The Industry Adapts
Submitted by advisor on Fri, 04/03/2009 - 12:13am.
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Reno Show ...
Your wonderful cartoon reminded me to ask if anyone attended or had any knowledge about how the Hearth, Patio, & BBQ Show went in Reno ???
It was held March 18th-21st ...
That show offers lots of "toys" and plenty of high-end stuff ... it would interesting to know how things went ...I have not heard a word !!!
Wow
Great Albert cartoon. My guess is that there still will be some third world distributors and the BBQ island folks who would want it cheaper from China. They will take your wonderful designs that you obviously enhanced and have it made in China. The cost ? China will pay them $5.00 each to sell them. That still will not be good enough. I have one of those grills and it has uneven heat. The stand alone heater though runs hot and cold !!!!!
Subject
The idea behind this was the economy and redefined luxury, not the Chinese. In fact, we spoke to two domestic manufacturers to see if they might want to be named in the cartoon.....but though they may have seen the humor, they thought better of it. I guess I can't blame them, though I still laugh every time I see it.
That said, if there are any suitable companies out there interested in becoming a member of the cartoon community, we will jam you right into the caption. Long after all your products have been melted into steel slag, this cartoon will still be kicking around.
Oh Yeah ????
I do find immense humor in the staff at Advisor putting their heads together to come up with such a wonderful Dilbert like cartoon that I hope evolves into a big hit. However, I have found a correlation with the downsized economy and redefined luxury that surely has something to do with jobs exported to China for the benefit of short term profit for the dealer/distributor base. We could talk all day about some of the greed out there with no sense of what exporting jobs has to do with the economy. From personal experience in the up to date industry as of last week people still want something that can't be produced here for their (educated ??) guess of a price. One person commented that to get his needed 70% margin he would gladly go overseas but does not want to pay for a full container or two of product. Back to your point though , the cartoon is very funny.
Made in China, eh ???
You've reminded me of when Weber re-introduced the Ducane line ... it was @ the same time they were "re-introducing" their lower end grilles ... the reason for the that being that independent Appliance Dealers were not able to compete price-wise with Home Depot & Lowes for the same product ... when the new "Dealer's Only" price was quoted us, I asked how they were doing that ... proudly the rep announced ... "We make them in China !!!" That's not even remotely amusing !!!
YUP !!!!
It is those type of stores who make it tough to produce here. Have you ever had to deal with a buyer from one of those places about grills ? Buyers for the most part were intelligent and would negotiate in good faith. These days for most of them they have one line. I want a low price or I will buy them overseas. I had a Costco Senior buyer tell me that some years ago when this whole China idea started. I asked him how he expected us to compete with labor that was for all intents and purposes $1.00 per day. His comment was"That is your problem" I say with respect to the good one's left it doesn't take any skill to do that. I ran across a guy who on his resume said he reduced manufacturing costs $22 million in one year in a $200 million company. I knew the answer but asked the question any way. He moved core manufacturing to China. His company did have delivery and quality problems and lost business but he sure thought he was skilled for what he did. This in turn puts immense pressure on other companies. This I think is not consumer driven but is driven at the buyer level so they can polish their resumes. Now the resumes will look better when they apply at MacDonalds.
COSTCO ...
One thing you always have to keep in mind is that COSTCO specializes in selling the equivalent of "overstocks" ... more like liquidator for manufacturers who have brand new, but "old" products to get out of their inventory !!! I have never seen a piece of electronics which was not @ least one (1), but usually more like two (2), three (3), or even four (4) "generations" old !!! Especially when you're talking about electronics, don't you think the customer should know that they are NOT getting the most up-to-date commodity for their hard-earned dollar ??? I think they are always interested, unless, of course, they're daft or something !!!
Costco 2
The problem with Costco is they sell generally on price. That has a trickle down effect on many businesses that either have a foothold or are attempting to seat a new product line.I am speaking of grills of course. In the discussion I had with this buyer the Sr. VP was also there and his comment was they wanted to bring in a product that would attract more people and didn't care about making a profit on that product. I think the high end guys are selling fewer grills than ever before and this thinking has influenced that trend over the past several years. The same will happen to cooking appliances if that thinking continues. I agree that with the lower cost products the service and dealer sales person is not what we in the business would expect. However , when Expo Design Center was going strong they also had much turnover in those stores and we had to retrain the sales people constantly. I guess that was the trickle down effect of being owned by Home Depot. They probably did not pay those folks any more to sell the high end goodies. They are out of business . Oh well.We are in agreement that the thinking is daft somewhere along the way.
Expo Blunders ...
I had an ongoing feud with the local Expo Appliance Department Manager ... no matter how hard I tried, he never understood what I was trying to explain to him !!! The reason they could not hold on to even marginally talented sales help was that they did not pay commission, nor were they allowed SPIFS ... on more than one occasion people left to go work for manufacturers or distributors !!! Expo also did not competitively bid ... so how were they going to compete ??? Expo was a failed experiment which started it's fatal downfall under Nardelli when he wanted them to sell more stuff !!!
