Household Appliance Stores

SIC 5722

Industry report:

This industry covers establishments primarily engaged in the retail sale of electric and gas refrigerators, stoves, and other household appliances, such as electric irons, percolators, hot plates, sewing machines, and vacuum cleaners. Many such stores also sell radio and television sets. Retail stores operated by public utility companies and primarily engaged in the sale of electric and gas appliances for household use are also classified in this industry.

Industry Snapshot

Sales of appliances hit a new record in 2003 after several years of disappointing sales, and most major categories increased again in unit sales in 2004, especially in the discount and upscale product categories. According to the Association of Home Appliance Manufacturers (AHAM), an estimated 74.9 million major home appliances were shipped in the United States in 2007 (down from 79.96 million in 2006). Sales of major home appliances totaled $23.67 billion in 2006. The top sellers were refrigerators ($6.89 billion), clothes washers ($3.63 billion), electric ranges and cooktops ($2.89 billion), clothes dryers ($2.53 billion), and dishwashers ($2.11 billion).

According to AHAM, an estimated 68.18 million major appliances were shipped in 2008, falling to 59.50 million in 2009. High unemployment not seen since 1983 forced consumers to put off major purchases like appliances. Every major appliance manufacturer experienced a decline of total units shipped in 2009, with refrigerators and clothes washers reporting the largest declines.

Household appliance superstores continued to deploy newer and slicker marketing strategies to keep up with the increasing competition. Household appliance stores sold everything from washers and dryers to digital satellite systems, radios, home theater systems, personal computers, cellular phones, DVD players, electronic accessories, and audiocassettes, compact discs, and videocassettes.

According to industry statistics, there were an estimated 16,443 establishments engaged in the retail sale of electric and gas refrigerators, stoves, and other household appliances, such as electric irons, percolators, hot plates, sewing machines, and vacuum cleaners in 2009 valued at nearly $7.8 billion with industry-wide employment of 138,467 workers.

Household appliance stores were responsible for 35 percent of industry market share with sales of an estimated $3.5 billion. Vacuum cleaners held 20 percent in market share with shipment values totaling $764 million, while major electric household appliances garnered 10.9 percent of the market and shipments totaling nearly $1.1 billion. The electric household appliances sector with 10.5 percent in market share was valued at $805 million. Sewing machine retailers captured 9.8 percent of industry share with shipments valued at about $429 million.

Organization and Structure

The appliance industry is a low-growth, relatively mature industry offering acceptable gross margins and relatively low inventory turnover. The low turnover, combined with the large amount of space required for storage, creates relatively low competition compared to other sectors of the retail industry. Throughout the mid- to late 1990s the industry experienced significant consolidation, and this was expected to continue. A number of important players went out of business, including Sun Television and Appliances Inc., Newmark and Lewis, Home Center and Federated Group, Crazy Eddie, Fretter, and Highland Superstores. In addition, forty Silo stores and 110 McDuff/Video Concepts stores owned by Tandy were closed. Many other regional chains faced decreasing profits and sales as a result of competition from larger stores such as Best Buy and Circuit City.

Small stores, which sell only household appliances, were becoming increasingly rare and were being outmuscled by larger chains. The market shifted toward superstores, which offer a comprehensive range of household wares and home office supplies in addition to low-margin consumer electronics. As in other sectors of the retail industry, there was a movement toward a no-frills warehouse-type format, which allows stores to offer a dominant selection in every category in which they compete while creating significant cost efficiencies relative to the more traditional formats. The megastore format had the potential to generate a much higher profit per square foot as the large store size creates savings in fixed store costs, including rent, labor, service, and overhead. The idea in a mixed format superstore is to use appliances as a draw into the store. If the store can satisfy customers in what is usually the first household purchase, it often can retain them for subsequent electronic and personal computer purchases.

In the United States, consumer home appliances and consumer electronics are an important and sizable part of total retail sales. These items together accounted for about $68.5 billion in sales annually at the turn of the twenty-first century. With consumer electronics, sales are usually renewed on a regular basis by the introduction of new technology that substantially widens the scope of the industry. According to P. J. Muldoon of McDonald and Company Securities, "Over the course of the [twentieth] century, there has been a pattern of at least one 'revolutionary' product per decade: the gramophone (1920s), the radio (1930s), the black-and-white television (1950s), the color television (1960s), the component audio system (1970s), and the video cassette recorder (1980s). There is additional impetus to growth in this retail segment from a steady stream of enhanced forms of existing items (for example, the proliferation of improved television formats--stereo, with remote, big screen, etc.). Historically, because of these factors, retail sales of consumer electronics generally grow at above-average rates relative to retail sales and consumption."

