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19 September 2012
WHITEGOODS IN THE
WHITESPACE
We commented recently about the
battering taking place in the
consumer electronics space, with a
number of high-profile collapses and
profit downgrades.
However, there is another sector of the market experiencing a significant shift
in buyer behaviour, and it involves one of the last bastions of bulky goods
retailing: whitegoods.
The Australian whitegoods sector (fridges, washing machines, dishwashers)
is worth almost $6.65bn a year and represents about 35% of all bulky goods
sales. In Australia, the key drivers are Harvey Norman, the Good Guys and
Bing Lee: gorillas in their respective markets, with the scale, balance sheets
and buying power that make them competitive on price and destinational in
nature.
The whitegoods gorillas have been in a comfortable space for a long time,
but right now they are facing the emergence of two new forces in whitegoods
retailing that threaten to shake up the sector: Masters and Appliances Online.
One is a new bricks-and-mortar retailer and the other a relatively new online
retailer. While their market share is currently small, between them they
threaten to reset the traditional retail model around whitegoods.
The Masters hardware chain arrived in Australia last year, and with just 13
stores – and the stated intention to build 150 – it has dragged whitegoods
into the home hardware space, where they never existed before. In further
evidence Masters is generating its own new model, it has created a strong
online offer – something Bunnings will no doubt be forced to respond to.
The whitegoods gorillas have
been in a comfortable space
for a long time, but right now
they are facing the
emergence of two new forces
in whitegoods retailing that
threaten to shake up the
sector: Masters and
Appliances Online.
Masters offers 46 brands and 476 SKUs in the whitegoods space, all of which
can be found at its online store. There is a delivery charge if you want it
brought to your home, but not if you want to click and collect. Masters
promises that if you find a cheaper price anywhere (including Australian
online players) it will beat it by 10% up to 30 days after the transaction.
Appliances Online is a pure play online retailer started in 2005 by the
Winning Group (which also launched online consumer electronics retailer, the
Big Brown Box). It boasts over 2,234 SKUs and is rapidly becoming a gamechanging force in the sale of whitegoods in this country.
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Source: http://www.youtube.com/watch?feature=player_embedded&v=fajQeaW-O74
Appliances Online claims to offer the best prices in the market and promises
free delivery – including Saturdays. It even sweetens the deal with the
promise of free installation (provided sparky or plumber is not required) and
free removal and disposal of the old appliance (subject to conditions).
But what really sets Appliances Online apart is its focus on high level
customer service – something unheard of in whitegoods online retail and for
which it has been twice awarded the Online Retail Industry Award.
Appliances Online offers: a 16-hours-a-day-7-days-a-week advice line; paid
installation; and e-mail follow-up to ensure satisfaction with goods and
service.
Appliances Online believes its commitment to customer service will enable it
to not only sell replacement whitegoods but eventually establish itself in the
mid-to-premium home appliance market. I have seen first-hand evidence of
this. My wife recently replaced our clothes dryer through Appliances Online
and was so pleased with the price and service, she went back and bought a
new coffee machine as well!
By contrast, Harvey Norman and the Good Guys both offer free in-store pickup, but after ordering online, delivery will cost you depending on the item.
Delivery terms are: Harvey Norman, 5-10 days; Good Guys, 3-7 days.
So what does all this mean?
Firstly: consumers win more than ever, with two new players looking to
change the game in a way we never thought possible five years ago. Online
retailing of whitegoods and household appliances is still in its infancy (just
4.9% of total retail sales in the category according to Morgan Stanley), but it
is growing at about 20% per annum – way ahead of store sales growth over
the last two years at about 1%.
Secondly, it starts to provide us with some idea about what the optimal
consumer electronics and homewares retailer of the future may look like. For
years, bulky goods retailers have developed a model based on big stores
holding lots of stock and hard-selling salesmen getting the deals done. Techsavvy consumers now do their own research and are well educated on deals.
With the touch of an iPad they can find the best deal on whitegoods without
even leaving their lounge room.
Just like many other areas of retail, whitegoods retailers will not be able to
hide from a shift in how consumers want to interact with them. Essentially,
the new rules will be on the consumers’ terms, at their convenience and at
the best price . . . delivered and installed for free, of course.
Regards
James Stewart
Partner
+61 3 9604 5642
Matthew Backwell
Senior Manager
+61 3 9604 5174
Every month, Ferrier Hodgson’s retail specialist James Stewart sends a Retail Postcard detailing the latest news and trends in the
retail sector. If you have any comments or suggestions, please contact James directly at [email protected]. If you know of
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