Rivergate Shopping Center corner of S Tryon & Rivergate Pkwy, originally uploaded by Calloway Homes.
NEW YORK-Despite the rapid growth in major appliance share gains at home centers Home Depot and Lowe's, the independent appliance dealer channel is gaining or at least holding strong to its market-share position.
Top management at buying groups the North American Retail Dealers Association, Nationwide Marketing Group and NECO Alliance, applauded the independent white goods retailer growth despite the home improvement retailers' rapidly expanding major appliance market share. Independent retailers currently occupy a roughly 31 percent white goods share, said Ed Kelly, president of Nationwide Marketing Group, citing a recent report by The Stevenson Company. He added that the sector grew its share nearly 2 percent in the past three years. The home centers logged a 27 percent major appliance share in 2005 compared with 22 percent in 2004, as reported in HFN's 2006 Major Appliance Report.
The channel's growth is in part attributed to dealers becoming "more promotionally minded" in terms of rebates and advertised sales, said Mel Hunger, president of NECO Alliance. He agreed that independents are "taking back market share" from some of the larger major appliance retail players, but did not disclose specific share or revenue figures.
Recent growth in high-end major appliance demand and consumers seeking to trade up "has been very good for independent dealers," said Tom Drake, president and chief executive officer of NARDA. Drake said that independent dealer share is currently remaining stable at about one-third of total retail major appliance sales.
The independent channel is now facing the challenge of store shutdowns driven primarily by the lack of succession plans at these smaller retailers when the owner exits, Drake said. "There are not necessarily employees with the resources to take over." He added that in the recently hot real estate market, a number of independent retail owners have discovered the value in their buildings and have been cashing out, "especially in some city locales where neighborhoods are becoming gentrified."
Despite store closures, Drake said independent dealer market share is holding strong because these retailers' customers are shifting spending to other local dealers. "There is no question that the number of independent retailers is declining, but sales are maintaining because consumers that buy at independents are predisposed to buying from other independents," he said.
Nationwide's Kelly said that previous store shrinkage has actually helped to strengthen the sector, as the weaker dealers have been weeded out. He said, however, that the bulk of store shrinkage occurred in the 1980s, adding that the sectors are currently experiencing store growth. "20 to 25 percent of the top dealers are in a nice growth mode. We are seeing a significant change in new store openings that we have not seen in 15 years."
Nationwide Marketing Group, which represents about 7,000 storefronts, has grown sales at a double digit pace in the past five years, hitting $10 billion in 2005 group sales, Kelly said. He attributed recent independent growth to the strong housing market, remodeling trends and "fresh" introductions in the major appliance arena. He pinpointed the East and West Coasts as the strongest regions for the independent channel. He added that Nationwide is currently experiencing a sales surges in the "rent-to-own" and custom home furnishing channels. Kelly is aware of the cool-off of the record housing market and said that as home buying slows, remodeling will be a driver of appliance sales.
The West Coast, Southwest and Pacific Northwest have been the strongest regions of growth for NARDA of late, Drake said. He attributed this to population growth and "strong economics" in areas like Arizona. Economically challenged regions, including parts of the Midwest, have proven more difficult for the independent channel, which tends to deal in higher-end appliances.
While the independent dealer's place has held steady, Drake said that competition from major appliance big boxes is mounting. "There is no question that competition is more fierce than ever from Home Depot and Lowe's. Sears has eroded, but still has a lot of market share and is a key player. It will be a very challenging marketplace going forward."
"BUYING GROUPS NOTE INDEPENDENTS ARE HAVING THEIR DAY IN WHITE GOODS; ACCORDING TO ANALYSTS, THE SEGMENT IS HOLDING OFF THE MAJOR CHAINS AND MAINTAINING MARKET SHARE." HFN The Weekly Newspaper for the Home Furnishing Network 17 July 2006: 35. General OneFile. Web. 13 Nov. 2010.
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