Too much inbreeding
Bob, you are right on there. I have intimate knowledge of EXPO and at one point was part of their managment training program (joke). They basically controlled the stores operation cost by RIFing (Reduction In Force) their sales staff. EXPO had huge potential carrying the HD name that consumers got all warm and fuzzy about over the early years...Now there was a place to shop for high end goodies with a name that people felt comfortable with. To the consumers surprise they were often met with deer in headlights sales people that had no clue what they were selling and often making less than $10/hr. Half the people (managers especially) were often brought over from HD, so the manager of the Appliance department may have managed the lighting section in HD. Additionally the guy that was pushing the broom for 10 years is now the seasonal manager. As the industry evolved EXPO devolved... You cannot be competative when sales people are paid a straight salary... no Spiffs, no commission, no incentive of any kind... they wanted a level playing field with all vendors... Hell you were instructed that you couldn't even accept "fluff" like pens or other tchochkies. It was this "bleeding orange" think inside the box mentality by the HD zealots that felt they could do no wrong that drove this place to the ground... Lucky for me I didn't drink the punch and got the hell out of dodge before jumping off the cliff.
Vodka
You and Bob must drink the same vodka. That's good. I probably met you at a training session. Did you work in Monrovia ?
The True Tragedy of EXPO ...
Simply stated, with what I was told was about 90% of the EXPO staff coming over from H/D, they are all now out of jobs ... and conveniently, H/D has a hiring freeze ... and they paid Nardelli all that just to get rid of him !!! Unconscionable !!!
Ethics.
Since when do many or any of these executives have a conscience ? Next time Nardelli will be the one to kick out his buddy with a big bonus.Payback is rich.
Maybe Soon !!!
Nardelli might get his if he can't negotiate something with Fiat ... look what Obama did to the GM CEO !!! ... and even if he does, I'm sure Fiat & Obama will not allow him to profit ... may he rot in hell with Dick Fuld !!!
Alright !!!!
Absofreakinlutely. This jerk has ruined many lives of good employees and their families. As leaders one responsibility is to the employee and extended family, to the supplier and extended family and the customer and their extended family. Not just the Benjamins that go in their greedy pockets. For each person involved in a business the impact is to an additional four people. With leadership comes that awesome responsibility.
Bermuda Bob. Right Again.
Bob, I could not have expressed this any better than you did. We had many Expo employees and managers complain about the same thing. Turnover and a lack of quality sales folks did contribute to their many problems. Many people do not give the hard working sales people credit for the good job they do every day. Some owners of appliance companies have been so brazen as to think the sales people are riding the wave of good products. It takes a good sales person behind the product to make a line successful. No doubt about that and the hard work they do. They can't hide in an office when they have a headache like executives can do. They put up with tough customers. It takes a lot of people to make a product successful. Not just some company theme or mission statement. The sales people should get the spiffs , not some other entity.Nardelli ? Wow , he ran them in the ground , got a bonus and landed on his feet at Chrysler. What are some of these people responsible to hire these key executives thinking about when they hire people like that... Amazing. Bob , you are a very smart man.Keep up the contributions to this site. I enjoy speaking with you.
Costco and Grills
Stallion (and Bob): I have a DCS grill that I bought about six or seven years ago and still use on a weekly basis. I had to replace the igniter for the rotisserie once, but other than that it's been relatively trouble free. But, as much as I love it, when it finally sizzles it's last steak, I probably would replace it with a Chinese replica. I hate what Chinese production has done to the American Appliance Industry. And, I hate what Costco, H.D., Lowes, (FedMart, FedCo, Incredible Univesrse, etc., etc., etc.) have done to the Appliance Retailers. But, as a consumer, I won't lay out $ 3,000 or $4,000 for a great grill, when I can get an "okay" grill for $500. Sure, I'll dump it in two or three years and get another, but that's okay. Face it, grills have become a commodity (a "disposable" one at that). The "quality", "durability", "even heat", "presitige", sales pitches that we used to use to sell high-end will only go so far. (And you can only "sell" a consumer on the merits of purchasing at your store Bob, if you catch that consumer before he loads a grill on the back of his truck while making the weekly run to Home Depot for garden supplies.)
If they come ... I can sell them !!!
You're absolutely correct Cohiba ... you have to get them in your door and H/D & Lowes have done a masterful job of getting people to automatically think that they are saving $$$ just by walking in the door !!! One of the unfortunate byproducts of this economy will be that people will have no choice but to purchase an inexpensive grille (which will be a boat anchor in a year or two !!!) as a way of maintaining some modicum of the lifestyle they have come to expect ... and if you're just a so-so griller, downsizing won't make that much of a difference to them, but I honestly don't know if I could downsize from your DCS grille to a "junk yard dog" ... that product has given you more options and almost certainly made you a better griller !!! So, in essence I'm more interested in getting YOU thru our door so I can explain that to you !!! I guess only time will tell !!!
Cohiba....
