What I'm curious about is the premise of the question ... how are "Big Box Stores" going to kill "High End" if they don't or (more succinctly) can't handle such a product line ???
It is analogous to the verse " ... to everything a season ..."
It would be the same as someone walking into a Chevrolet dealer looking for a Mercedes ... there is little or no chance of interesting that person in a Chevy Get my Drift ???
Submitted by Appliance Stallion on Mon, 08/24/2009 - 2:16pm.
I think selling high end , expensive products at big box stores is like eating one month old bread trying to wash it down with spoiled milk. Doesn't sit well. Sales people are geared for sales, not selling features and benefits of high end products. Just go to one of the stores and see for yourself. Even some of the customers would be lost. Going to look for a $400.00 "stove" and someone shows them a $3,000 range ? I think not.There is much value in the high end store and the trained sales people. They are the backbone of the high end market.
It's hard to argue with the struggles some very high profile "big box" stores have had trying to succeed in high-end. Think EXPO, Great Indoors, etc. However, the term "big box" seems to have become our industry "catch-all" ID for any merchant that either isn't a small independent, or at the very least a small regional chain. That's a very broad brush to be painting with. How do we really define a "big box" and who is or isn't one? Are they just Home Depot, BestBuy, Sears and Lowe's? Where does a P.C. Richards, HH Gregg, RC Wiley's, or Pacific Sales fit? Or, an Abt (that's certainly a single BIG box). There's a lot of smart people out there in many of these organizations who are not just already succeeding, but who are driving innovation, and the evolution of their business models. There are a lot of variables, including the economy, that have the potential of changing the landscape over the next few years. They all merit watching closely, and not taking generalizations for granted.
Kona ... the term "Big Box" has been around a long time and was usually tagged on the Mass merchants you mentioned, Sears, Lowes, Home Depot, Best Buy, etc. All of these stores were national in scope and used their volume to leverage supplier pricing. Some of the high-end lines have managed to avoid the volume temptation of stetting up the Big Boxes, especially when independent regional distributors complicated the process of providing uniform pricing and programs. And, as Stallion has already stated, the sales people in these Big Boxes were generally ill-equipped to give the customer the time and attrention necessary to sell the high-end, more technical products. But the "Big Boxes" are not the only stores that could use their buying power to drive down prices. There are plenty of regional giants capable of selling appliances below a small dealer's cost. And, these guys do have high-end brands, and sales people capable of selling them. Give thanks to UMRP and the manufacturers and distributors that support it.
Submitted by thebigfish on Fri, 04/15/2011 - 9:54pm.
A big box is usually considered a company that has stock traded in the stock market and/or owned by a hedge fund.
There are two types of manufacturers: Those geared towards market share to achieve profitability, and those that are geared towards lower volume with a higher margin per unit. A Whirlpool or Frigidaire makes money by keeping the factory running at 100% efficiency. A SubZero kind of manufacturer needs efficiency too, but not at the levels that a Whirlpool does.
A UMRP not only keeps the pricing level at a certain point, it also keeps pricing pressure off of the manufacturer. If dealer X gets a great deal, then dealer Y is looking for just as good, if not a better deal. This mentality is easy to understand.
But there's also the expectation or preception that goes with a price level. A $249 Bosch dishwasher ruins the brand. Or a $599 SubZero. So a UMRP does lots of things. It keeps margins reasonable, it keeps pricing pressure on the supplier to a minimum, and reinforces the perception of what kind of brand the brand actually is.
Even though Whirlpool owns them all - here's the brand ladder:
Amana - Entry Level
Maytag Mass Market
Whirlpool Mass Market
KitchenAid Mass / Premium
Jenn Air Premium
Even though you can find french door refrigerators in every one of those brands, the pricing and the perception will be different in the marketplace.
I appreciate the points made by both Stallion and Cohiba. UMRP and strong toothed internet pricing policies will be absolutely necessary to keeping the major market small dealers viable as the larger chains exercise their merchant leverage with the manufacturers. Regardless of the proclamations manufacturers make in support of the small independent dealers, market and economic forces will continue to influence high-end manufacturers to address and appease the powerhouse regional and even national chains. With two-step distribution lines and markets, Distributors can, and are fighting hard to protect the interests of the independents, but ultimately it's going to get harder and harder to resist manufacturers who will argue (or perhaps even start demanding) that their production lines depend on the bigger customers that are growing and expanding into new locations and new markets versus supporting the small dealers. As far as the issues of service and customer support go, I would expect that the direct manufacturers will have to come up with new ways to handle more of those functions themselves to support the big guys. The two-step lines will most likely push most of that responsibility downhill to distribution and make it their responsibility to solve those puzzles (and bear those costs).
Submitted by Appliance Stallion on Tue, 08/25/2009 - 2:33pm.
Big box stores.Hmmm. Home Depot , Sears,Best Buy and Lowes all are a good start.You also have some second tier distributors who , although they are good people are driving prices down because they want or need to break into the market and do mostly importing or take lower margins. I call those guys the ones with the pencil behind their ears saying they can always do it cheaper, not neccessarily better. Innocent to an extent ,hurting the market to a larger extent.I think Pac Sales may also be in the first group using what they call buying power as a way to lower prices. While the best price is an important value,product reliability and service should count. Nothing wrong with people making money at the high end. Do you think the Chinese imports aren't making money ? They are. I am interested in your theory of some of these organizations "driving innovations and the evolution of their business models" It would seem to me their efforts are one sided so maybe you can explain to me if their model requires substantial input from manufacturers and if the stores are driving product innovation ? I am curious to the general statement you made there.
How are They Going to Do That ???
