of tHe industry by jennyyingdi

VIEWS: 11 PAGES: 24

									        news




     Pressure
                                                                              ToTal Home FurnisHings Channels of Distribution

                                                                                                       Department                                                        Department




           At
                                                                                         Other*          stores                                        Other*              stores
                                                                                        11.6%            13%                                           11.6%              14.5%
                                                                                                                         Mass
                                                                                     Home                              merchants                                                         Mass
                                                                                                                                                    Home                               merchants
                                                                              improvement centers                       23.9%                improvement centers
                                                                                    8.2%                                                                                                23.1%
                                                                                                                                                   7.2%
                                                                                    Specialty stores                                              Specialty stores




        Home
                                                                                       17.4%            Furniture stores                                                  Furniture stores
                                                                                                           & chains                                  16.2%
                                                                                                                                                                             & chains
                                                                                                           25.9%                                                             27.4%



                                                                              Retail Sales              2005                       % cHange                               2004
                                                                              ($ in millions)     $137,147.33                              2.9%                      $133,342.81
                                                                            *INCLUDES OFFICE SUPERSTORES, ELECTRONICS STORES, FLOORINg STORES, VACUUM SHOPS, APPLIANCE STORES, DOOR-
                                                                            TO-DOOR, SUPERMARkETS, DRUgSTORES, INTERNET, TV SHOPPINg, CATALOgS AND OTHER MEDIA.




Continued from page one
   Another boon for rug makers was the new Las Vegas Market. A large number of
floor covering vendors were exhibiting at the first Vegas market in July, and even more      FurniTure/ligHTing/Decor Channels of Distribution
showed up for the second market in January. Vendors were excited to display their                           Department
                                                                                                       Other stores                                               Department
                                                                                                                                                             Other stores
wares to retailers in new markets, especially West Coast stores, with which many had                    4%     8%                                             5%             Mass
                                                                                                                         Mass                                        8%
no prior contact. Mass merchants, who shop the Vegas Market aisles, continue to ac-          Home improvement                                      Home improvement        merchants
                                                                                               centers 4%              merchants
celerate in the category as they expand product lines and push upstream.                                                15%                          centers 4%              13%
   But the push into new channels may have also played a role in driving down prices,           Specialty stores                                      Specialty stores
said Anne Brouwer, a senior partner with the retail consultancy firm McMillan Doo-                  21%                                                   19%
little. Expansion in new and alternative channels, such as home improvement cen-
                                                                                                               Furniture stores & chains                              Furniture stores & chains
ters Home Depot and Lowe’s, may have led to aggressive pricing, ultimately driving                                       48%                                                    51%
down sales dollars, Brouwer said.
   Tabletop vendors blamed a flat 2005 on the usual suspects—raw material and
fuel costs, private-label and direct-sourcing pricing pressures, and retail consolida-
tion—as well as the dressing down of the home.                                               Retail Sales              2005                  % cHange                         2004
   Upstairs dinnerware, which suffered a 2.6 percent decline over 2004, was espe-
                                                                                             ($ in millions)       $73,174.27                     2.2%                     $71,602.06
cially impacted by this domestic dress-down trend. One supplier explained it as the
“emerging consumer’s tendency toward casualization and minimization.” Consoli-
dation of a primary formal dinnerware retail channel, the department store sector,
has also negatively impacted this luxe category.                                             TexTiles Channels of Distribution
   Dan Butler, director of merchandising and retail operations at the National Re-                        Other                                                 Other
tail Federation, agreed that department store consolidation is impacting all home                         2%                                                    3%
furnishings distribution. But, he added, this should be offset by the “tremendous            Home improvement Department stores                                             Department stores
                                                                                                                                                   Home improvement
growth in specialty stores.” Said Butler: “Vendors must rethink how they do their              centers 8%          16%                               centers 7%                  18%
                             business. They must consider developing product that ap-          Catalogs 4%                                           Catalogs 5%
     STATE                   peals to midsized specialty markets; they can’t just bank
of tHe industry on one sector of retail.” One dinnerware manufacturer ac-                           Specialty stores                                     Specialty stores          Mass merchants
                             knowledged the specialty store growth, citing the expan-                   25%                Mass merchants
                                                                                                                                                             23%
                                                                                                                               45%                                                     44%
sion of Bed Bath & Beyond’s high-end concept store model.
   The textiles industry’s marginal 0.8 percent upward climb, to about $19.7 billion
last year, signified gains in categories, including pillows, mattresses, pads and sheets,
in the face of shrinking retail distribution and competition from lower-cost overseas
manufacturers.
                                                                                             Retail Sales              2005                  % cHange                         2004
   Pillows recorded some of the strongest overall category increases, climbing 6 per-
cent to $983 million, from $928 million in 2004. Mass merchants continue to be the key       ($ in millions)       $19,767.5                      0.8%                     $19,602.02
destination for bed pillows, followed by specialty and department stores. Pillow sales,
according to one vendor, were fluffed up on “pricing consistency of filler materials”
combined with more moderate prices.
                                                                    Continued on page 26


