Retail Observer

RETAILOBSERVER.COM APRIL 2014 52 G rowth is something that not many appliance retailers have considered in the last several years. The economy is just now springing back, so even the most successful appliance retailers are understandably tenuous about expansion plans. The first step in determining whether or not the time is right for expansion is looking at the current climate in the appliance retail business, as well as that of the home building/buying market. For starters, even with the horrible weather that has been plaguing parts of the country, people are still getting out to buy new homes. In fact, a few days ago, the National Association of Home Builders (NAHB) announced that sales of newly built, single-family homes rose 9.6 percent in January. According to them, this is the strongest sales pace since July of 2008. "The fact that the cold weather that hit much of the country didn't stop home buyers from going out and purchasing a piece of the American dream is a great sign," said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder from Wilmington, Del. "However, the very low supply of new homes on the market and the continued concern of available buildable lots still have builders cautious about getting ahead of themselves." Like appliance manufacturers, builders are cautious about overdoing it during this transitional phase. Additionally, appliance sales for 2014 are looking good. According to the Association for Appliance Manufacturers (AHAM), electronic range and ovens will experience a 4.7% increase to 4.897 million units. Refrigerators for 2014 will experience a 4.9% increase to 9.641 million units. For 2015, the forecasts look nearly as good. What does this all mean for the appliance retailer? A lot. For the successful appliance manufacturer, it bodes well. But before appliance retailers begin scooping up additional sites, they need to consider several key factors when it comes to expanding their operations. First and most obviously, retailers need to carefully weigh the costs of expanding. Finding a retail location that is in the right market is very important, but it has to be a space that strikes the right balance between square footage and rent. You will also need to allocate a marketing budget to properly promote the new store. Next, you have to consider the infrastructural needs of expanding. Take staff, for example. If you have a new location, you're going to need new staff, including sales staff, floor managers, and any temporary staff to help bridge the gap between locations. If you can't afford to hire new staff and the expansion will strain your existing resources, it's probably not the right time to expand. Finally, you have to make sure that new locations don't cannibalize your existing customer base. If you have one location too close to another, you might just end up spreading your business out over two stores, which would be a waste of time, money, and resources. So whether you are about to sign a lease on a new location or are just getting the inkling of the idea that you want to grow your business, tread lightly and think carefully and strategically about your business plans. With the appliance market looking great for this year and next, it's tempting to sign the first lease that opens up in your target market. But for the long haul, your business will benefit greatly from this period of considered reflection. John White Appliance Trends John White is a 20-year veteran of the appliance industry and is currently serving as the Executive Vice President of Appliances for BrandSource. GROWTH: HOW AND WHEN TO EXPAND YOUR BUSINESS RO

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