Cohiba , you are right. The genesis of the high end grills is that it has turned into a commodity and the shine is off the large price tag. Having the brand tag on your product for grills is becoming much less fashionable. There are only so many things you can do to make a high end grill fashionable. It heats up and cooks food the old fashioned way. Part of the issue is two step distribution. The distributors to the consumer add nothing except price. That is hard to swallow but probably is true unfortunately. The next product line to fall from exceptional to commodity will be some of the high end indoor appliances. I think we are seeing that already. I know some high end buyers looking at all products and wonder why the price difference does not seem to justify the features difference if any.Even I would have a hard time justifying spending $3,000 for a grill when a $1,000 grill will do. Same thing with a $6,000 range vs a $3,000 range.That is why I say most of the high end medium sized guys will have to pare back or lose altogether.A matter of timing. If DCS was born today it would not have grown to the size it was given the environment today.Sub Zero today would have to rethink the cooking division and Dacor would still be in one factory.
Stallion
I couldn't agree more. I think there will always be a high-end niche, but it's gotten awfully crowded at the top and it's very difficult to discern value added features that are supposed to justify premium pricing. That is true of both products and distributors.
Back at Cohiba
Some high end companies must adapt and adjust. Those that cannot will not survive.SZ= Will survive. Cautious and conservative. Viking= Survive. Will downsize but the commercial line will help keep them strong.Dacor= I am not sure they can adapt. They added a high level of fixed costs. Have some unproven talent. Not much appliance knowledge left. DCS/F&P=They will fade as a high end product and not even realize it.Too rigid and feel they know better than the customer. Thermador line=Should survive with fine tuning. Solid product. Good customer base.Whirlpool , GE and especially Electrolux should thrive but the pricing will come down. They can adjust to that market better than the others. The grill business will be factory direct and mostly imported with some manufacturing done here.High margin days are probably over.
TV Exposure is Essential ... in all forms !!!
I totally agree that they manufacturers (especially the high end ones) need to improvise and adapt to overcome ... There are a few niches where this is being done, but needs to be intensified in order to support the local Appliance Dealers ... 1. They need to continue is to be placing their products in the hands of the celebrity chefs ... l am a very accomplished home chef and done some private work as well and one of my favourite pastimes is to see how long it takes to identify the products used in cooking shows, etc. If you look @ a show like America's Test Kitchens, they have gone from Sub/Wolf to Thermador to DCS ... people notice that kinda stuff and it gets them into an Appliance Dealer where that sales staff has to know how to capitalize on that !!! 2. Another aspect are readily identifiable advertizing campaigns ... anyone who I have ever dealt with regarding the Electrolux Laundry products wanted what " ... that Kelly Ripa uses on TV ..." Once you get those people in the store you have the opportunity to sell them any alternate Laundry Appliance in case they change their mind !!! 3. I once attended a program where Norm Abrams from "This Old House" was the speaker and he made a great point ... " ... you know, every tool manufacturer wants to get their tool in my hands and on TV ..." Shortly thereafter, I had a client tell me "WOW, you have a hammer like Norm !!!" I told him "No, he's got one like me !!!" People will always think they can do the same thing as the chef on TV if they have the same stuff as he does ... Why do you think Whole Foods & Wegman's are so popular, even when the perception is that you're going to spend more there ??? Heck, those stores have tried to get the cooking shows and magazines to let them know when they are going to feature a food so they can stock up for the demand which they anticipate will come because of the feature !!! Yes, some of the higher end appliances and grilles will be pared back by the economy but the one way to intercept that predisposition is to build on that which the manufacturers have done on TV ... encourage them to keep their ear to the cutting board, so-to-speak, so they can continue to do the important "set-up" work for the Appliance Dealer !!!
TV Exposure
This is a key element no doubt. Some of the owners I dealt with in the past did not want to pay to have their products on TV. It only helps and the chefs will push the product . They will not use it if it is not performing either. Some owners have been elitist in their thinking. The market will change that or those organizations will suffer more than they have already.I guess they can justify what they want but they need to come back to the real world. You make many valid points again.
Easy to Sell Against Those Guys !!!
I've never had much problems going against those other guys, or even BigBox stores ... try these facts on for size:
1. H/D & Lowes have the highest percentage of "scratch & dent" because their people are not trained to handle appliances, they handle what's called in the shipping business as "FAK" - Freight of All Kind !!!
2. If your Refrigerator dies when you get home on Friday you go there and they'll get you one the next day ... but you and I know that you're not going to know if that box is any good for about 3-4-5 hours !!! By then, your old unit is gone and you're stuck with a bad box and need factory service ... which you won't see until maybe Tuesday if you're lucky !!! We give out loaners, and if something like that happens, we'll do everything to remediate the problem before getting Factory Service involved !!!
3. Does the customer see the same sales rep there every time ??? Hardly, and the guy working my only have a rudimentary knowledge of the product you're looking for ... and @ best will only be able to recite manufacturer info, not clarify things, or compare products like a dealer can !!!
4. Last, but not least, we have a window to throw it thru ...