Unless you happen to have been living in a cave for the past few months you will be well aware of the current trading conditions, it’s grim, very grim. Analysts and pundits are, basically, predicting the end of the world as we know it with major retailers going bust all over the place and some surprisingly large ones at that.
People that many people would have thought untouchable and too big to be affected by a little recession here of there are feeling it and, it would appear, badly.
This year the appliance industry really started to feel it when MFI entered into administration, the first time, quickly followed by Antonio Merloni. Of course MFI did live again but only briefly due to a management buy out.
But in there is the interesting thing about all this, we have retailers such as MFI, Woolworths, Whittard, Adams as well as a host of others all getting column inches and Antonio Merloni, who own Servis UK and the Electra brand names getting zero attention. In fact the administration was not reported in the UK press for some weeks after this took place and only then in local press around Birmingham where Servis UK was based. It must not be important enough to bother with although, I expect that the thousands of people that own Servis or Electra branded goods may think differently.
More surprising to many people will be the fact that Antonio Merloni were the largest “OEM” supplier in Europe, which means that they would make machines for just about anyone and plonk whatever badge you like on the front of the machine. For example, a good many of the Hygena and Diplomat machines were in fact made by Antonio Merloni. But it doesn’t stop there, there are a host of other brands that also roll out the Merloni factory in Fabriano as well, such as some machines from Baumatic, Powerpoint, Proline, White Westinghouse… the list just goes on and on.
Yet the press seems to care that much despite some of these brands being large and their demise affecting tens of thousands of people.
Unless you need spare parts and suddenly find that you can’t get them of course.
It may well be that there’s blood on the high street with retailers dropping like flies but much of the true danger is in actual fact off the high street as far as appliances are concerned.
A House Of Cards
There’s a knock on effect that not many people seem to have cottoned onto, a lot of these appliance were insured and if they cannot be repaired then they have to be replaced. This is, I expect, costing the insurers a small fortune, not to mention brand owners and retailers that bought Merloni produced appliances only to find that they have no warranty cover and no replacement parts if needed. Replacement is the only option, especially for retailers where the product is under warranty.
In the current climate this is additional financial pressure that retailers and insurers can ill afford.
But brand owners, who could be sat with containers full of these products mat find themselves in a position where they cannot sell the products yet cannot afford not to. They really could be damned if they do, damned if they don’t.
Beyond Currys and Comet however (both of whom have other problems, although related) most of the brands that sell these appliances are the lesser well known ones, often sold through smaller kitchen retailers, face immense pressure at any rate. All them import goods into the UK, almost no appliances are now UK made and have therefore suffered the crippling effect that the changes in exchange rates have had on top of a slow market that it is difficult, if not impossible, to raise prices in. Whether you trade in US dollars or Euros the effect of the currency markets is absolutely huge with 20%+ swings, not in the UK’s favour.
But then the strength of Sterling has made appliances almost impossibly cheap here for a decade or more and, once stocks are cleared in the January sales, expect large price increases as retailers and brand owners have to restock with the new, much higher, buying prices.
Of course all this will push up spares costs, again as well as push up the cost of replacements for everyone, insurers included. It is generally accepted that this will mean a hike in insurance premiums at some point as well in order to compensate for the higher pricing as well as to recoup the losses suffered by failed brands.
It really is a house of cards with almost everyone being affected, even if it is poorly reported, if it’s even reported at all. And, if the current reports are correct, we can expect more in 2009, some of whom you can bet, will probably come as a shock.