   meTHoDology
   Estimates of home furnishings sales and channels of distribution are developed by HFN market research through surveys of leading vendors, as well as from data pro-
   vided by trade associations, government agencies and business information sources. Draft estimates are then reviewed by HFN’s editors, who in turn solicit additional
   information from key retailers and other manufacturers. For the 2005 estimates, 80 vendors responded to the annual HFN survey.



24 HFN / February 27, 2006                                                                                                                                                                   hfnmag.com
        news


Pressure at Home
Continued from page 24
   Furniture, which underperformed the home furnishings category as a whole,
with a 2.2 percent increase to roughly $73.17 billion in 2005 sales, was both directly       major appliances Channels of Distribution
and indirectly impacted by Hurricane katrina. Directly, the devastating gulf Coast
storm led to the temporary and permanent shuttering of numerous furniture stores                                                                                   Other
in the region. Indirectly, the post-hurricane spike in oil prices impacted shipping                      Other          Department                                 4%
                                                                                                         11%                                                                     Department
costs and polyurethane foam production.                                                                                   stores
                                                                                                                                                                                   stores
   Upholstery, the only furniture category to suffer a sales decline, was hit hardest                                     32%
                                                                                                                                                           Appliance               37%
                                                                                                   Appliance
by the cost of polyurethane foam production, as refineries that convert oil to the                  stores                             Mass                 stores
chemical that makes the polyurethane foam were all based in the storm-ravaged                       22%                              merchants              28%                         Mass
                                                                                                                      Home             8%                                             merchants
gulf Coast.                                                                                                                                                                Home         9%
                                                                                                               improvement centers
   It is not all stormy days in furniture, however, as vendors expect continued                                      27%                                            improvement centers
                                                                                                                                                                          22%
growth in ready-to-assemble, driven partly by demand for flat-panel televisions.
These larger-screen sets have created a need for home entertainment furniture to
house these devices, along with any audio/video accessories.
                                                                                            Retail Sales              2005                  % cHange                         2004
   ken Wasik, director of the consumer products group at Houlihan Lokey Howard
& Zukin, said this flat-screen TV invasion is actually partly responsible for softness      ($ in millions)       $18,236.37                     8.8%                      $16,764.18
                           in home furnishings sales. He said consumers are directing
     STATE                 a larger portion of their discretionary income toward con-
                                                                                             Housewares Channels of Distribution
of tHe industry sumer electronics, personal care and leisure. So the onus
                           is on manufacturers to revitalize home product demand by
                                                                                                                  Department                                               Department
injecting newness and design differentiation into the category. “There hasn’t been a                      Other     stores                                    Other          stores
large decorating trend,” Wasik said. “People are now more concerned with decorat-                         13%       10%                                       12%            11%
ing the wall with a 50-inch set, than buying a new couch.”                                  Home improvement                                      Home improvement
                                                                                              centers 8%                                            centers 7%
   Despite the raw materials/oil costs/retail consolidation trifecta, most housewares                                      Mass merchants                                         Mass merchants
categories last year recorded minor sales increases.                                        Supermarkets/drugstores                               Supermarkets/drugstores
                                                                                                    10%                        48%                        10%                         48%
   One housewares success story—food storage—survived rising raw material                                Specialty                                              Specialty
costs and posted a 1.5 percent sales gain for 2005, following a 10 percent dive in                        stores                                                 stores
2004. The largest retail distribution shift in this subcategory came in the super-                        11%                                                    12%
market channel, which jumped 7 percent to account for more than 25 percent of
market share. Mass merchants, which accounted for nearly half of the market,
