- 1 Key Metrics
- 2 Regulatory Trends
- 3 Other Key Market Trends
- 4 Market Size and Forecast
- 5 Competitive Landscape
- 6 References
|Base Year||2017||Researched through internet|
Energy Rating is Competitive Differentiator
The Energy Star program in the US has fared very well since its inception in 1992. The program provides an international standard for energy efficiency within consumer appliances originating from the US, and was created in partnership with the Department of Energy and Environmental Protection Agency. The standard has achieved significant milestones by creating an environment whereby its Energy Star logo is top of mind for many people shopping for new appliances, and is easily recognized by many.
In 2012, Energy Star celebrated 20 years of success in achieving significant milestones, eg, 25% of new homes are Energy Star-certified, public awareness of Energy Star reaching 80% and many others. The standard continues to be improved year after year by partnering with more manufacturers and creating new standards for new categories of products. In 2013, the standard was applicable to computers, servers, refrigerators, dishwashers, heating and cooling systems, consumer electronics, lighting, imaging products and homes.
Although energy efficiency can benefit everyone in the long run, most American consumers still value price when shopping for new appliances, even though they are very much aware of the Energy Star goals. However, education efforts and an improving economy are driving Americans to change their shopping habits. Approximately 30-45% of households reported purchasing an Energy Star qualified product in a given year.
Heating and cooling appliances will remain an important driver of Energy Star products, as they consume the most energy in any household; however, with recent remodeling rates at a high, homeowners are becoming more conscious of the benefits of good insulation and duct work in the long term.
Other Key Market Trends
Premium Appliances may be on the growth path
Overall, consumer appliances had a good year of growth in 2013. While volume sales increased by 3%, value sales rose by 6% to reach US$57 billion. Premiumisation emerged as a key theme across consumer appliances, including both major and small appliances. Average unit prices rose across the board, including even smaller appliances, such as food preparation appliances and vacuum cleaners. Through extensive advertising, new product development and improved features, companies are finding ways to entice consumers to splurge on their appliances. The fastest growing area within appliances appears to be the premium end.
Several other trends, such as strong growth in the building industry, high remodeling rates, the kitchen becoming the centerpiece of a house, eco-consciousness and even healthy living trends combined, with the popularity of food shows and celebrity chefs, have helped fuel the rapid growth of premium appliances. The industry is responding to this increased enthusiasm for higher end appliances by adding key features such as multi functionality (eg Oreck Versa Vac), aesthetic appeal (egSub-Zero refrigerators with glass doors), technological advancements (eg LG dishwashers) and premium customization options (eg KitchenAid stove tops). High-end countertop blenders, like Vitamix, are catering to consumer demand for healthy living through juiced foods.
As US economic prospects improve, consumers are starting to spend more money on high quality products. This often means technologically advanced appliances with smart capabilities, and products that offer more control and functionality. For instance, in refrigeration appliances, LG Corp experienced the fastest growth rate in 2013 – increasing volumes by 8%. LG enhances its appliances with an app that allows consumers to make grocery lists, review internal temperatures, see technical issues and do many other things. In February 2013, Samsung Electronics introduced a four-door refrigerator that dispenses sparkling water, in partnership with Soda Stream, the leading manufacturer and distributor of home beverage carbonation systems.
There will be opportunities for companies to innovate and provide high quality products within economy to mid-range appliances. The younger consumers who are purchasing their first home might be hoping to outfit their kitchen with basic appliances, and many will not have the knowledge or disposable income to trade up to premium appliances.
It is expected that more major appliance manufacturers will increase their focus on significant demographic groups, such as the millennial. According to real estate listings site Redfin, 25- to 34 year-olds form the largest segment of home buyers by age. In June 2013, General Electric introduced a new Artistry series of kitchen products, including a refrigerator that targets millennial with its clean, simple design and affordable pricing.
