CHANGES SWEEPING THE MARKET
New lifestyles, newcomers challenge industry
One of the most traditional of businesses, vacuum cleaners, has been experiencing some significant changes.
The total market, as traditionally defined, may not be growing substantially, but some important developments are changing the industry:
–The consumer penchant today for more than one vac, exemplified by the popularity of the Dustbuster and substantiated by the anticipated growth of stick vacs and wet-day models.
–Product changes fueled by demographics. While a super-performance class is developing, lightweight and convenience features are becoming more important as the population ages and seeks labor saving tools.
–An influx of foreign suppliers moving to challenge the long established giants, Hoover and Eureka, who each claims 32 to 35 percent share of market. Sharp Electronics, Whirlpool, Miele Apppliances and Moulinex/Hamilton Beach have entered the American market within the year. At the same time, Pansonic, Black + Decker bdh2000pl and Sanyo are beefing up their lines to strengthen their position here -Market: the best car vacuum cleaner.
But it is the stick vac segment that is expected to generate the big excitement this year in the floor care industry. While only modest growth is being predicted for the core upright and canister segments of the field this year, the lightweight stick units are expected to show sharp sales gains in the overall picture, where volume in 1985 reached the 9 million mark.
The best statistics available, supplied by the Vacuum Cleaner Manufacturers Assn., showed the stick vac category garnering 1.5 million unit sales, or 15 percent of the total traditional vac volume, while sales of canisters were 3.2 million, or 34 percent of total, and uprights, 4.3 million units, or 51 percent of the total.
Figures are less reliable for the growing handheld vac field, since many of the producers do not report to the VCMA. Still, sources close to the market estimate that unit sales last year ranged from 5 to 6 million.
Figures are also closely guarded in the shop vacuum category, a market dominated by three firms: Shop-Vac Corp., Sears, and Genie Products. Estimates by well placed industry sources put sales of the wet-dry models in the vicinity of 1.7 million.
The industry is expecting aggressive promotion by new stick vac producers fighting for a share of the pie. This, coupled with a growing demand for second vacs for supplementary cleaning, and the advent of cordless technology in the field, are seen boosting stick vac volumme 10 to 15 percent this year.
Coming on to challenge Regina’s dominace and Hoover’s and Bissell’s runnerup position in stick vacs, are such names as Eureka, Panasonic, Dazey and Moulinex/Hamilton Beach. Regina and Eureka are spearheading the cordless movement.
The industry is less sanguine about the future of uprights and canisters.
Because of their high 92 percent market saturation, growth of these traditional categories is not expected to exceed five percent this year. The bulk of the business here, sources believe, will come from the vast replacement market, which will be demanding higher ticket, full-featured models.
Newcomers and established vac makers alike appear to be zeroing in on high end models retailing from $200 to $500. The average vac sale these days is $200, sources say. While door-to-door sales, which some observers say account for 8 percent of the market and sometimes reach $700, tend to distort the picture, a $200 sale at retail is not unusual, it is said.
Manufacturers generally agree that mass merchants, department stores and catalog showrooms take the lion’s share of the retail vac business. Some producers have also been getting considerable mileage out of appliancechains, dealer-owned hardware coops, and vac specialty stores.
The size of the role played by individual channels of distribution varies from one producer to another, however. While one firm might find department stores accounting for 34 percent of its business, another might find the percentage to be 25. By the same token, catalog-showrooms may command 20 percent of one firm’s sales, yet 10 percent of another’s. Mass merchants’ share is more consistent, averaging 25 to 30 percent of many producers’ sales.
The status of the floor care industry as it enters 1986 is analyzed in depth on these pages in terms of product, sales and distribution.
Competition seen fierce this year
Market share competition in the largest vacuum category, uprights, is expected to become even more fierce in 1986.
While unit volume is expected to remain steady, an increasing number of companies is coming into the upright business.
Perhaps the most significant of the new factors this year will be Sharp Electronics and Whirlpool, the latter a long time vac supplier to Sears. Whirlpool introduced models under its own name last year, but may hit its stride this year. Sharp’s first uprights will be unveiled this summer.
In addition, other companies such as Sanyo, Metropolitan Vac, and Bionaire are looking to develop niches in the upright market.
All the new players will have to contend with the two powerful, entrenched leaders–Hoover and Eureka. Together they account for over 60 percent of the market. With their strong brand recognition, intimate knowledge of the market, and determination not to lose share, these two giants have repelled newcomers’ repeated attempts to grab a significant share.
The newcomers will be participating in what Hoover vice president of marketing David Evans describes as a largely saturated market, where replacement sales make up most of the business. Evans expects business here to experience a 4 to 5 percent growth this year.
Of the new entrants into the field, Gil Dorsey, Eureka’s vice president of marketing, considers Sharp to be the most formidable competition, whether in uprights or canisters. He has adopted a wait-and-see attitude toward Whirlpool, which he says does a good job with washers, but is yet to be tested on vacs.
