SIC 5722 Household Appliance Stores

SIC 5722

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.

NAICS CODE(S)

443111

Household Appliance Stores

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 77,938 appliances were shipped in the United States in 2004.

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, from radios to home theater systems, from personal computers to cellular phones, and from audiocassettes and compact discs to videocassettes, DVD players, and electronic accessories.

ORGANIZATION AND STRUCTURE

The appliance industry is a low-growth, relatively mature industry offering acceptable gross margins and relatively low inventory turnover. The latter, 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 is expected to continue. A number of important players have gone 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, 40 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 out-muscled by larger chains. The market has 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 is 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 has the potential to generate a much higher profit per square foot. 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 can usually 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 account for about $68.5 billion in sales annually. 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 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...