Retail Observer

RETAILOBSERVER.COM FEBRUARY 2020 50 I n any given year, the demand for home appliances can be influenced by any number of factors, but the key contributors always include the economy, consumer replacement cycles and advancements in technology. One thing is certain, though – the ongoing need for appliances in nearly every American household. And it's that need that will continue to create opportunities for the Independent retail channel as the preferred shopping destination for your consumers. Let's look at what happened in 2019, and how 2020 might shape up for the home appliance category. STATE OF THE INDUSTRY Let's start with the economy. Home appliances were relatively healthy as a category, but 2019 was not without some turbulence. One of the largest concerns continues to be the imposed and potentially increasing impact of tariffs as a result of the U.S. and Chinese governments' continued trade dispute. While the first round of tariffs went into effect Sept. 1, the situation brought unpredictable and fluctuating price increases throughout the balance of Q4 in 2019. Up to this point, most manufacturers have worked hard to offset the tariff pressures through increased efficiencies and product cost improvements. But the unknown outcome remains a risk to further cost increases. Turning to other economic indicators, the annual GDP ended 2019 at approximately 2.1%. Economists expect a slight downtick to 1.7% in 2020, with stable inflation, while unemployment will remain near record lows (see figures A and B below). The housing market has yielded mixed results thus far, as the home ownership rate of 64.2% was virtually unchanged YoY, and existing home sales are down approximately 7% YTD. However, sales of single-family homes rose 4.5%, and inventory dropped 4.8%. To tie this all together, we saw shipments end the year down approximately 2.5% (AHAM). So, where do these trends and events leave the home appliances category as we enter 2020? TRENDS & OUTLOOK As forecasters project another flat to slightly down year in overall appliance shipments, there still remain tremendous opportunities for the year ahead. Let's begin with Sears and the continued erosion of its market share that has occurred with its 100+ store closings in the second half of 2019, which will ultimately reduce its share loss to less than 10%. It's expected that Sears will hit rock-bottom with a single- digit market share in 2020. Sears' demise will continue to pour consumers into the market who are looking for alternatives and who'll skew toward the Independent retailer. These consumers tend to purchase a more premium mix of products while also utilizing consumer finance credit programs. I believe the appliance business is closing in on embracing the fast- paced connected home category. More and more appliances are coming to market with smart features embedded. This evolution into the connected age will begin to separate those retailers who have the employee talent and experience to win in this new environment. This is where I see Independent retail – and possibly Best Buy – leading in this space, leaving the lumberyards and clubs on the outside looking in. Consumers will begin to look for help on new technology features, and if you don't have an educated staff and an in-store experience to deliver, you'll lose consumer dollars. With the launch of Nationwide's connected home division in the second half of 2019, we've tasked ourselves with finding ways to help our members win in this space by leveraging all of our assets, including but not limited to AT&T, our Google hardware relationship, and our new-prospect service providers. Finally, the industry may experience some balance-of-share shift as the Korean brands look to continue making a mark in the appliance space. There's also the possibility of new emerging brands entering the U.S. market. Whirlpool, GE and Electrolux will look to keep pace and grow in the year ahead, as they come to market with new and innovative products. No matter what changes occur in 2020, one thing is certain: the team at Nationwide Marketing Group will continue to work tirelessly for your success. I'm incredibly honored to serve you and this channel, and I thank you for allowing our organization to be part of your bright future! Doug Wrede Appliance Trends RO HOME APPLIANCES— STATE OF THE INDUSTRY, TRENDS, & OUTLOOK Doug Wrede — Vice President of Appliance Merchandising, Nationwide Marketing Group Source: U.S. Census Bureau & National Association of Realtors

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