Background and Development

The first household appliance store was established in 1827 in Salem Village, Massachusetts, by Amasa Goodyear, according to J. Leander Bishop in the History of American Manufacturers. She sold housewares such as coffee and tea pots, waffle irons, brass andirons, and cast-iron gridirons in addition to a range of hardware goods.

Early household appliance stores usually sold a combination of housewares and hardware products, according to Earl Lifshey's The Housewares Story. They took shape as independent units and as departments within large stores. Of the latter, Lifshey writes: "It was the emergence of the department stores in the latter half of the past century that spawned the housewares department as we have come to know it. The conditions and economies of those days encouraged the expansion of housewares departments. Some of the great department stores . . . had houseware departments of enormous size, owing less to the extensive assortment of items than to the practice of maintaining large stocks of goods on the selling floor. Such refinements as cost accounting and the pressure for getting maximum sales per square foot did not come until much later."

The turning point in the industry took place around the time of the Civil War. During the early and mid-1860s a number of key developments occurred, which included the electrification of people's homes; a rise in the standard of living; improvements in transportation systems, particularly the railways; increased capital; the development of plate glass, which made store windows possible; and the rise of retail advertising. The advent of electricity, in particular, revolutionized the household appliance store industry, making possible the invention of the range of items that have become synonymous with the business, such as refrigerators, electric cookers, and vacuum cleaners.

Electricity had been around for a long time, however, before there was a significant demand for household appliances. George H. Jungen, a former vice president of the Baitinger Electric Co. in New York City, described the situation in an interview with Earl Lifshey in the December 20, 1937, issue of Retailing Home Furnishings, saying, "Electricity was first used in factories and office buildings long before being introduced into the home. Electrical appliances--such as they were at the time--couldn't be readily purchased by interested consumers from dealers simply because there were few or no such dealers around. There were only five firms (in New York City) then handling electrical goods: Stanley & Patterson; Latham; Manhattan Electric; Western Electric; and J. H. Burnell. Most of their business was done on electrical equipment. When people wanted to get an electrical appliance, it was only natural, therefore, that they should think of getting it from the people who furnished them with other electrical supplies." Consequently, many of the larger household appliance stores, such as Lewis & Conger and Hammacher Schlemmer, issued catalogs and mail-order services to encourage sales.

As late as 1914, department stores as prominent as Marshall Fields in Chicago were debuting their "household utilities" departments, selling kitchen utensils, laundry requisites, refrigerators, sewing machines, vacuum cleaners, and electrical sundries. The real invasion of household appliances was yet to come. It was only in the 1940s and 1950s that many of the appliances Americans in the early 2000s take for granted became a part of the average American household. Since then, new products have appeared with increasing predictability. In the early 1980s consumer demand for electronics led to large sales and profit growth; many companies flourished. By the mid-1980s, however, the environment became more competitive, the market for VCRs became saturated, and the recession of the late 1980s slowed overall sales.

In 1993 the overall market for home appliances improved but remained difficult, and competition was expected to remain stiff. P. J. Muldoon stated: "From the better tone of housing markets in 1992, it appears that the trough in this segment has been reached and that demand for consumer durables will rise. The overall industry environment--namely, generally sluggish demand and the declining trend in pricing--continues to call for a strategic orientation toward grabbing more market share. Surviving operators have to properly prepare financially and strategically. Those that survive will be presented with considerable growth opportunities. This potential will be enhanced further in the more distant future when the next blockbuster is introduced."

Despite the rise and proliferation of superstores, a greater number of small stores were in the industry. According to Dun's Survey of American Business 1993, most stores in the industry were small or medium sized. In 1993 there were 14,201 outlets that generated annual sales between $100,000 and $250,000--more than twice as many as in any other sales' range. There were 5,669 small retail outlets that had between $50,000 and $99,000 in sales revenue, and more than 3,000 stores had sales of less than $50,000. There were progressively fewer stores in the higher-revenue brackets as 6,351 outlets had sales between $250,000 and $500,000, 4,769 had sales from $500,000 to $1 million, 3,902 had revenues from $1 million to $5 million, and only 620 stores had annual sales in excess of $5 million in 1993.

The industry as a whole experienced sales growth in the first quarter of 1993. In a 1993 survey by the Salomon Brothers of 75 percent of all household appliance stores, 67 percent of stores reported unit sales growth. These figures were significantly higher than those for the third quarter of 1992, when 17 percent of stores reported flat sales and another 17 percent experienced a decline in sales. Moreover, many retailers experienced an upsurge in sales in April and mid-May of 1993. Leading brands from General Electric, Whirlpool, Maytag, Roper, Hotpoint, Kelvinator, Amana, Tappan, Speed Queen, Frigidaire, KitchenAid, Sharp, and Jenn-Aire helped increase retail sales. According to Russell L. Leavitt, "buyers cited manufacturer promotional activity and the financial position of consumers along with low interest rates as primary factors contributing to the stronger appliance sales."

