Retail Observer

RETAILOBSERVER.COM SEPTEMBER 2016 56 L et's look a little more clearly at the old adage; "They don't make them like they used to". It is a common phrase when talking to someone about their household appliances. Everyone has a story of the refrigerator they had that lasted 30 years and never had a service call. Or the range that cooked a meal for their grandfather when he came home from the war. While, with some degree of variability, these stories may be true, there is a huge cost to this perceived value. Energy and water consumption, flexibility, lighting and technological advances are just a few of the many values that consumers are missing out on. The cost to acquire and run these appliances was (and is) significantly higher than those of today. Continued governmental pressure on efficiency and energy consumption has driven the cost to operate these units down to record levels. The increase in brick and mortar retailers (Home Depot, Lowes etc) and the prevalence of online promotions have made these appliances incredible values to consumers. The addition of global competitors in the US market has added to the complexity. Innovation, speed to market, and more dynamic product offerings have put added pressures on manufacturers. So what does it all mean? Consumers today, whether they know it or not, are getting the best values this industry has ever offered. I recently read an article on the time-cost equation for purchasing appliances by Mark Perry, a Professor of Economics and Finance at the University of Michigan, and had an eye opening moment. In his study, comparing the cost of an advertised dishwasher in 1981 vs. that of one purchased in 2015, the average consumer would be required to work 1/3 less time to purchase the same dishwasher. Based on average hourly wages between the two years, the cost of acquiring this dishwasher is not only less, the annual cost to run the same dishwasher is less than half of what it was. As Professor Perry noted, "If the time-cost of dishwashers hadn't fallen by 65% since 1981, and if dishwashers hadn't improved in energy efficiency by a factor of more than two times, Americans today would be paying about $1,000 for a basic dishwasher (48.5 hours of work at $20.74 per hour) instead of only $350, and it would take more than twice as much energy to operate. Likewise, we would expect comparable large decreases in the time-cost of the other f our appliances, along with significant reductions in their operating costs due to the dramatic increases in energy efficiency since the early 1980s." At that rate, a consumer could afford to buy 3 new dishwashers today for the same time-cost that he spent in 1981. If you add this all up, American consumers have never been better off when it comes to the standard home appliances that we all own and take for granted. Modern home appliances are cheaper, better, and more energy-efficient than ever before. More affordable and energy-efficient household appliances are part of the ongoing, but under-appreciated "miracle of manufacturing". Thanks to advances in technology and worker productivity, American consumers get cheaper and better-manufactured goods (appliances, cars, clothing, and household furnishings) year after year, which translates into a higher standard of living for all Americans, especially for lower and middle-income households. "If we wanted to identify a 'golden era' of prosperity for middle-class America based on the affordability of owning and operating common household appliances, today's consumers are many times better off than the consumers of any past decade. The 'good old days' for most American consumers are happening right now." The challenge for all retailers is getting this message through a consumer's head during the purchase process. The fact that they are getting a better value for their dollar is a perfect opportunity to introduce a sell up strategy to the conversation. The features and benefits that a consumer will get today far surpass their expectations. Additionally, there is a FOMO (fear of missing out) on new technology. The reluctance to invest additional money on something that will potentially be outdated in a short period. The reality is the investment dollars are less, so they can upgrade in a shorter period of time. Appliances have long been a "need in" purchase. In other words, a consumer didn't buy until they needed a new one. Consumer electronics, on the other hand have been a "want in" purchase. Customers are purchasing because they want the latest and greatest technology. With the speed to market for innovations in appliances and a lower cost-time output, we are seeing a larger amount of appliance consumers wanting in. We need to make sure our stores are ready for this challenge and deliver what the consumer wants. Affordable innovation with a smile. Patrick Maloney Appliance Trends AFFORDABLE INNOVATIONS WITH A SMILE RO Patrick Maloney Senior VP Appliances Nationwide Marketing Group

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