Taking the Legwork Out of Housework

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Taking the Legwork Out of Housework
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Fragmented But Stable

• Over the past decade, the appliance industry has
  realized solid, steady growth.  But since its
  growth is primarily driven by home sales, product
  replacement and home remodeling, the industry is
  currently on a declining growth path. 
• There are approximately 10,000 appliance stores
  across the U.S.
• The industry is fragmented, with the fifty
  largest appliance stores dominating about 35 of
  industry sales.
• The industry is fairly sizeable, with combined
  annual revenue of about 14 billion.

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Products

• A typical appliance store carries multiple
  product segments. These include kitchen, laundry
  and small household appliances. Some stores also
  carry consumer electronics. 
• Appliance stores typically offer customer
  services such as delivery, installation, repair
  and extended warranties.

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Layout

• Traditional appliance retailers range in size
  from about 8,000 to 30,000 square feet. Theyre
  usually located in small strip or shopping malls.
  
• Some appliance stores offer a superstore format.
  They often exceed 100,000 square feet. Theyre
  laid out by product segment. Employees are
  knowledgeable in a particular segment and are
  available to answer questions and process orders.
  
• Another store format is "Scratch Dent." These
  offer slightly damaged or discontinued
  merchandise for a discounted price.

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Whats in Stock

• Industry sales are dominated by kitchen
  appliances, which account for about 40 of total
  sales. 
• Laundry products are second, with 20 of total
  sales.  
• All other major household appliances account for
  about 15 of industry sales.

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Facing the Competition

• To be profitable, a company must focus on
  marketing, merchandising customer service. 
• The larger stores have the advantage of being
  able to undercut the little guys through volume
  price discounts from manufacturers. 
• To compete, smaller stores tend to focus on
  providing superior customer service and in
  offering specialized product segmentation. 
• Two of the dominant players include PC Richard
  and ABC Appliance.  Major competition comes from
  department stores like Sears, home improvement
  stores like Home Depot and big box retailers like
  Sam's Club.

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Store Operations

• Appliance superstores typically generate 30 to
  70 million annually. More traditionally
  formatted appliance stores generate between 2
  and 12 million each year.
• The inventory in most appliance stores is managed
  through an in-store, point-of-sale (POS) computer
  system. It enables the store to not only manage
  customer date and purchase history, but also
  handle customer credit-approvals and store
  inventory. 
• With the possibility of declining interest rates
  and continued interest in remodeling, there is
  hope that the industry will remain flat, rather
  than fall into a slump.  

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Taking it Outside

• The home remodeling industry iscurrently seeing
  significant growthin the installation of outdoor
  kitchens.  
• To the good fortune of the appliancestore
  industry, this is yieldingincreased sales of
  kitchen andspecialty appliances.
• According to the RemodelingFutures Program of
  the JointCenter for Housing Studies,consumer
  spending on homeimprovements is expected
  toincrease at a 3.7inflation-adjusted
  compoundannual rate over thenext decade.

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Adding Value to the Home

• In 2006, spending on home remodeling reached 280
  billion.
• Industry experts predict that by 2015, a typical
  upscale single family home will include an
  outdoor kitchen, equipped with a sink, grill,
  refrigerator and cooking island. 
• An outdoor kitchen puts allof the necessary
  ingredientsfor outdoor dining in a convenient
  location. It canbe as simple or inclusiveas the
  consumer wants. 

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Seeking Style and Luxury

• According to the Kitchen Bath Design News,
  consumers want options when it comes to their
  appliances.
• Many are seeking specialty kitchen appliances
  that are typically considered entertainment or
  lifestyle appliances.
• Manufacturers of not only traditional outdoor
  grills, but also kitchen appliances, cabinetry,
  countertops and sinks have all responded to
  consumer demands for outdoor kitchens. 
• The expanse of products currently available for
  outdoor kitchens has exploded and now includes
  everything from grills built into a stone walls
  to refrigerators to stainless steel sinks and
  weatherproof cabinetry.

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Worth the Expense

• Cost doesn't seem to faze consumers. They are
  spending an average of 3,000 on low end,
  good-quality grill, patio and counter items and
  15,000 for a fully outfitted kitchens. 
• For the foreseeable future, kitchens will
  continue to be one of the most important factors
  affecting consumer buying choices. 
• Outdoor kitchens are clearly adding value to the
  consumer's lifestyle and the overall value of
  their home. Appliance stores that offer
  outdoor-focused products or specialty products
  should benefit.  

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Competition From New Big Box Retailers

• With new big-box retailers such as Costco and
  Sam's Club selling appliances and consumer
  electronics, the landscape is changing.
• As competition grows and space becomes tight,
  traditional consumer electronics and appliance
  stores are finding it difficult to maintain their
  traditional size. 
• Many are downsizing because they are truly
  running out of locations that are capable of
  supporting their big stores.  AC Nielsen reports
  that 66 of the U.S. population lives within 10
  miles of a Best Buy store and that 62 lives
  within 10 miles of a Circuit City store. 
• The economy simply cannot afford to keep these
  retailers in business, especially when there are
  other retailers offering lower prices just around
  the corner.   