With regard to inventory levels, the Salomon Brothers report found that 47 percent of household appliance retailers considered their inventory levels to be consistent with demand. Another 42 percent considered their stocks slightly above target levels, and 11 percent of buyers believed inventories were too low. Retailers considered their inventories of laundry, cooking, dishwasher, and microwave supplies as mostly on target, while many stated that their inventories of refrigeration equipment and room air conditioners were often high.

In terms of the range of inventory, the mix of product lines at the retail level were concentrated toward mid-priced products in the early to mid-1990s. A greater proportion of stores were stocking lower-priced refrigeration, cooking, and laundry products. According to retailers, premium brand merchandise made up 17 percent of overall appliance sales in the first quarter of 1993. The trend among appliance store retailers was to broaden product range in an attempt to increase market share.

Although personal computers had been expected to be one of fastest-selling products at household appliance stores through the mid-1990s, toward the end of the decade high-definition TV, consumer electronics, and digital products in all categories gained considerable market share.

Price wars, acquisitions, expansion, and slick marketing strategies were the name of the game in the mid-1990s. Household appliance superstores were carrying practically every type of electronic equipment a home would need and became a one-stop shop for consumers. The use of better displays, in-store catalogs, and extended service plans helped to lure customers and boost sales at household appliance stores.

According to HFN, a Salomon Brothers survey found that major appliance retailers expected sales to be flat and inventories to be higher between May 1, 1995 and April 30, 1996. These forecasts were based upon sales for January through April 1995. However, the household appliance stores were ahead of the market figures with their new marketing strategies. Prices increased by approximately 2 percent. Sales softened and promotional activities expanded. Almost 55 percent of retailers reported an increase in appliance sales.

In the mid-1990s major electronics and appliances retailers were showing definite trends of expansion. Montgomery Ward's acquisition of the New England-based Lechmere, and Circuit City's purchase of eighteen former Silo store leases in the Los Angeles area, validated this trend. Circuit City's plans included growth by opening 180 stores between January 1994 and January 1997. Minneapolis-based Best Buy Inc. had expanded in the southeastern and western United States. Best Buy introduced seven Concept III stores, the largest stores in this chain, in Los Angeles in the mid-1990s. Best Buy also opened several stores in the Washington, D.C., and Cleveland areas for the first time.

Along with expansion were new marketing strategies and promotions to increase sales. Besides opening new stores in geographically diverse areas, many companies boosted profits through employee training. The willingness of appliance superstores to reinvent themselves through product diversification was established with Best Buy's introduction of gourmet kitchen appliances at its outlets in May 1996. This move also reflected the tough household electronics and appliances market of the mid-1990s.

According to an article in HFN, the appliance industry had prospered despite increased competition: "Notwithstanding the burgeoning of mass merchants with their capacity to slash prices, manufacturers selling directly to consumers, and the growing appeal of Internet shopping, independent electronics and appliance dealers as a whole fared reasonably well during 1997, as reflected by several key performance measures."

Included in those measures were a lowering of wholesale cost due to retailer participation in buying groups, exciting new electronic and technological advancements, and increasing interest in home theater products. The stores that offered appliances as well as furniture and electronics fared best, typically averaging an 18 percent gain over 1996.

Another factor encouraging the industry was the increase in housing development. The North American Retail Dealers Association (NARDA) reported that housing development had risen to a twelve-year high in 1999. "January '99 housing starts jumped 3.8 percent over the robust numbers posted in December '98. This surge sets a pace for 1999 housing starts to reach 1.8 million." As a result, appliance and electronic sales were expected to remain strong into the next millennium as more consumers would be purchasing new items.

Demographics also were important to the success of the industry. Appliance stores in general target 35- to 64-year-olds. With a 35 percent growth rate, this population segment grew faster than any other in the late 1990s.

In 1998 the U.S. appliance market was seeing a decline in prices. Due to increased imports from China, Japan, South Korea, and Mexico, increased pressure was placed on pricing. This factor resulted in lower prices for the consumer as American manufacturers were forced to provide high-quality, innovative products at lower costs to compete with foreign imports.

