According to Louisville, Ky., market researcher Stevenson Co., only six market-share points separate appliance sales in the retail channel dominated by Lowe's, Home Depot and department stores, almost entirely represented by Sears. And that's troubling to retail watchers for reasons well beyond the category.
"Appliances are a bellwether for the future of Sears," said George Whalin, an analyst with Retail Management Consultants. "This has been their strength for so long, so it's the one category that can hurt them the most. Because when consumers think of Sears today, it's no longer the place where you go to buy everything."
Indeed, when it comes to major appliances -- an estimated $83 billion category -- that place is increasingly the home-improvement channel, which had increased its share of the appliance market to 26.6% by June 2006, up from just 16.2% in June four years earlier, Stevenson reported. Meanwhile, sales of appliances in department stores dropped to 32.9% from 40.8% during the same period.
Only five years ago, Home Depot did not sell a single refrigerator, washing machine or dishwasher, but today it's the No. 4 appliance retailer, as the so-dubbed white goods fly out its doors. It nabbed $1.8 billion in appliance revenue in 2005 and disclosed in a recent call with analysts that it now controls 10% of the market.
Further along is Lowe's, which has been selling appliances on a national scale since 1994 and is the No. 2 retailer, the closest to catching up with Sears. Lowe's had appliance revenue of $4.3 billion in 2005 compared to $6.9 billion at Sears. And like Home Depot, Lowe's in recent earnings calls cited the category among its fastest-growing.
Considering these seemingly unstoppable sales trends and changing consumer shopping preferences, can Sears ever regain lost share? "Impossible," said Mr. Whalin, noting that Sears faces the disadvantage not only of not opening new stores, but that consumers do not think of Sears when it comes to home remodeling. "If you're already redoing the countertops and cabinets, it's easier to sell a trio of appliances to the consumer," he said.
And there are more appliance brands than ever to sell. "It was once Kenmore and a few other U.S. brands," said Tim Sonheil, editor of Appliance Magazine. "Now there are all these new brands like Bosch, LC and Samsung that weren't even here 10 years ago."
In fact, although Kenmore is still the No. 1 brand sold through Sears, making Sears an extremely important retail partner for Whirlpool -- it manufactures some Kenmore appliances for Sears -- Whirlpool is no longer entirely dependent on Sears. "If they were to lose a significant portion of business from Sears, they could easily make it up in Lowe's," Mr. Sonheil said.
The other challenge for Sears is retaining margins in a category that is growing increasingly competitive as consumers regularly comparison shop online for big-ticket items, according to Jeffrey Grau at online-research firm eMarketer. Sears began selling appliances online in 2003 but declined to disclose its web appliance sales.
Kenmore Pro line
The retailer is trying to bolster its position with a string of product launches. In October, Sears rolls out Kenmore Pro, a line of professional-grade appliances manufactured by Electrolux and designed to look like the gas grills, double wall ovens and counter-depth refrigerators seen on cooking shows, according to spokesman Larry Costello.
Additionally, it hopes to lure remodeling-minded consumers with a total "room solution" storage system that works with its high-end front-loading Kenmore washing machines. The system includes solid work surfaces for folding clothes and ironing stations at what it terms "value" price points.
Although the Sears/Kmart merger was touted as an opportunity to cross-sell brands and would seem like a logical way to help Sears expand its declining market share in appliances by selling through Kmart's 1,445 stores, only 129 carry Kenmore appliances today.