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issue: November 2004 APPLIANCE Magazine

APPLIANCE Line
A New Formula


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By Lisa Bonnema, Editor, APPLIANCE Magazine

The last few years has seen its share of combination appliances: Whirlpool’s cooking and cooling Polara, LG’s microwave toaster, and, more recently, Nokia’s TV cell phone. But a whole new breed of combo products is popping up that’s adding a twist to the term “durable” good.

Lisa Bonnema, Editor, APPLIANCE Magazine

What is a durable good? The question seems simple enough to answer. According to the U.S. government, it is a good that has an intended life span of 3 or more years. But the recent trend of “soft” and “hard” goods manufacturers teaming up to market products has made the term more difficult to define.

The marketing strategy really isn’t that complicated: team up with a well-known packaged goods company, design a new product, slap on some well-known brands, and bingo—you have a great product that meets consumer needs on all levels.

Royal Philips Electronics of The Netherlands seems to be leading the charge on the hard goods side. It has partnerships that incorporate everything from coffee and beer to shaving lotion and toothpaste into their appliances. In fact, the strategic alliances are a major part of the company’s global branding strategy. Philips sees them as a way to offer consumers products it wouldn’t be able develop on its own.

“ These kinds of alliances are a fundamental part of our strategy,” Paul Bromberg, head of strategy for Philips’ Digital Appliances division, said in an announcement of Philips partnership with beer brewer Interbrew. “We see them as a key to our future. You can expect to see more and more of these types of partnerships.”

And boy have we. For the trend-setting Senseo™ pod coffee brewer, Philips teamed up with coffee maker Sara Lee/Douwe Egbers. Unilever was brought in for a new ironing appliance that dispenses a “smoothing” liquid, and Nivea provides the shaving gel and lotion for Philips’ CoolSkin shaver for men. The partnership with Interbrew was for Philips’ PerfectDraft appliance, a home-use beer dispenser that includes a tap handle, an internal cooling system, and a 6-L keg.

Most recently, Philips announced an alliance with packaged goods giant Procter & Gamble (P&G). The two companies teamed up to produce the IntelliClean System, an integrated power toothbrush and toothpaste dispensing system.

P&G is leading the soft goods side and has partnerships with several other appliance makers. Applica worked with the company for its Black and Decker pod brewer, Home Café, which uses Folgers or Millstone coffee pods. The companies also created a new category in the laundry sector with their Tide™ Buzz™ Ultrasonic Stain Remover, a powered stain remover that uses Tide detergent.

The trend has also found its way into floor care. P&G teamed up with Techtronic Industries, which owns the Dirt Devil brand, to create Swiffer Sweep+Vac. The rechargeable vacuum uses Swiffer® cleaning cloths to pick up dirt and debris, while the vacuum sucks up larger objects. And, of course, the Hoover Floor MATE™ brought together Hoover and cleaning products maker Reckitt Benckiser to offer consumers a hard floor cleaner that dispenses LYSOL® and Old English® cleaning products.

While this seems to be a great way to offer innovative products—and sometimes even create new product categories—I question the “value” being added here from a business perspective. Small electrics and floor care have both been fighting against low-price margins for years, and these new “consumable durables” aren’t exactly premium products, nor are they being marketed as such in many instances.

Take stick vacuums as an example. Let’s say model A incorporates a partnership with a packaged goods company and sells for $39.99. Model B, made by the same company, doesn’t incorporate the trend and sells for $49.99. While Model B may have more power than Model A, let’s be consumers for a minute. You have two rechargeable stick vacs, and the one with the “value-added” brand you recognize is less expensive. Which one would you choose? Is this the opposite of what manufacturers are trying to accomplish? Are we shooting ourselves in the foot by making appliances less durable and more consumable, and in turn, cheaper?

No, according to Phil Brandl, president of the International Housewares Association. In fact, he believes quite the opposite. “From a business standpoint, it would seem to offer an opportunity to add value and perhaps get out of the product commoditization box that consumer products seem to be caught in. This may add a bit of margin for the suppliers and retailers that are involved,” he tells APPLIANCE.

Mr. Brandl also thinks the trend represents opportunity for added distribution. “In the retail environment, it certainly should lend itself to cross-merchandising opportunities,” he says. “Would you have ever seen an electric floor care product in the cleaning aisle? Probably not. Does it make sense? Probably so.”

Overall, Mr. Brandl believes these joint alliances will lead to incremental growth opportunities. “I’m not sure that the purchase of the pod coffee maker in the mind of the consumer would replace the need they would have for a multi-cup coffee maker,” he notes.

And research indicates he may be right. Market research firm NPD Houseworld predicts that coffee pod brewers will end up representing only 5 percent of the total number of coffee makers sold in the U.S., suggesting that they won’t completely change consumer behavior. The firm also predicts, however, that only two manufacturers will succeed in the category, which suggests that this trend does take careful planning.

As Mr. Brandl points out, the success of this marketing scheme ultimately relies on what consumers think, which only time will reveal. Even so, I can’t help but be a little cautious. As the area between “soft” and “hard” goods gets grayer, will “soft” goods manufacturers start crossing over? P&G already released its own Scentstories™ product, which plays scented CDs. That’s an electric appliance if you ask me. And what will the future hold if the trend does skyrocket for the small appliance segment? After all, consumer lifestyles are only moving faster, and if a product can make life easier with little investment, why wouldn’t you purchase it?

Let’s face it, in the true spirit of capitalism, no one really wants to share in the long run. Perhaps this new breed of product partnerships will develop into a new breed of mergers and acquisitions. If that’s the case, this new product formula may have a larger impact than industry thinks.

 
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