fell by 8 percent.                                                                          Retail Sales              2005                  % cHange                         2004
   Wire storage also rebounded from a 2004 decline to log a 9 percent sales gain, driven    ($ in millions)       $16,453.78                     3.9%                      $15,837.75
by a demand for organization products. A portion of that gain may, however, be credit-
ed to vendors and retailers inflating price tags to offset escalating raw material costs.
   Laundry care outperformed its housewares peers with a 4.7 percent gain, which             TableTop Channels of Distribution
manufacturers partly attributed to a waxing interest in laundry room organization
and garment care products, along with an increased demand for higher-end goods.                          Other                                                   Other
                                                                                                          5%         Department                                   6%
Vendors are injecting fashion, color and new materials into these products in re-                                                                                           Department
                                                                                                 Catalogs 3%           stores                            Catalogs 3%
sponse to the consumer’s need to spruce up the laundry room.                                                           19%
                                                                                                                                                                              stores
                                                                                                                                                                              20%
   Major appliances stood to benefit from this need for innovation and design in the
laundry room, as the category led home furnishings and outperformed total retail
                                                                                                     Specialty                                                Specialty
with an 8.8 percent sales gain last year.                                                             stores                                                   stores             Mass merchants
                                                                                                                          Mass merchants
   New front-loading washers, which combine energy efficiency with design-friendly                    32%                     41%                              31%                    40%
construction, helped to accelerate laundry sales. As laundry began to migrate from
the basement to the kitchen, garage and bedroom, consumers traded up traditional
white top-loaders for front-loading models in a variety of colors and stainless steel.
   Room air reaped the benefits of a hot 2005 summer, recording the greatest major
appliance sales gains with a 15.2 percent increase, after suffering a 15.9 percent          Retail Sales              2005                  % cHange                         2004
sales decline due to a damp and cool 2004.                                                  ($ in millions)         $4,947.94                    0.3%                      $4,935.23
   The retail market-share shift in major appliance sales was somewhat representa-
tive of the total home furnishings retail shift. Home improvement retailers stole            rugs Channels of Distribution
share from department store giant Sears in three of four categories—refrigerators,
laundry and cooking appliances.                                                                             Other                                                  Other
                                                                                                             1%                                                     1%
   Some industry players attributed Sears’ major appliances market-share loss to
its high concentration of mall-based stores, a channel that of late has experienced                                   Department                    Home improvement
                                                                                             Home improvement           stores                                                 Department
waning traffic. While Sears slowed, Lowe’s added square footage at a double-digit              centers 12%              16%
                                                                                                                                                      centers 11%                stores
pace, filling newfound floor space with new major appliance brands, such as Sam-                                                                    Catalogs 4%                  21%
sung. Home Depot, which is also growing square footage, dedicated more space to             Catalogs 7%
                                                                                                                               Mass merchants      Specialty stores 8%
major appliances.                                                                           Specialty stores 8%                    37%                                              Mass merchants
   So what’s in store at home for 2006? Retailers and manufacturers will still be                                                                    Furniture stores                   39%
                                                                                                   Furniture stores Flooring                          & chains 6%
forced to contend with the aforementioned cost and pricing pressures, as well as a                     & chains      stores                                Flooring stores 10%
cooling off of record housing.                                                                           11%          8%
   “I expect a harder year [for home furnishings],” said Carl Steidtmann, chief econ-
omist with Deloitte Research. “Housing has peaked and we don’t expect it to come
back anytime soon. This will make for a challenging year for furniture and appli-           Retail Sales              2005                  % cHange                         2004
ances.” — Carla Webb O’Connor, Jennifer Quail, Jessica Goldbogen Harlan and                 ($ in millions)         $4,567.47                    -0.7%                     $4,601.57
Allison Zisko contributed to this story.