While many stores such as Best Buy and Circuit City saw gains in 1998, some smaller, regional stores succumbed to the pressure of the rising superstores. Sun Television and Appliance Inc., Fretter Inc., and Highland Superstores went bankrupt in the mid-1990s. Rex Stores Corp. saw sales decline in 1998, as did Tops Appliance City Inc. In 1999, though, Rex Stores did see some growth in sales.

In 1998 the industry had sales of $68.5 billion as consumer demand for appliances remained steady due to the stable economy, consumer confidence, and the increase of new housing developments. The majority of appliance stores were fairly small operations with only a few workers in the early 1990. However, a continuing trend toward consolidation of the market in the late 1990s led to the leadership of superstores and warehouses in this industry. Although these megastores comprised a minority of the industry's stores, the low prices that they could offer due to their economies of scale made competition against them extremely difficult for smaller stores. Due to the success of these retailers, appliance stores tended to diversify their product range. By the late 1990s most household appliance stores offered a wide range of products--including consumer electronics and office supplies.

Following the terrorist attacks of September 2001, consumer confidence plunged. A survey of five thousand U.S. households in October 2001 indicated that 26.8 percent expected to buy a major appliance within the next six months, compared to an average 29.6 percent who planned a major appliance purchase between March and September of 2001. However, by October 2002 the monthly survey indicated a rise in consumer confidence, with 27.9 percent of those polled expecting to buy a major appliance in the following six months.

After several years of disappointing sales, 2003 sales of major appliances hit an all-time high and then dipped slightly from 2005 to 2006. In 2006 sales of major home appliances were $23.67 billion, according to the AHAM. The rebound of the economy and increased consumer confidence were factors in the general growth of retail, and housing starts were on the rise, contributing to the growth of appliance sales. Improvements in technology, features, and design were also contributing factors for this industry. The segments with the strongest sales were the economy (or value) lines and the upscale (or luxury) lines. In previous seasons, when high-end products were selling well, the appliances often were purchased for "show" rather than for use, but the new customers for the high-end markets purchased the products for more practical concerns--features and versatility.

According to the AHAM, an estimated 74.9 million major home appliances were shipped in the United States in 2007, with an estimated combined shipment of 44,063 washers, dryers, dishwashers, refrigerators, freezers, and ranges. This represented the first time since 2003 that unit sales dipped below 79 million. From 2006 to 2007, cooking appliances fell from 23.5 million to 21.16 million units; laundry equipment fell from 17.47 million to 16.38 million; kitchen clean-up appliances fell from 14.25 million to 13.46 million; and refrigerators and freezers fell from 13.23 million to 12.39 million. The only increase came from air conditioners and dehumidifiers, which increased from 11.51 million to 11.55 million units.

In 2005 the Appliance Research Consortium, a partnership formed in 1989 by the U.S. Department of Energy, the Environmental Protection Agency (EPA), and the Association of Home Appliance Manufacturers, was focusing on research related to so-called smart appliance technology, which monitored energy usage and could make these appliances more energy-efficient than other appliances.

Current Conditions

The already struggling major appliances industry was hit hard when the economic downturn took a turn for the worst. Shipment values of all major appliances plummeted to 59,503 units in 2009, compared to 68,184 units in 2008 and 74,877 units in 2007. In one effort to jump-start the economy, the U.S. Congress passed a stimulus bill providing $300 million to fund the Energy Efficient Appliance Rebate Program. Under the program, consumers trading up to an Energy Star appliance such as refrigerators, freezers, dishwashers, and clothes dryers will receive a rebate. While the stimulus bill was geared towards energy saving and the struggling economy, household appliance stores were beginning to feel a little more upbeat.

The industry was bracing for a comeback in September of 2009 when major appliance shipments, including washers, dryers, dishwashers, refrigerators, freezers, ranges, and ovens climbed for the first time since 2006 before the economy went south. Despite such a minute climb of 0.9 percent, the industry was feeling hopeful.

With sales of new homes expected to pick up in 2010, and appliance manufacturers continuing to offer products with the latest technology, not to mention the "Cash for Appliances" programme offered by the government, household appliance stores were feeling optimistic. "It's encouraging to see such positive results in a sector that's been struggling for so long," Mark Delaney, director of The NPD Group's home division noted in HFN in June 2010, adding that "If retailers and manufacturers execute well with their product offerings and we see sustained improvements in the housing sector, the major appliance industry is poised for a solid year."