According to its divisional vice president David Allen, Whirlpool is well aware that it is entering a field with entrenched firms. “We will have to promote heavily, heavier than our competition,’ Allen said. Whirlpool is already making use of network television to this end.
To go after the vast replacement market, which traditionally goes for step-up models, many manufacturers are moving to higher priced, fully-featured units.
Indeed, most of the newcomers are entering the field with many machines that retail over $200, while many of the established companies already have machines in that price range. Whirlpool’s new line, for instance, includes uprights and power teams retailing from $129 to $439. Popular price points, Allen said, have been $239 and $249.
Efforts to move into the upper brackets have generally paid off. Bionaire has been so successful with its Electronic Floor Care System that it is augmenting it with three other models in the $149 to $299 range. They are scheduled to debut in April.
Hoover pioneered electronic controls on its top-of-the-line vacs. The units have been selling well but “not outstanding,’ said Evans.
The many new factors in the field should inflate 1986 unit sales of uprights, which were estimated by the Vacuum Cleaner Manufacturers Association to be 4.3 million units in 1985. That was roughly half of the 9 million unit sales projected for all traditional vacs last year.
In addition to Whirlpool and Sharp, Metropolitan Vac joined the upright ranks last year. Sanyo will be in the thick of the fight this summer, while Bionaire is moving from one unit to near full line status this spring.
Metropolitan Vac is taking the upright route after years in canisters because “55 percent of the vac business is now in uprights and there are not that many upright suppliers in the market,’ said Ken Stern, vice president of sales. The company’s $234 model, unveiled last fall, is aimed toward better department stores, catalogs, and direct mail.
Sanyo, another canister-oriented company, is adding two upright models to its line. The units, which will be available in March or April, said Richard Pressman, national sales manager, “will give us full presentation. It’s the extension we need to become a full line company,’ he said.
Sharp Electronics, which entered the U.S. market last spring with 20 years of vac experience on the European market, will enter the upright market next summer with its first five models, said Mike Williamson, national sales manager for its vac operation. The models will retail from $99 to $249.
While uprights are popular with Americans, Williamson pointed out, canisters overwhelmingly dominate the world market.
Whirlpool is focusing on major department stores and vac specialty shops with three upright and three power head models it began marketing last year under its own name.
Although Singer Co. sees a resurgence in canister sales, the company’s basic strategy is to develop its upright business, said Mike Orifinik, vice president, floor care products. The company, which began promoting its own brand aggressively in 1982 (it makes models for Sears), has five uprights and three canisters in its line.
Newcomers fuel upscale trend
The movement to high end, fully-featured canister vacs probably will continue in the next few years, even though the bulk of the business is in the medium to low end price points.
The upscale movement will undoubtedly be fueled by the influx of lines coming on the market from overseas. Since canisters are the prime products for offshore suppliers, they can easily adapt lines in this area for gaining access to the American market. In addition, the fully-featured models are popular with Japanese and European consumers.
The newcomers looking to establish themselves in the canister ranks this year include: Sharp Electronics, Whirlpool, Miele Appliances, and Moulinex/Hamilton Beach. All market lines made overseas.
Of the two giants, observers credit Eureka with an edge over Hoover in the canister market.
And Eureka is planning to hold that lead. Gil Dorsey, vice president of marketing, said, “we will be putting our efforts behind power teams during the first half. That is where the growth potential is. Many consumers are unaware of their capabilities.’
Hoover, meanwhile, has been more than holding its own in the canister area. The company’s Dimension series unveiled last year to retail from $289 to $484 has been one of Hoover’s most successful lines. “Our total high end volume has been up because of it,’ said David Evans, vice president of marketing.
Growth is also expected in the wet-dry shop vac segment of the canister classification, a market dominated by three companies: Shop-Vac Corp., Sears, and Genie Products. Although sales of these units were estimated to be 1.7 million last year, executives at both Genie and Shop-Vac are expecting significant sales increases this year.
John Gray, Genie president, pointed out that the classification has a low 20 percent market penetration. Tom Guise, Shop-Vac Corp.’s director of marketing, said, “the second vac market is growing and we consider shop vacuums an important part of that business.’
Genie is attempting to broden the appeal of its units by styling models that might appeal to the women of the house seeking a second vac as well as to its basic customer, the male home workshop enthusiast.
Paced by power nozzle models, the canister vac volume (excluding shop vacuums) reached an estimated 3.2 million units last year, or about 35 percent of the overall 9 million unit traditional vac market.
The canister category falls into two basic groups–power nozzles, which registered 1.9 million unit sales last year; and straight suction numbers with 1.3 million unit sales. Compact canister sales were pegged at 600,000 sales.
As is the case with other segments of the vac business, new companies have come in to challenge the supremacy of Hoover and Eureka in the canister arena, and will undoubtedly swell unit volume this year.
Sharp Electronics, for instance, which entered the American vac market last spring, will add in March seven models to its present three-model assortment.
