Manufacturers scramble to make every possible sale

By Mark Hansel

Friday, Jan. 30, 2009 | 2 a.m.

One of the best ways for manufacturers and suppliers to lessen the effects of an economic downturn is to maximize channels of distribution.

This particular slump has been so far-reaching, however, that almost every outlet for merchandise has been affected.

Appliance dealers and other manufacturers at the recent International Builders Show at the Las Vegas Convention Center have used several strategies to offset the slump in sales.

“Everyone in some way, shape or form is feeling the downturn of the economy,” said Allison Gatta, program manager, public relations for General Electric Consumer and Industrial. “We’re doing our best to combat that, but it’s going to come back up. We truly believe that. We’re developing new products every day that are going to be great for the consumers.”

GE’s diverse distribution chain for appliances includes retailers, wholesalers, and builders. The company distributes appliances through suppliers and directly to builders, who often buy large quantities for multifamily units and housing developments. GE refrigerators, stoves, washers and dryers are a fixture at most major appliance retailers nationwide.

Despite its broad distribution network and worldwide name recognition, GE, like most other appliance manufacturers, has felt the effect of the slump.

On the retail side, consumers are waiting for signs the economy is stabilizing before remodeling kitchens or upgrading appliances. Even those who have not yet been directly affected by the downturn are reluctant to make big-ticket purchases.

The slumping housing market, which has hit Las Vegas especially hard, has developers reluctant to start any new projects and some existing projects have been halted because of tight credit markets.

The competition in the appliance industry has also made it difficult for manufacturers and distributors to offer incentives to developers.

“Builder pricing is pretty competitive to begin with,” said Tyler Jones, an owner of the Las Vegas residential developer Blue Heron. “A lot of our other trades and vendors have offered incentives, but appliance vendors — not as much because they don’t have a big margin to begin with.”

Blue Heron focuses on loft-style homes and in-fill communities.

Jones said Blue Heron, which is one of the few local developers that has managed to move forward with its planned projects despite the downturn, has actually upgraded its appliance package.

“We have made a conscious choice to build more value into our homes,” Jones said. “We now offer a full package of Viking appliances.”

Jones said he doesn’t think many developers have followed his company’s lead and some have decreased or downgraded appliance packages to help defray costs.

GE, in fact, considered spinning off its consumer and industrial division, but put that plan on hold last month. In a July news release, Jeff Immelt, chairman and chief executive of GE, explained why the company was looking to spin off or sell the division.

“As we explored our options for appliances, it became clear that the fastest, most efficient step we could take in completing the transformation of our industrial portfolio would be to focus on a possible spinoff of the entire unit,” Immelt said. “This is consistent with the strategy we have been executing to transform the GE portfolio for long-term growth and makes sense for GE shareholders.”

Last month, GE officials said in a statement that although the strategy still makes sense, the timing was not right.

“The challenging economic environment makes a spin or a sale now extremely difficult,” the statement said. “Remaining part of GE and staying totally focused on operating the business effectively are the best moves for the business as we prepare for what is shaping up to be another very tough year in 2009.”

Unlike other consumer products, which are replaced when they wear out, most appliances can last for years or even decades. The business model for appliances relies, in part, on consumers replacing products that are still functioning. Often, they are replaced because of a home remodeling project or a move to another home.

With the prolonged economic slump, many prospective customers have chosen not to replace appliances that are still in good working order, and the industry has taken a hit.

As a result there is a renewed effort within the industry to focus on innovations and upgrades that are attractive to customers.

Gatta said GE has been working closely with builders and vendors to determine which products will be most in demand in the coming years and focus its development efforts in that direction.

“We are getting a lot of input from builders here and we have an eco-imagination home and a lot of people are interested in that,” Gatta said. “The interest is coming not only from builders, but consumers are interested in those type of products as well. We’ve seen a big increase in interest in energy efficient and Energy Star products.”

While GE is focused on product development, Thomas Lighting has begun to focus more on integration of services.

“Our goal is become the one resource for all of our customers’ lighting needs,” said Wade Macht, business development manager at Thomas Lighting.

Thomas Lighting, a subsidiary of Phillips, is a partner in the Phillips 1 program, which uses the parent company’s combined resources to fill the needs of a broad customer base.

“We are striving to supply products and services to individual consumers or to the building industry across as many touch points as possible,” Macht said.

Another offshoot of the slumping economy is a decline in trade-show attendance, which manufacturers rely on to display products and meet with industrial customers. Attendance figure for this year’s builders’ show are not yet available, but attendance was down 11 percent in 2008. The projections for this year’s show indicated an anticipated 21 percent decline in exhibitors, from 1,900 to 1,500 and a 24 percent drop in attendance, from 92,000 to 70,000.

The show had taken place in Orlando, Fla., for the past four years before returning to Las Vegas this year.