Market Size and Forecast
Sales of Major and Smaller Appliances by Units and Revenues in the US (2013)
Sales of Major and Smaller Appliances by Channel in the US (2013)
International Brands Intensifying Competition
Domestic players continued to hold the largest market volume share within consumer appliances in 2013; however, the international competition is starting to make its presence felt in the US. Leading international giants such as LG and Samsung are vying for a piece of the market, and are being bolstered with their brand names that are easily recognized for their consumer electronics. According to data from Kantar media, Samsung spent US$29 million on US appliance advertising in 2012, while domestic competitor Whirlpool spent significantly more, at US$54 million.
In 2013, LG increased its volume sales in dishwashers by 18%, in home laundry appliances by 13% and in refrigeration appliances by 8%. Across these categories, LG was the fastest growing appliance company.
International brands have entered the market through focused targeting and differentiation strategies. Haier was the second fastest growing brand after LG in dishwashers and home laundry. Electrolux, another international player in dishwashers, is using technological innovation, design and price to capture its target market’s attention.
Leading domestic players, such as Whirlpool and GE, are fighting back through brand differentiation, brand legacy, innovation, anti-dumping lawsuits and smart capabilities. According to Grand Rapids Business Journal, Whirlpool’s “teen jeans” ad spot (launched in May 2013) was an attempt to break through the ad “clutter”, in general, through storytelling. The popular ad was part of the “Designed to Simplify” advertising campaign introduced by the company in 2012. The campaign attempted to communicate to its target audience that an appliance brand like Whirlpool can simplify their lives.
In a similar vein, GE launched the “Re-imagining Home” advertising campaign in August 2013. The campaign was intended to emphasis GE’s overhaul of its appliances unit based on consumer insights.
In March 2014, Haier announced the expansion of its operations in the Americas, with the planned opening of a new headquarters in Wayne, NJ in the third quarter of 2014. South Korean electronics company Samsung says that it wants to become the world’s largest appliance manufacturer by 2015, and it has aggressive plans for the US market.
Although electronics companies like LG and Samsung have a clear advantage when it comes to smart capabilities in appliances, there is a limit to how far these companies can benefit from their technical prowess. Consumers are looking for convenient, well-designed and simple products that make their lives easier.
Sears is steadily losing share in terms of major appliance sales. Home improvement stores like Lowe’s and Home Depot are experiencing a boom, as consumers shift their shopping habits away from department stores. In its heyday, Kenmore was the number one selling major appliance brand in the US. By 2013, however, Sears Holdings Corp has been relegated to number three behind Whirlpool Corp and General Electric Co.
Competitors are reaching consumers with new, easy-to-use apps and websites that help users achieve their desired goals. For instance, Home Depot provides contracts (professional customers) with an app that can check a store’s inventory, allow them to create and save supply lists and arrange in-store pick-up. Competitors are using consumer insights based on observed shopping habits, purchase frequency and surveys to optimize customers’ shopping experience.
For Sears’ 2013 fiscal year, the company reported losses of US$1.4 billion.
There will be many factors impacting retailers’ performance in the coming years. First, increasing multi-channel shopping and online use will impact how their bricks and mortar stores perform.
Many Americans still have and purchase Kenmore, Craftsman, and DieHard, but due to Sears’ faltering retailing image these brands have suffered. Kenmore, a mainstay in consumer appliances, has suffered as its original manufacturing rights have changed from Whirlpool to the hands of other companies, like LG.
Sears’ historic empire within consumer appliances is deteriorating, but it could still avoid failure. There is a chance that the company could be acquired by another player, which could give it the resources, insights and refocus it desperately needs. In this scenario, the acquiring company would be best served if it were smaller than Sears to leverage Sears’ established networks, outlets and distribution.
However, Sears could also transform itself from a bricks and mortar retailer to an exclusively online retailer, which seems a very likely option, as Sears is currently sourcing over half of its revenue from its new Shop Your Way program.
- US Environmental Protection Agency
- United States Census Bureau
- Association of Home Appliance Manufacturers
- GE Appliances Launches New Reimagining Home Campaign
- Bloomberg Business Week