Retail Observer

December 2020

The Retail Observer is an industry leading magazine for INDEPENDENT RETAILERS in Major Appliances, Consumer Electronics and Home Furnishings

Issue link:

Contents of this Issue


Page 49 of 67

RETAILOBSERVER.COM DECEMBER 2020 50 John Laing — Director of Appliances and Outdoor Living Nationwide Marketing Group RO H ow has 2020 affected the overall appliance business? With consumers spending 50-100% more time eating at home and staying home, demand is unprecedented across all appliances. Retailers are currently averaging a 3:1 ratio of backorders to monthly gross dollar volume. This phenomenon will probably abate at some point in 2021, but for now the outlook is very strong for this business. Here are some of the factors impacting this shift. Macro Environment — The "hockey stick" shaped recovery is well underway. This quick turnaround is being fueled by an economy that bounced back in Q3 with a +33% increase in real gross domestic product (GDP), a stable yet strong stock market, and positive consumer confidence increases. The September 2020 confidence numbers rose over 15 points, the largest one-month increase in 17 years. Assuming employment numbers continue to expand and the election year changes do not severely impact the economy, the outlook for 2021 is very good indeed. Home ownership is also a key driver to the kitchen appliance business. In fact, there are 10 million more households in the United States than there were four years ago – or 77 million households in total. And while luxury home sales were flat pre-COVID, a Q3 2020 exodus from overpopulated cities is driving up demand and pricing. High-end second-home sales and new construction are on the rise, and quotes for remodeling projects have exploded as consumers look to improve their "locked-down" environments. Premium & Luxury Appliance Brands Segmentation — The U.S. luxury market, which bottomed out in 2011, has enjoyed steady growth and is now valued at $3.7B in retail dollars. Fortunately, the economic uncertainties that occurred in 2008 and impacted all durable purchases are NOT a factor today. And despite a decline of 31.7% in the real GDP and a Q2 2020 slowdown in appliance shipments, the premium / luxury appliance market should finish the year with industry revenue better than 2019 and equivalent to 2006. Product & Lifestyle Trends Post COVID-19 — Three trends were gaining in popularity before 2020 began and have continued to gather steam throughout the COVID-19 pandemic: 1. Connected and artificial Intelligence appliances – Adoption has grown and will continue to grow as more relevant benefits are developed. 2. Air fryer and sous vide cooking functions – These are no longer fringe benefits; they're now regularly being built into major appliances. 3. Appliance color customization – Customization, not just for finishes but for knobs and handle options, provides an opportunity for even greater customer input. Check out Elmira Stove Works as an example of how built-to-order luxury appliances could become more than just a niche. Then there are changes that have come about as a result of COVID-19. Aspiring chefs and shelter-in-place hobbyists are fueling significant increases in recipe downloads, cooking blogs and the use of both indoor and outdoor kitchens. Consumers now want quartz countertops instead of granite because they are less porous and will not absorb or retain germs, and cabinets and appliances that incorporate "no touch" opening / closing doors like those found on some minivans and SUVs. Also, reducing kitchen odors and noise has become more important, as more people are in the home more of the time. Sales & Marketing Trends — E-commerce is still a relatively small portion of appliance sales, with unaided premium and luxury appliances ecommerce sales estimated to be 5-7% of the industry balance-of- sale.* However, retailers have quickly adopted better website functionality to enhance the shopping experience. Product-featured video content, chat, and virtual showroom tours are becoming the norm, and individual showroom appointments have led to more personalized attention and service. In fact, close rates have significantly improved of late, even with minimal face-to-face selling time. The lifestyle and behavioral changes that we have adopted in 2020 are here to stay. Ultimately, I am VERY BULLISH on the premium and luxury appliance business for 2021, and I hope we can all learn from this past year and get more than our fair share in 2021. * Source: trend and top trade customer intelligence. WHY I'M BULLISH ON THE PREM IUM & LUXURY APPLIANCE BUSINESS John Laing Appliance Trends

Articles in this issue

Links on this page

Archives of this issue

view archives of Retail Observer - December 2020