I recently commented on the Pro-Style marketplace in another section of Appliance Advisor ... here's the link:
http://applianceadvisor.com/content/future-pro-style-appliances0024#comment-1047
What I'm curious about is the premise of the question ... how are "Big Box Stores" going to kill "High End" if they don't or (more succinctly) can't handle such a product line ???
It is analogous to the verse " ... to everything a season ..."
It would be the same as someone walking into a Chevrolet dealer looking for a Mercedes ... there is little or no chance of interesting that person in a Chevy Get my Drift ???
the questions is a Mercedes
the questions is a Mercedes still a Mercedes if it in a Chevy Dealer?
Comments
I think selling high end , expensive products at big box stores is like eating one month old bread trying to wash it down with spoiled milk. Doesn't sit well. Sales people are geared for sales, not selling features and benefits of high end products. Just go to one of the stores and see for yourself. Even some of the customers would be lost. Going to look for a $400.00 "stove" and someone shows them a $3,000 range ? I think not.There is much value in the high end store and the trained sales people. They are the backbone of the high end market.
Who are and who aren't the "big boxes"?
It's hard to argue with the struggles some very high profile "big box" stores have had trying to succeed in high-end. Think EXPO, Great Indoors, etc. However, the term "big box" seems to have become our industry "catch-all" ID for any merchant that either isn't a small independent, or at the very least a small regional chain. That's a very broad brush to be painting with. How do we really define a "big box" and who is or isn't one? Are they just Home Depot, BestBuy, Sears and Lowe's? Where does a P.C. Richards, HH Gregg, RC Wiley's, or Pacific Sales fit? Or, an Abt (that's certainly a single BIG box). There's a lot of smart people out there in many of these organizations who are not just already succeeding, but who are driving innovation, and the evolution of their business models. There are a lot of variables, including the economy, that have the potential of changing the landscape over the next few years. They all merit watching closely, and not taking generalizations for granted.
Big Box II
Kona ... the term "Big Box" has been around a long time and was usually tagged on the Mass merchants you mentioned, Sears, Lowes, Home Depot, Best Buy, etc. All of these stores were national in scope and used their volume to leverage supplier pricing. Some of the high-end lines have managed to avoid the volume temptation of stetting up the Big Boxes, especially when independent regional distributors complicated the process of providing uniform pricing and programs. And, as Stallion has already stated, the sales people in these Big Boxes were generally ill-equipped to give the customer the time and attrention necessary to sell the high-end, more technical products. But the "Big Boxes" are not the only stores that could use their buying power to drive down prices. There are plenty of regional giants capable of selling appliances below a small dealer's cost. And, these guys do have high-end brands, and sales people capable of selling them. Give thanks to UMRP and the manufacturers and distributors that support it.
Big Box II
A big box is usually considered a company that has stock traded in the stock market and/or owned by a hedge fund.
There are two types of manufacturers: Those geared towards market share to achieve profitability, and those that are geared towards lower volume with a higher margin per unit. A Whirlpool or Frigidaire makes money by keeping the factory running at 100% efficiency. A SubZero kind of manufacturer needs efficiency too, but not at the levels that a Whirlpool does.
A UMRP not only keeps the pricing level at a certain point, it also keeps pricing pressure off of the manufacturer. If dealer X gets a great deal, then dealer Y is looking for just as good, if not a better deal. This mentality is easy to understand.
But there's also the expectation or preception that goes with a price level. A $249 Bosch dishwasher ruins the brand. Or a $599 SubZero. So a UMRP does lots of things. It keeps margins reasonable, it keeps pricing pressure on the supplier to a minimum, and reinforces the perception of what kind of brand the brand actually is.
Even though Whirlpool owns them all - here's the brand ladder:
Amana - Entry Level
Maytag Mass Market
Whirlpool Mass Market
KitchenAid Mass / Premium
Jenn Air Premium
Even though you can find french door refrigerators in every one of those brands, the pricing and the perception will be different in the marketplace.
Excellent Points Cohiba & Stallion
I appreciate the points made by both Stallion and Cohiba. UMRP and strong toothed internet pricing policies will be absolutely necessary to keeping the major market small dealers viable as the larger chains exercise their merchant leverage with the manufacturers. Regardless of the proclamations manufacturers make in support of the small independent dealers, market and economic forces will continue to influence high-end manufacturers to address and appease the powerhouse regional and even national chains. With two-step distribution lines and markets, Distributors can, and are fighting hard to protect the interests of the independents, but ultimately it's going to get harder and harder to resist manufacturers who will argue (or perhaps even start demanding) that their production lines depend on the bigger customers that are growing and expanding into new locations and new markets versus supporting the small dealers. As far as the issues of service and customer support go, I would expect that the direct manufacturers will have to come up with new ways to handle more of those functions themselves to support the big guys. The two-step lines will most likely push most of that responsibility downhill to distribution and make it their responsibility to solve those puzzles (and bear those costs).
Kona
Big box stores.Hmmm. Home Depot , Sears,Best Buy and Lowes all are a good start.You also have some second tier distributors who , although they are good people are driving prices down because they want or need to break into the market and do mostly importing or take lower margins. I call those guys the ones with the pencil behind their ears saying they can always do it cheaper, not neccessarily better. Innocent to an extent ,hurting the market to a larger extent.I think Pac Sales may also be in the first group using what they call buying power as a way to lower prices. While the best price is an important value,product reliability and service should count. Nothing wrong with people making money at the high end. Do you think the Chinese imports aren't making money ? They are. I am interested in your theory of some of these organizations "driving innovations and the evolution of their business models" It would seem to me their efforts are one sided so maybe you can explain to me if their model requires substantial input from manufacturers and if the stores are driving product innovation ? I am curious to the general statement you made there.