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How Do They Do It?

• With 95 million members between then, Costco and
  Sam's Club are taking hold of the appliance store
  industry. 
• Sam's Club and Costco, with over 580 and over 375
  locations respectively, undersell other stores.
  They cut expenses to the bare minimum and buy in
  large quantities directly from manufacturers. 
• For the most part, these retailers make their
  money from their membership fees. These range
  from 40 to 100 a year. 
• Their operating expenses are covered by the small
  markup on their products. 

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Product Differentiation

• Both retailers offer well-known brands of
  appliances, but their approach to product
  offerings varies. 
• Sam's Club has focused on primarily selling GE
  labeled appliances in the laundry and kitchen
  segments. 
• Costco offers private label products that are
  high-volume and can be offered at 20 below the
  equivalent national brand.
• Costco has partnered with Whirlpool to design and
  label appliances with its Costco store brand,
  Kirkland Signature.

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Trade-off for Savings

• The tradeoff for shopping in one of these big-box
  retailers is a limited number of choices, the
  inability to use manufacturers coupons, exclusive
  models designed specifically for the retailer,
  and minimal shopping support. 
• Mom and pops and larger retailers such as Sears
  are often recognized for their attention to
  service and onsite repairs. 
• Sears even offers maintenance and repair on
  non-Sears branded appliances.  Neither Sam's nor
  Costco offers this sort of support.
• Both Sam's Club and Costco have realized higher
  profits in the recent months. They attribute that
  to an increased demand for appliances.

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Further Savings Trade-off

• Every four weeks, Sam's Club and Costco see 58
  million and 80 million shoppers respectively.  
• Affordable prices on state-of-the-art appliances
  make it difficult for consumers to pass up a
  big-ticket purchase from one of these retailers. 
  
• For the smaller appliance stores to go toe-to-toe
  with the big guys, they must differentiate
  themselves with specialty products offerings,
  knowledgeable sales people, superior customer
  service and reasonable prices. 

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Going High Tech

• The household appliance industry has gone high
  tech.  In search of growth, manufacturers across
  the globe are designing and producing new
  versions of the standard household appliances.
• On the outside, many of today's appliances look
  like their predecessors. But they actually take a
  manual and possibly an onsite demonstration to
  become proficient.
• The American mainstays continue to be the Sears'
  Kenmore line, Whirlpool and Maytag.

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Infusing American Soil

• Manufacturers infusing the U.S. include LG, Sharp
  and Samsung. They are hoping that their success
  in the cell phone and flat panel TV segment can
  be continued in appliances.
• Over the past 12 months, there has been a
  significant amount of innovation in the appliance
  industry.  
• The competition from foreign soil is forcing
  traditional appliance manufacturers to engage in
  innovation. 

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Driving Industry Demand

• As the U.S. housing market continues to show
  signs if a slow down, the appliance industry is
  going to be forced to rely upon consumerproduct
  replacement or remodeling. 
• The economic slowdown has some consumers gun
  shyabout spending money. Unless the consumer can
  be lured with a lot of neat gadgets, upgrading
  wont be much as a factor.
• New, tech savvy appliances can include a number
  ofcool features. These include removable
  Internet-access screens, dishwashers and ranges
  with liquid crystaldisplays and smart
  refrigerators that can determinethe best
  temperature setting to preserve perishables. 
• According to GE Appliances, consumers
  areinterested in appliances with
  self-diagnostics. 

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Smart Product Innovation

• As consumers continue to have less and less free
  time, they are going to be looking for ways to
  save time. Part of the annual growth, therefore,
  will continue to come from smart appliances.
• Samsung America had an all out appliance launch
  during 2006. They launched a new line of
  dishwashers and ranges featuring LCD displays.  
• Sharp Electronics took it a step further when
  they introduced a convection microwave oven that
  can be linked with the Internet so that consumers
  can download recipes from Sharp's web site.
• Maytag came out with a refrigerator design
  featuring side-by-side doors and a lower-level
  freezer.   
• For appliance stores, the most difficult part of
  all of this innovation is learning how to use the
  appliances and then keeping them in stock.

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Advertising Strategies

• Appliance stores seeking to differentiate
  themselves should begin to carry high-end luxury,
  innovative products. Store advertising
  strategies should be targeted at upper class
  consumers seeking to not only increase the value
  of their homes, but also seeking additional space
  for entertaining and relaxing.
• Big-box retailers should partner with appliance
  manufacturers that are recognized for their
  reliable, innovative products. This will help
  them establish the store brand as a household
  name.

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Advertising Strategies

• Appliance stores should target their advertising
  efforts towards homeowners who are in the market
  to remodel their homes and secure their money
  through property appreciation.
• To capitalize on the growth in home remodeling,
  small appliance stores should partner with or
  staff a designer that can assist consumers with
  selection.

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WHY TV?
The answer is three simple reasons!
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WHY TV?
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WHY TV?
Remember,Only television can give youThe right
messageTo the right peopleAt the right timeIn
the right place!
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