Meanwhile, Whirlpool Corp., which began marketing its own line last year after years of producing models for Sears, which it still does, plans to expand its selection of both canisters and uprights. David Allen, divisional vice president, declined to elaborate. He said, however, the company is expecting sales gains in both canister and upright models, with perhaps a slightly larger increase in canister volume.
Some firms, though, are approaching the market cautiously. Some will be content to find a special niche for their lines.
Moulinex/Hamilton Beachh, as it is with its stick vac, will be moving slowly into the canister field, rolling out on a regional basis and selling selected accounts in each market. “This is an area that requires specialized selling,’ said John Flaherty, Hamilton Beach group vice president.
Toshiba is planning to stick with its three canister models. According to Kevin Furlong, national marketing manager, “rather than fight the big boys without a full line, we are going to hit hard with selected models.’
Another newcomer seeking a niche is Miele Appliances. The German manufacturer entered the American market in 1984. After gaining a foothold here in vac specialty shops. The company is now tryinmg to position itself in upscale department stores. Its power nozzle unit retails at $460.
Miele is just one example of the emphasis many producers are placing on high end vacs, even though low to middle price units dominate sales.
Largely because of the big replacement market, the average vac sale now is $200, said Eureka’s Dorsey, in commenting on the upward swing in popular price points. He conceded that door to door sales, which can go as high as $700 per unit, tends to distort the average sale figure. He said, however, that a $200 vac sale is not unusual nowadays.
Dramatic growth expected in ’86
The burgeoning stick vacuum field is shaping up as a major battleground of the floor care industry in 1986.
Since 1983, the market has grown 13.5 percent in units, and many industry veterans see even more dramatic growth this year with new players in the game promoting aggressively, and established companies expanding their horizons, particularly in the cordless area.
Hoover vice president of marketing David Evans, for instance, thinks the aggressive promotion by new producers seeking to build a market share this year will boost stick vac sales to 1.7 million units, up 10 to 15 percent from the 1.5 million units with a $69 million value sold in 1985.
At the same time, Gil Dorsey, vice president of marketing at Eureka, which has fared well with its cordless Quickup, says cordless models could add 200,000 units to stick vac sales this year.
Changing American lifestyles are also seen contributing to the growth of stick vacs. Ken Klaver, Bissell’s vice president of marketing, has found increased use of carpeting in kitchens and bathrooms spurring growth of supplemental cleaning equipment. As a result, many of today’s more affluent consumers are buying two and three vacs for different types of cleaning chores.
Although they do not say it publicly, some executives concede that the current invasion of the stick vac field harks back a couple of years ago when Regina’s top management obtained the company in a leveraged buyout from General Signal Corp.
At that time, it was explained, the industry viewed the action as a sign of weakness and perceived Regina as being vulnerable to competition.
Regina executives, however, are known to feel that the company is in a very strong competitive position now as a resullt of a refinancing received through low-interest bonds valued at $14.8 million by New Jersey and Mississippi, states where Regina has plants. The firm is now going public with a stock offering.
Whatever the reason, the field of contenders is crowded. Within the year, Eureka, Panasonic, Moulinex/Hamilton Beach, and Dazey have moved in to challenge Regina’s supremacy with its Electrikbroom. Some estimates put the Rahway, N.J., firm’s share of the stick vac market at 60 percent. Hoover is acknowledged to rank number two.
There have been rumblings in the trade that Conair and Norelco may be getting into the act this year following their entry into the handhald vac market. Neither company would confirm the reports.
Trade veterans believe that heavy advertising by the newcomers will go a long way toward building consumer awareness of the category as well as heady price competition that will build volume.
One of the leaders in the advertising derby already is Regina. Last year the company is said to have spent $80,000 there. The amount includes funds allocated to television spots.
The stick segment is also benefiting from two new twists: the cordless concept and the rash of triple-action models such as Bissell’s 3-Way Vac and Dazey’s Vac-Man, which can be operated as a handheld, stick or canister vac.
Probably the most significant development, though, is the cordless concept.
Panasonic will join Regina and Eureka, which so far have been the prime contenders in the cordless field. Panasonic is offering two models that can be operated as a stick or hand vac for 25minutes on one charge and retail at $69 to $79. In addition, said Bob Falzone, Panasonic’s portable appliance manager, the company is unveiling a new two-speed plug-in model at $59.95 retail to supplement a one-speed unit already on the market.
Eureka’s Gil Dorsey concedes that Regina is first in sales of plug-in stick vacs, but believes Eureka has the lead in battery-powered models because of its early jump on the fledgling market with its Quickup.
Regina executives, on the other hand, are contending, the trade hears, that their firm can maintain an edge in any sweeper competition because the classification is a basic business for it, where it is just an extension of the vac business at Eureka and Hoover.
On the multi-use front, Bissell’s 3-Way Vac has been one of the company’s major successes. According to Klaver, the company gained immediate national distribution of the product.
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