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issue: May 2008 APPLIANCE Magazine

Appliance Line
Mass + Premium

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Tim Somheil, Editor

The appliance industry is fine-tuning its approach to make the best of unpleasant circumstances.

Tim Somheil, Editor

In recent years, the appliance industry has focused much of its U.S. activity on the premium market. Higher margins on premium appliances combined with overall growth in unit shipments were a successful combination. This success helped offset raw-materials price increases and growing manufacturing costs.

It was bad news for the appliance industry in 2007 when housing slowed, the economy lost momentum, and major-appliance shipment numbers began to backslide. Most industry watchers see no recovery for housing, or for major appliance shipments, this year.

At the 2008 Kitchen/Bath Industry Show in Chicago April 10–13, one could see how the industry plans to deal with the situation. There’s a movement afoot to put even more emphasis on the premium market and lure hesitant buyers by cutting retail prices.

Despite the economy’s woes, premium appliances are still selling. They’re not immune to the slowdown, but they’re suffering less. This was the message from several OEMs I spoke with on the KBIS floor, and it was the message conveyed in their product positioning as well. There are more appliances going for the “mass premium” buyers, who may still be willing to pay for a high-end appliance if they feel they are getting a good price.

The biggest example at KBIS was the launch of the Electrolux brand in the United States. Despite speed bumps in 2007—the U.S. economy, and a large-scale product launch in Europe that did not go smoothly—Electrolux did not curtail the U.S. introduction of this mass-premium brand.

Electrolux, whose dominant U.S. brand has long been Frigidaire, is launching no less than 130 major-appliance SKUs with the Electrolux name. The line includes freestanding and built-in ranges, in dual-fuel, gas, and electric. There are wall ovens, cooktops, microwaves, refrigerators, dishwashers, ventilation, and more. It’s a full line of appliances and then some.

Electrolux marketing has a big job to do. Say “Electrolux” and many U.S. consumers still think of vacuum cleaners. Electrolux bought the U.S. rights to the brand name in 2003 from the floor care company that is now named Aerus. The 2004 launch of the U.S. brand Electrolux Icon was geared primarily to a super-premium market niche.

Now the company plans a big advertising campaign with TV personality Kelly Ripa as spokesperson. Even Ripa addresses the U.S. lack of familiarity with the brand in a press release. “Who knew,” she asks, that Electrolux makes major appliances and has been a big name in Europe for 70 years?

Engineers Doing Ethnographic Research

The real work behind the launch was done by design and manufacturing engineers worldwide.

G. Frank Downing, director, Product and Design, said Electrolux performed two years of U.S. consumer studies with more than 15,000 participants. This included ethnographic consumer studies. “We actually sent engineers into consumer homes to see how they interacted with their appliances,” he told me at KBIS. “We also set up cameras in volunteers’ homes to see how they worked with their appliances.

“Sometimes engineers think they know best,” added Downing—himself an engineer. “But it’s the consumer that knows best.”

Engineers observed how families interface on a day-to-day basis with appliances. “We got to see Dad and Mom and the kids interfacing with the appliances,” Downing said. “We got a good picture of how users invent their own workarounds when they have a problem.”

Downing said this kind of research was extremely valuable in the development of the Electrolux line. “It gave us the kind of insight that standard consumer research just can’t provide.”

The new line is already in production, often with manufacturing systems that were proven in Electrolux plants in Europe. Manufacturing engineers from Europe and the U.S. spent much time making the trans-Atlantic manufacturing technology transfer. New refrigerator-drawer manufacturing, for example, was set up in the plant in Anderson, SC,
U.S. Wine coolers, once made by an OEM supplier, were also brought in-house for better quality control and are now made in Anderson.

Also among the 130 new appliances: hybrid electric cooktops with both standard burners and two induction burners. It seems reasonable that consumers would be willing to buy a half-induction cooktop when the same buyers might not be willing to pay for the cost of full induction. They can keep using their glass or aluminum cookware on the non-induction burners. At my house, we rarely use more than two burners at a time anyway.

The timing might not be optimal for a product launch on this scale. Shipments industry-wide are down for the first quarter of 2008. Some premium-appliance OEMs are suffering and there have been U.S. layoffs already in 2008. Other premium-appliance OEMs, speaking at KBIS, said 2007 was simply their best year ever. They point to continuing growth in the baby boomer demographic and the inevitable economic turnaround.

But when will the U.S. economy recover? Some are projecting the economy, housing, and the impact of the lending crisis will all hit bottom and begin to show improvement in the New Year. Extra buoyancy could come from consumer optimism following the November 4, 2008, presidential election.

We’ll just have to wait and see.


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