Discount stores should benefit most from microwave replacement sales

Discount Store News, July 4, 1988

Discount Stores Should Benefit Most From Microwave Replacement Sales

Nationwide DSN Report

The good news in microwave ovens: there is a healthy replacement market simmering, especially among those who did not invest in a large capacity microwave oven the first time around.

The bad news: the replacement market will take another five to ten years to peak and until then, while the market for first-time buyers is nearing saturation. The last two years of microwave oven sales were a lot better than the next two are forecasted to be.

Whether consulting the statistics prepared by the Association of Home Appliance Manufacturers, or talking with microwave oven vendors and discount retailers, this consensus emerges: market saturation is not far away; those interested in becoming two-oven owners are limited; and the replacement market probably won't heat up for another five to ten years.

Research conducted in May for DSN by the Chicago-based research firm, Leo J. Shapiro & Associates, revealed that 73 percent of U.S. households presently own a microwave oven, up from 56 percent two years ago.

While that still leaves 27 percent as perspective buyers, 19 percent of the survey population--450 households--said they have no interest in owning a microwave oven, leaving the industry just 8 percentage points from total penetration.

Discounters were not selected as the preferred choice of leading retailers for microwave oven purchases, mentioned by only 16 percent of respondents who said they will buy a microwave during the next year. Six percent mentioned catalog showrooms and 7 percent mentioned conventional department stores.

In comparison, about 25 percent planned to buy a microwave at Sears--which was one of the few retailers mentioned by name. Another 25 percent would shop at an appliance specialty store, or appliance superstore.

One out of 6 looking to buy a microwave are undecided about where to shop.

No doubt the temptation among full line discounters would be to drastically pare the store's oven assortment, but industry sources suggest that maintaining adequate visibility in microwave ovens now will pay off in the future.

Replacement Models

When looking for a replacement model, these educated consumers will no longer need the guidance of a specialty store, but will go to the discounter for sharp prices.

Steve Sherman, national sales manager, Sanyo, said that despite a flattening and possibly declining microwave oven market, discounter sales have the potential to climb.

"Consumers used to go to a specialty store, but people are highly familiar with microwave ovens now. It can become a larger category for the mass market. The mass retailers' segment of market does not need to be as impacted."

The DSN study indicated that price has become more of an issue among consumers. On average, survey respondents expected to pay $291 for a microwave compared with $379 just two years ago.

Most of those interested in buying a microwave during the next 12 months expect to buy a full-size model, especially as a replacement oven. About 25 percent are looking to buy a mid-size. One out of 8 are shopping for a compact model, especially first-time microwave oven buyers.

Sherman said Sanyo's research estimates a 50 percent to 60 percent market saturation in microwave ovens, but is uncertain what that bodes for the future. "Will a microwave oven be like a refrigerator where 98 percent of households have one? Or closer to 70 percent like a washing machine? No one knows for sure."

Craig Schultz of the AHAM's market economics department said the association estimates that market penetration is currently 70 percent or more.

PHOTO : Full size, higher-ticket microwaves like these at Carrefour, Philadelphia, will be

PHOTO : preferred by second-oven shoppers.