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I dunno whether to publish this as news or not, whether it actually makes sense to people not steeped in the politic, understanding the economics of it and so on so, I’ll let you guys call it.
If it makes sense and you can understand what’s going on from it, I’ll publish it. If not I’ll leave it but I would suggest that you read it, think, then read it again as there’s a lot here to get your head around and I need to add to it in light of Lux buying Daewoo. Or, nearly buying Daewoo at least although, it’d be very unlike Lux to open it’s big gob without the deal being more or less done and dusted.
Anyways….
kwatt wrote: Appliance War
If you have been paying attention to the industry news over the past few months you may have noticed that there is a bit of trouble brewing within the industry with many key, global, players seemingly moving their pieces into place for an almighty battle.
Just to put some perspective on how tensions have been frayed over the past couple of years simply consider that Whirlpool is the largest appliance manufacturer in the world, stealing that crown from Electrolux when it purchased Maytag a few years ago and jumping ahead of Bosch while they were about it. Clearly the Swedes and Germans are unlikely to be particularly happy that an American corporation that appears to be, well nowhere, in Europe has stolen a march on them but Whirlpool dominates the USA in a seemingly unassailable position within that territory.
These are the three major global appliance corporations as we know it. For now.
From Korea comes two more, LG, who now claims the No.3 spot on the chart and, Samsung who, pretty much claim the same. In fact, they both have a nasty habit of claiming things that aren’t true or that there is no evidence to support but that’s a tale for another time.
LG came out and said, basically, “we will be the No1 appliance brand globally”.
Samsung said, “we will be the No1 appliance brand globally”.
Meanwhile the older corporations haven’t really said much, although Whirlpool have recently given LG a bloody nose by slapping them with a patent infringement law suit and, winning. The money is irrelevant in the case, the legal fews were higher, so you have to wonder what the point of it was.
Then LG, again, have been taken to task over what appears to be false claims about energy use in the US and then, in Australia.
Meanwhile, Samsung buy the Amica washing machine and refrigeration plant in Poland with a view to ramping up production significantly so as to increase their market penetration in Europe. It will also reduce Samsung’s shipping costs quite significantly which will (should) give them an edge on costs over LG.
Samsung however has not been without it’s share of problems lately, the faulty and exploding fridge fiascos have left a bitter taste with many customers and dealers. Two mammoth product recalls in the space of two years and a whole bunch of publicity about poor quality products that I guess Samsung could have lived without.
Of course other manufacturers have had recalls but, as the old saying goes, the bigger they are, the harder they fall.
Battlegrounds
The main battlegrounds, it would appear, are to be the North Americas and Europe. Asia is dominated by the Korean and Chinese brands already, the global players have been trying to get a toehold in these markets but it appears without too much success to date.
The Koreans however are going after these global brands on their home turf.
Europe looks set to be deluged with cheap Samsung and LG machines as, after all, what else will they fight Whirlpool, Electrolux and BSH on? And, if you want to take market share from Indesit or Beko you have to be cheap as it’s only a price war, the products at that end of the market are bereft of quality or features. Plus, down at the bottom end the customers that buy them don’t much care about anything other than price.
We’ve already seen the introduction of cheap, low end, Samsung washing machines being sold through the likes of B&Q which is hardly doing the independent dealers or repairers any favours at all when you can get a Samsung washer for under £180.
LG, so far, seem to be maintaing the price of their own washing machines but they are cheap on refrigeration, especially the side by side machines. How LG intend to compete in what looks to be shaping up to be an out-and-out price war is, as yet, unknown.
The European market however is complex in many ways, very simple in others. It’s the simple route of cracking the nut with a sledgehammer, the sledgehammer being price, that the Korean companies seem to be gearing up to do and to steal market share from the incumbents.
Unlike the USA the Koreans also face the very modern (in some cases) production and logistics that the Turkish companies such as Arcelik (Beko) and Vestel possess. Although you may not see Vestel being sold under it’s own branding in the UK, you will see it in various other guises and it is gaining traction in other EU states, driven largely by advances in the browngoods sector.
We also have Fagor Brandt who, in the UK at least, have never really made much of an impact but they are well known in many other parts of Europe.
Quite what the point is escapes many within the industry with one CEO simply saying that it was “stupid and pointless”. The conversations I’ve had would seem to indicate that everyone is bracing for a war and, largely, that war will be fought on price.
The last time that this happened many of the smaller manufacturers were swallowed up by the large, dominant ones. It is difficult to see them all surviving if this war happens soon after the effects of the global finance last year, many of which are still being felt.
GfK say that the whitegoods industry is resilient, this may prove how much resilience it truly has.
Trickle Down
The effect of this is liable to be felt throughout the industry.
Retailers still struggle to get credit insured and, for many, credit is a big issue. But it’s an issue that affects not only the retailer but also distributors and manufacturers so, you could argue that prices dropping would be a good thing in some ways, allowing more stock to move. I would not subscribe to that point of view.
All that would happen is that many retailers and distributors would just max out their credit allowance once again and, most probably, be right back where they started only earning less margin, putting more strain on the businesses and placing them in even greater danger of collapse.
I’m thinking it needs expanded on a little bit but, by the same token, I don’t particularly want to be offering strategy to anyone or be the sayer of doom that befalls us all either.
I also had to try really, really hard not to just say that people are generally idiots that buy the cheapest cr4p they can lay their hands on then bemoan the fact that they can’t buy any quality stuff.
The public at large face a huge enemy that they seemingly can’t escape… themselves.
K.
Re: Provoking Reaction Review
An interesting article, who is it aimed at, Joe Public (do they really give a damn) the trade or both?
It does scan and make sense ( you need to change legal fews to fees 😉 ) sadly with the total collapse of any UK production and obliteration of any UK owned manufacturers a lot of people will just shrug their shoulders, moan a lot and try to make the best of the situation. 😥
Jim.
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