TWICE recently had an opportunity to chat with Howard’s Appliance president and CEO John Riddle about how the pandemic and supply chain issues will impact appliance retailing in 2022 and beyond.
TWICE: Generally speaking, what do you think the biggest changes in retail will be for 2022 – and beyond?
Riddle: I believe the biggest changes in 2022 and beyond will be driven by:
A. The overuse of major appliances during the pandemic, will lower[appliance] life expectancy dramatically from 10 years average to seven years average life.
B. Appliance service will change and become more difficult, due to the lack of service techs coming into the trade. This will further replacement sales to new heights of 70%-plus of the industry’s volume.
C. The consumer will continue to be more educated, and a higher percentage of the industry’s business will continue to be driven by millennials purchasing their first home.
D. Manufacturers will return in Q2 [2022] to a more aggressive promotional cadence as inventory levels build and incumbent OEMs who lost assortment space and market share, will push to regain.
TWICE: What is the state of the supply chain for appliances?
Riddle: Major appliance Inventory has steadily regained supply since August. Inventory levels with retailers, outside of those using VMI (vendor managed inventory plans), has also risen to more normal levels. However, some brands and some series of product categories are still slow in fulfillment or on “pause.”
Those manufacturers that have produced availability have gained share, and over the next few months I believe we’ll see more normalizing of supply. I believe by Memorial Day, we will see full return of supply with the exception of some niche players.
TWICE: Given potential SKU limitations, do you think consumers are more willing to wait for what they want, or are they their normally impatient “instant gratification” selves and more willing to settle on a secondary choice just to get a product faster?
Riddle: Consumers who are in replacement are very receptive to options of other brands, different models, etc. New remodel projects are a bit different, and there the consumer is more willing and tolerant of delays. In luxury appliances, I believe the pandemic will provide opportunities for shifts in share from incumbent players to more new players or revitalized brands acquired by larger OEMs.
TWICE: How will supply chain issues impact pricing, both wholesale and retail, and both short term and long?
Riddle: The industry has seen steady price increases since 2018 and has now grown the inflationary index of major appliances to 11% or so. [It’s] important to note that major appliance pricing had risen in 2018 and 2019, long before the pandemic, due to government tariffs and a non-free trade department in Washington, which curbed promotional cadence and also price increases across the board. The pandemic has layered three new major price increases since Q2 2020 and further diminished any promotional cadence support from OEMs. We must as an industry be concerned with how the consumer down the road reacts to the affordability of new major appliances.
TWICE: What is the future of the actual selling process? How much more technology do you think brick & mortar retailers will need or want to adopt in-store to combat consumer’s increasing reliance on buying online?
Riddle: I personally believe the consumer experience for purchasing major consumer durables has been bad for decades, and it’s gotten worse. Big national retailers that boast about their on-line percentages of their sales volume are making lemonade out of lemons.
Their in-store experience and home delivery/install experience [is] so confusing, so not easy, so crappy, that the consumer just ends up buying on-line. We know that the consumer wants to test out and see, touch and feel major consumer durables for their home.
We just, as an industry, have not done a good job in making the experience a good one. Look, every great company today, Google, Netflix, Tesla, Apple, etc., all make the consumer experience frictionless and easy. At Howard’s, we are developing two major initiatives to achieve this:
1) The Experience Centers, where consumers can play and test all the new technology and great products for the home; and,
2) R.A.R.E – Revolutionary Appliance Retail Experience – is our store staff-consumer engagement process. We have studied Tesla for a year [and] concluded that Tesla has changed how a consumer feels and is engaged to purchase an automobile. We are going to do the same thing at Howard’s and it’s already working.
To learn more about Howard’s Appliance, visit www.howards.com.
See also: Executive Insight: Howard’s Riddle Shares Insights Into Pandemic Trends