Industry Leaders

Of the variety of companies engaged in retailing household appliances, either exclusively or as part of a range of product lines, Best Buy Company Inc. led the industry with sales of $35.9 billion in fiscal year 2007 and 140,000 employees. Home Depot, the nation's largest home improvement chain and the second-largest retailer in the country behind Wal-Mart, sells a wide array of goods, including household appliances. Home Depot posted $90.8 billion in sales in 2007 and had 364,000 employees. Lowe's Companies, Inc. has emerged as the nation's second-largest home improvement chain, and in the mid-2000s it held an 18 percent share of the home appliance market. Lowe's had $46.9 billion in sales in 2007 and 210,000 employees.

Sears, Roebuck and Co. with revenues of $30 billion in 2007 and 520,000 employees, also maintained a large share (39 percent) in the appliance industry. Throughout the late 1990s, the company was attempting to reduce its costs and restructure itself to meet the demands of a changing market, and in 2005 the company merged with Kmart to become the third-largest retailer in the country. The company was in the process of converting its hardware stores to Appliance and Hardware stores.

Best Buy Company Inc. through its more than 1,400 stores in the U.S. and Canada, and another 2,600 stores in Europe, China, and Turkey the company reported revenues of $45 billion in 2009 and $49.6 billion in 2010 with 180,000 employees. Home Depot's revenues have been trending down before posting $66.1 billion in 2010, a result of the sluggish economy. The company has shed about 47,000 employees since 2007. Lowe's operates about 1,700 stores throughout the U.S. and over 15 stores in Canada and Mexico. The company reported revenues of $47.2 billion in 2010 with 239,000 employees. Sears Holdings Corporation, formed from the merger of Sears, Roebuck and Co. and Kmart posted revenues of $46.7 billion in 2009, falling to $44 billion in 2010 with 322,000 employees.


According to the U.S. Census Bureau, there were 76,000 employees in the home appliance store sector in 2004, a large percentage of whom were part-time sales associates. Sales-related occupations made up approximately 48 percent of the entire workforce. In the mid-2000s, according to the U.S. Department of Labor, Bureau of Labor Statistics, the mean annual salary for a sales associate was $26,440; managers and supervisors earned a mean annual salary of $42,750; general and operational managers earned a mean annual salary of $57,670; and chief executives earned a mean annual salary of $85,640. The industry's total payroll in 2004 was $2.0 billion.

The number of home appliance stores rose from 9,800 in 2000 to 10,100 in 2004. Home appliance stores made up more than 20 percent of all electronics and appliance stores, which numbered 49,000. In 2009, the total number of home appliance stores fell to an estimated 5,748 with 88,126 workers.

Research and Technology

Like all sectors of the retail industry, household appliance stores have been strongly impacted by new technologies, particularly computerization, digital technology, the Internet, and advanced electronics. Computerization revolutionized the control of inventory flow and the ordering of stock and allowed more stores to move to a just-in-time system of delivery. Management information systems have made information collection and analysis faster and more accurate. Research has focused on new management techniques to keep up with the fluctuating market.

Pricing continued to be studied especially closely in the late 1990s, and an increasing number of industry retailers switched from promotional sales to everyday low pricing (EDLP). Standard and Poor's Industry Surveys stated, "For retailers, the benefits of an EDLP strategy versus a high/low strategy can be significant. Most important are reduced costs: advertising outlays for sales are eliminated, a more even flow of merchandise improves inventory management, and labor costs are reduced since prices no longer need to be marked down. Moreover, the equation works both ways: lower costs can be translated into lower price." Most of the bigger chains have undertaken detailed studies of their business and have sought ways to reduce costs, increase efficiency and productivity, control inventory, and rationalize operations.

The National Retail Federation estimated that more than 40 million households shopped online by 2003. While commodities such as books, CDs, and apparel were much easier to sell online, the appliance industry has not backed down from offering products online.

Increased technology in the appliances themselves is also expected to have an impact on this industry. Electronics are changing how many basic appliances work. In an HFN article, Ron Kerber--Whirlpool Corp.'s executive vice president and chief technology officer--stated that electronics are "going to be a huge impact on this business. They will control functionality; they will add functionality." Sales are expected to rise with the introduction of such innovations as advanced cooking controls that could time the start and stop of cooking, either in an oven or microwave; advances in refrigeration, dishwashers, and clothes washers; and new products for home dry cleaning.

Energy-saving mechanisms in home appliances, which are supported in the Energy Independence and Security Act of 2007, bode well for the industry, according to AHAM President Joseph M. McGuire, who stated in December 2007: "The law demonstrates once again that home appliances are in the forefront of energy efficiency and provide real solutions for consumers wishing to do their part to save energy and protect the environment. Legislation still pending in Congress, when enacted, will supplement these appliance standards with tax credits to manufacturers to produce 'super efficient' products making upgrading home appliances the most cost effective step a consumer can take to save energy."

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