26 HFN / February 27, 2006                                                                                                                                                               hfnmag.com
                                                                                                                                       textiles the markets

Marginal sales
                                                                                          beD spreaDs                       Channels of Distribution
                                                                                                                  Other                                                  Other
                                                                                                                  1%                                                     2%




rise in 2005 Leaves                                                                                   Catalogs
                                                                                                       11%
                                                                                                                                                              Catalogs
                                                                                                                                                               10%




industry upbeat
                                                                                          Specialty stores                 Department              Specialty stores               Department
                                                                                              12%                            stores                    10%                          stores
                                                                                                                             37%                                                    39%



                                                                                                    Mass merchants                                         Mass merchants
By Rosamaria Mancini                                                                                    39%                                                    39%

new yorK–It was a mixed bag for the textiles industry in 2005 as retail sales grew
marginally to about $19.7 billion, a small increase from the $19.6 billion in 2004.
But the growth was a sign that there are some textiles categories, such as pillows,
                                                                                          Retail Sales              2005                % cHange                         2004
mattress pads and sheets, that are coming on strong in spite of the shrinking retail
base and overseas competition.                                                            ($ millions)            $396.07                    0                         $396.07
   “2005 was a banner year in sales for Hollander, although it did have its challeng-
es,” said Beth Mack, a senior vice president in Hollander’s basic bedding division,
who noted that direct importers made a huge impact at retail and her company had
to go head-to-head on almost all product categories.
   Jeff Jacobs, executive vice president of sales for Sferra, said 2005 was a challeng-
                           ing year for retail in general, but fortunately the luxury
     STATE                 sector weathered that difficult economic environment           QuilTs             Channels of Distribution
of tHe industry well. “Sferra was able to continue to expand distribution                                         Other                                                   Other
                           of our products and brands in a measured and thoughtful                                2%                                                      0.5%
manner,” he said. “This allowed us to gain retail shelf space, but maintain an exclu-
sive air to the products. …We want to maintain control of how our products are sold,                     Catalogs                                                Catalogs
                                                                                                           5%                                                      5%
and to educate consumers as to why the investment quality is worth the price.”
   Baltic Linen Co. said it finished the year on top. “It was a fairly good year, all                                     Department                                             Department
things considered,” said Rick Lipton, director of bath accessories at Baltic Linen Co.,                                     stores                    Specialty stores             stores
                                                                                              Specialty stores              28%
who cited pressure to remain relevant to the consolidated retail survivors.                       19%                                                    18.5%                    30.5%
   Looking forward, vendors said 2006 had already started off strong. “If all goes
as planned, 2006 will prove to be as successful as 2005,” Mack said. “We will still
have the same challenges with imports; however, with time comes experience. If
anything, it has caused us to work faster and smarter.”
                                                                                                             Mass merchants                                     Mass merchants
   Others believe that in order to increase their business, they must continue to push                                                                             45.5%
                                                                                                                 46%
for fresh, one-of-a-kind styles. “We are design-driven with almost 75 percent of our
New York staff dedicated to design and creating innovative looks to help separate us
out from the competition,” Lipton said.
   The challenge in a business that is now dominated by importing is to “secure           Retail Sales              2005                % cHange                         2004
deliveries and assure quality standards that will not only make you continuously          ($ millions)            $501.98                 -0.4%                          $504
relevant, but valuable as well,” Lipton added.
   Jacobs said one of the issues his company will face will be to “master the op-
portunities and the dynamics of retail product distribution in a rapidly changing
marketplace. The impact of the Internet on consumers and our service-oriented
specialty store marketplace for our products presents interesting challenges.
We are trying to find the equilibrium point of developing all channels in an ap-          baggeD beD ensembles                                   Channels of Distribution
propriate manner.”                                                                                   Catalogs
                                                                                                       1%
                                                                                                                  Other                                                Other
Bedroom                                                                                                           3%                                          Catalogs 3%
The bedding category posted some of the strongest numbers overall. The bed                                                                                      4%
pillow business saw some of the best overall sales growth in 2005, jumping 6
percent to $983 million, from $928 million in 2004. The mass merchants con-                    Specialty stores            Department                                             Department
                                                                                                   20%                       stores                   Specialty stores              stores
tinue to be the “go-to” place for bed pillow products, followed by specialty and                                                                          17%
                                                                                                                             31%                                                    31%
department stores. The growth here was credited to “pricing consistency of filler
materials” as well as a lower, more moderate price point associated with the pil-
low business.
   Other basic bedding categories were also strong, including mattress pads, whose                        Mass merchants                                         Mass merchants
retail sales totaled about $571 million, up 5 percent from the $544 million in 2004.                          45%                                                    45%
In this category, where there has been a growing interest in creating the “heavenly
bed” type of feeling at home, sales distribution remained the same from 2004.
Again, the mass merchants dominated the category with 55 percent of the channel
of distribution pie, followed by department and specialty stores.
                                                              Continued on page 30        Retail Sales              2005                % cHange                         2004
                                                                                          ($ millions)           $1,390.92                  1%                        $1,377.15




