Amazon’s Appliances Move Could Be Tipping Point for CE Retail
Amazon and Sears announced a new arrangement that will bring the struggling department store’s Kenmore-branded appliances to the ecommerce giant’s platform. Thus, Amazon has crossed one of the last remaining major category frontiers in retail. To this point, appliances sold on Amazon came out of the third-party marketplace. This partnership changes that and will allow Amazon to sell appliances direct to consumers.
The two also announced a new line of Alexa-enabled smart appliances.
The news, which is a combination of shocking but expected, sent the stocks of other appliance sellers tumbling: the combined market cap loss of Home Depot, Lowe’s, Whirlpool, and Best Buy was about $12.5 billion by the end of the day Thursday. Sears was up about 10 percent after being up nearly 25 percent during the day; Amazon was up slightly.
"We continuously look for opportunities to enhance the reach of our iconic brands to more customers and create additional value from our assets," Edward S. Lampert, Chairman and Chief Executive Officer of Sears Holdings, said in a statement. "The launch of Kenmore products on Amazon.com will significantly expand the distribution and availability of the Kenmore brand in the U.S. At the same time, Sears Home Services and our Innovel Solutions unit will benefit from the relationship as more customers experience their quality services for Kenmore products purchased on Amazon.com."
Specific terms weren’t disclosed, but Amazon’s deal with Sears is structured so that Amazon will own the inventory and Sears will ship and install orders through its Home Services Innovel Solutions units.
This appliances move by Amazon comes at a time when the company’s ambitions appear to be much larger. According to sources at the company who spoke to The Wall Street Journal, Amazon is looking to expand its reach in the furniture and appliances businesses. The company apparently has plans to build at least four massive warehouses that would focus on handling bulky items.
Additionally, while the Sears deal will utilize the department store’s in-house logistics to ship and install appliances, there’s a good chance that that changes over time. Amazon did recently announce their own Geek Squad-esque fleet of smart home consultants, and they already have other installation services available, so adding appliances seems like it’d be no biggie for them. Or, you know, they could pull another Whole Foods move and buy Sears.
Major (Appliance) Issues
Initially, the move by Sears to put their appliances on Amazon reeks of desperation. But it certainly makes sense. This is a company that has reported sales declines every year since 2007, has seen countless stores shutter, and appears on the verge of bankruptcy (it’s Canadian arm did file for bankruptcy in June). Aligning itself with Amazon is essentially a last gasp attempt by the company to jolt some life back into its earnings.
At the outset, it could benefit from putting its Kenmore-branded appliances on the world’s largest ecommerce platform. But over time, the move seems like one that will put Sears in a catch 22 situation—if they can buy their most popular brand of appliances online, what reason do customers have to visit their stores anymore?
The same goes for other appliance sellers as well. Best Buy, which has notably remained an outlier in the struggling retail industry, wasn’t shielded from the impact of the Sears-Amazon announcement. Appliances had been the one area where big box stores remained “untouchable” in their war with Amazon. Now that the appliances domino has fallen, their thinking in that space needs to adjust.
Showrooming—the act of looking at product in a physical store and then buying online—has long been a struggle for brick-and-mortar could now involve the appliances category. More appliance brands are likely to follow Kenmore online, which could result in a price war of sorts between Amazon and brick-and-mortar appliance sellers who want to keep those sales in-store.
In our talks with CE retailers one theme that always comes up about showrooming is that there are certain categories that it doesn’t apply to. The thought is that consumers simply can’t forgo the act of seeing the product in person to know exactly what they’re getting into, especially with high-ticket items. Those categories include things like TVs, mattresses, and appliances.
Sears’ move to begin selling appliances on Amazon should read to the rest of the CE retail industry as an admission that that way of thinking is outdated. Retailers can’t assume that consumers won’t buy something online because the price tag is high or because it’s something that has to be seen in-store to get the full effect. And, even if they are coming into your store to look at the product, chances are they’re holding their smartphone in their hand to see if they can find it online for a few bucks less.
The call is for retailers to make a compelling argument to the consumer as to why they should make their purchase with you. Is it the excellent service you provide? Maybe it’s the perks you provide through your loyalty program. Or perhaps you offer exceptional post-purchase education for the consumer. The best retailers offer a combination of all of those things and more. They’re differentiating themselves from a customer-centric company that lacks the ability to provide true personal-level service.