air conditioner sales failed to live up to expectations. Due to more moderate summer temperatures, the category didn't come close to matching 1999's chart-busting numbers. When retailers complained of inventory shortages early in the season due to spotty hot spells, manufacturers ramped up production in July. But then the weather chilled, and with it, sales.

As a result, merchants returned some 15,900 air conditioners to their suppliers in October, resulting in a 140 percent decline for the category, according to the Association of Home Appliance Manufacturers.

"It was the best May and June [retailers] ever had, and it was the worst July and August," Marty Friedman, president of distributor Eastern Marketing Corp., told TWICE.

Another surprising blow to the industry came in early August, when Circuit City announced it would exit the majap business. Circuit City president/CEO Alan McCollough said at the time that the decision was precipitated by a "significant degradation in our appliance business," which was exacerbated by the dramatic price wars between Lowe's, Home Depot and Sears, as well as by the disappointing air conditioner sales.

Shortly after Circuit City dropped appliances, all eyes turned to Best Buy in anticipation of the other shoe dropping. But president/chief operating officer Brad Anderson confirmed his company's commitment to the category, saying, "We don't think it makes sense to get out of the business."

In a grab for Circuit City's market share, other national chains either increased or initiated their commitment to majaps throughout the second half.

For example, in late September, Wal-Mart rolled out a pilot program with GE to offer Hotpoint, GE and GE Profile brand refrigerators, freezers, ranges, over-the-range microwaves, dishwashers, washing machines and dryers. The program was to include about a dozen Wal-Mart Supercenters by the year's end. The trial effort is similar to GE's arrangement with The Home Depot in that the manufacturer assumes all warehousing, delivery and installation duties.

While this bombshell was being dropped, two major buying groups-MARTA Cooperative of America and Nationwide TV & Appliance-convened in Las Vegas for their annual conventions.

Commented MARTA president Warren Mann, "Over-distribution and self-serve selling hasn't grown the appliance business, but it's very effective at bringing down the average cost of goods at retail, squeezing margins for retailers and vendors. It's hard for me to believe that Wal-Mart contributes anything to reversing this trend."

Although Mann acknowledged that GE is "a good friend of independent dealers," he cautioned that "there are certainly some dealers of the opinion that enough is enough; and that they can no longer afford to sell the same stuff that's on the floor of Best Buy, the lumber yards and Wal-Mart."

Meanwhile, Harry Elias, JVC's executive VP/chief operating officer, addressed the Nationwide group with a calming message for the smaller dealers: "To survive.dealers need to help customers test drive the equipment. When we do this, customers.realize they want and need an experienced salesperson to talk with them and to teach them the differences between the growing list of products."

In other buying group news, Associated Volume Buyers (AVB) added 28 leased regional warehouses to its distribution network, which the group said should provide some margin advantages.

Meanwhile, online commerce in majaps, be it b-to-c or b-to c, continued to increase. Outgoing GE chairman Jack Welch noted that the move toward e-commerce is "the biggest change in business since the industrial revolution," and for that reason the company was working to "reinvent" itself. Added GE Appliance's president/CEO Larry Johnston, "More than 50 percent of all GE Appliance's revenues are now derived from online transactions."

Continuing the trend, Lowe's relaunched its information-only website,, in November as a full-service online store, choosing white goods and tools for its initial Internet offerings. In contrast to its brick & mortar sites that typically stock about 250 models, the e-commerce site offers more than 3,000 SKUs, the company said.

Despite the upheavals that shook the white-goods world up to that point, there was one more bombshell to be dropped before year's end: Maytag chairman/CEO Lloyd Ward's resignation in early November.

After only 14 months at the helm, Ward stepped down because of "a difference with the board of directors over the company's strategic outlook and direction," Maytag said. Timing was apparently everything: the company's high-end appliance business had deteriorated during Ward's tenure, as steeper interest rates slowed big-ticket sales and majaps came under increasing pricing pressure. n


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