some categories are growing despite a shrinking retail base and overseas competition
hfnmag.com                                                                                                                                                     February 27, 2006/ HFN 27
the markets textiles
Marginal sales increase in 2005 Leaves industry upbeat
Continued from page 29                                                     STATE            ing the “cost increase” associated with down fills, as well as the bird
  The comforter business produced mixed results in 2005. The sale of tHe industry flu scare that is now traveling through Europe, particularly in Italy
of non-down comforters saw a hefty 6 percent increase, with sales                           and greece.
totaling about $1.5 billion, but the down comforter business slowed. Sales in    The retail sale of sheets continued its steady rise. Sales totaled about $2.46 billion,
the down category dropped to $511 million, a 3 percent decrease from the $527 up from $2.43 billion in 2004. In this category, specialty stores continued to grow their
million in 2004. There were several reasons for the slide, vendors said, includ-                                                                  Continued on page 32


 beD pillows                     Channels of Distribution                                            comForTers (non-Down)                                 Channels of Distribution

                Catalogs Other                                        Catalogs                                              Other                                               Other
                  1% 1%                                                 2%                                                  1%                                                  1%
                                                                              Other
                                                                             2.5%                                   Catalogs                                             Catalogs
                                                                                                                      6%                                                  6.5%
                                                                                                                                    Department
          Specialty              Department                                                                                           stores                                            Department
           stores                  stores                       Specialty               Department          Specialty                 20%                      Specialty                  stores
           18%                     23%                           stores                   stores             stores                                             stores                   21.5%
                                                                16.5%                    24.5%               18%                                                18%




                Mass merchants                                                                                      Mass merchants                                          Mass merchants
                                                                        Mass merchants                                  55%
                    57%                                                    54.5%                                                                                                53%




 Retail Sales             2005                % cHange                          2004                 Retail Sales            2005                % cHange                       2004
 ($ millions)           $983.89                    6%                          $928.2                ($ millions)          $1,559.61                 6%                     $1,471.33


 sHeeTs              Channels of Distribution                                                        maTTress paDs                        Channels of Distribution
                         Other                                                  Other
                         1%                                                     1%
                                                                                                                          Other                                               Other
                                                                                                                 Catalogs 2%                                         Catalogs 3%
              Catalogs                                                Catalogs                                                                                         2%
                 2%    Department                                                                                  3%
                                                                        3%     Department
                         stores                                                  stores
                         10%                                                                                                        Department                                          Department
         Specialty                                              Specialty        12%                    Specialty stores              stores                 Specialty stores             stores
          stores                                                 stores                                     15%                       25%                        15%                      25%
          20%                                                    17%




                     Mass merchants                                                                                  Mass merchants
                                                                                                                         55%                                              Mass merchants
                         67%                                                Mass merchants                                                                                    55%
                                                                                67%




 Retail Sales             2005                % cHange                          2004                 Retail Sales            2005                % cHange                       2004
 ($ millions)          $2,469.44                  1.4%                      $2,435.35                ($ millions)          $571.68                   5%                      $544.46


