Sears draws line in the sand on appliance sales - Brief Article

Home Channel News, March 6, 2000 by John Caulfield

Last month, Home Depot initiated what is scheduled to be a rollout of appliances that will be carried in all stores by August. Company officials have said that Home Depot's goal is to become the first- or second-largest retailer of appliances in the United States. To reach that goal, though, Depot will have to climb over some formidable competition, including one company that may be learning its lesson after having its market dominance in a number of other products and services swiped by the big-box giant.

Sears is the indisputable leader in home appliance sales, with a 33 percent market share, according to Tom Nicholson, a company spokesman. "We sell more appliances than the next 17 companies combined, and there's a wide gap between us and No. 2," a position Nicholson said was held by 600-unit Circuit City and 354-unit Best Buy, both selling appliances and consumer electronics.

This must seem like deja vu to Sears. Throughout the 1980s, it watched Home Depot loosen its commanding grip on retail sales of paint and tools in major market after major market. Last year, Home Depot claimed to have passed Sears as the industry's leading installed sales dealer.

However, Depot's foray into the appliance market won't be a cake walk. For one thing, selling appliances isn't the easiest business to be in. Ask Tops Appliance City, a well-known regional retailer that had served the New York metropolitan area for 30 years before it went bankrupt last month and decided to close its last five stores. Ask Roberds, the 24-unit home furnishings and appliance retailer that is currently reorganizing under Chapter 11. Ask Maytag, the appliance manufacturer whose stock price dropped nearly 11 percent on Feb. 13 after it predicted that its appliance sales would be flat for the first quarter of 2000.

Home Depot will encounter stiffer and smarter competition in this category, too, including one of its nemeses. Lowe's, which has sold appliances for decades, last year generated around $1 billion in category sales -- close to 7 percent of its total revenue -- and has strengthened the connection linking appliances with kitchens and baths by the way it displays those products in its stores.

Sears chairman Arthur Martinez boldly told Reuters last week that his company -- which stocks appliances in its 850 full-line department stores and 750 dealer outlets that serve rural markets -- expects to increase its market share of retail-appliance sales to 40 percent, despite Home Depot's entry in the field. And that prediction is being backed by Sears' increased marketing efforts on several fronts.

The company recently paid to become the "Official Supplier of Home Appliances" for the 2002 Winter Olympics, and it will help supply the Olympic Village at the University of Utah and the news-media housing projected for Salt Lake City's Gateway district.

The dealer's stores are conducting a program that Nicholson said "challenges customers to compare Sears with any company that sells appliances." He said that the promotion showcases the stores' low-price guarantee, the fact that Sears "is the only retailer selling all six major brands;' that it offers home installation and repair nationwide and that its stores have access to over four million repair parts.

Home Depot and Lowe's are selling appliances in conjunction with larger home improvement projects, whereas Sears and the specialists aim mostly at the replacement market. For the time being, that may keep them at arm's length. But Depot has never been a proponent in incremental market penetration; the question, in this case, is whether history will repeat itself.