 Down comForTers                              Channels of Distribution                               HarD winDow coverings                                 Channels of Distribution
                                                                                                                            Department                                         Department
                                                                                                                        Other stores                                       Other stores
                       Other                                                 Other                                      2% 2%                                              1% 3%
                       5%                                                    5%
          Catalogs                                               Catalogs
           10%                                                                                                   Catalogs                                            Catalogs
                                                                  10%                                              6%
                                 Department                                                                                                                           10%
                                                                                        Department                                    Mass                                                Mass
                                   stores                                                 stores                                    merchants                                           merchants
                                   30%                                                    35%                                        20%                                                 18%
                                                                                                           Home
    Specialty stores                                        Specialty stores                            improvement                                           Home
        25%                                                     25%                                       centers                                          improvement
                                                                                                           32%                                               centers
                                                                                                                                                              30%

                          Mass merchants                                       Mass merchants                                Specialty stores                                       Specialty stores
                              30%                                                  25%                                           38%                                                    38%




 Retail Sales             2005                % cHange                          2004                 Retail Sales            2005                % cHange                       2004
 ($ millions)           $511.81                   -3%                       $527.64                  ($ millions)          $4,452.2                  3%                     $4,322.52


28 HFN / February 27, 2006                                                                                                                                                                     hfnmag.com
the markets textiles
industry upbeat About Marginal sales increase in 2005
Continued from page 30                                                         STATE               mained relatively flat. Sales of bedspreads stayed at $396 million and
market share—they accounted for 20 percent of the business, up from 17 of tHe industry the channel of distribution pie remained basically the same, with mass
percent in 2004. But the mass merchants continued their dominance in                               merchant stores leading the way. The quilt business, which had annual
this category with 67 percent of the market share, followed by specialty and depart- sales that totaled about $501 million, suffered slightly with an almost 0.5 percent loss.
ment stores.                                                                         In 2004, retails sales of quilts were $504 million. Sales of bagged bed ensembles grew
  For the most part, sales of bedspreads, bagged bedding ensembles and quilts re- 1 percent to $1.39 billion, from $1.37 billion in 2004.


 curTains & Drapes                            Channels of Distribution                                  baTH Towels                     Channels of Distribution

        Catalogs                                               Catalogs
          3%          Home                                       3%          Home                                        Other                                                Other
                                                                                                                Catalogs 5%
                   improvement                                            improvement
                                                                                                                  2%           Department                             Catalogs 5%       Department
                     centers                                                centers                                              stores                                 4%                stores
                       5%                                                     5%                                                 14%                                                      13%
                                  Department                                              Department
                                    stores                                                  stores         Specialty stores
                                                            Specialty stores                32%                22%                                              Specialty stores
    Specialty stores                27%                                                                                                                             21%
                                                                17%
        20%


                                                                                                                              Mass merchants                                    Mass merchants
                   Mass merchants                                    Mass merchants                                               57%                                               57%
                       45%                                               43%




 Retail Sales            2005                   % cHange                       2004                     Retail Sales             2005               % cHange                        2004
 ($ millions)          $2,693.92                   -7.5%                  $2,912.35                     ($ millions)          $2,227.14                 1.3%                    $2,197.84


 Table linens                     Channels of Distribution                                              sHower curTains                           Channels of Distribution
                       Other                                                    Other                            Catalogs                                            Catalogs
                       3%                                                       1%                                1.5%                                                2.5%
                                                                                                                            Other                                               Other
                                                                       Catalogs                                             4.5%                                                4.5%
            Catalogs                                                     5%                                                          Department
              7%               Department                                                                                              stores                                               Department
                                 stores                                                 Department                                     18%                                                    stores
                                 18%                                                      stores                                                                                              20%
                                                                                          23%               Specialty stores                                     Specialty stores
                                                                                                               21.5%                                                 21%
                                                           Specialty stores
    Specialty stores                                           35%
        38%
                                 Mass merchants
                                     34%                                                                                      Mass merchants
                                                                                  Mass merchants                                 54.5%                                          Mass merchants
                                                                                      36%                                                                                           52%




 Retail Sales            2005                   % cHange                       2004                     Retail Sales             2005               % cHange                        2004
 ($ millions)           $619.27                    0.5%                       $619.19                   ($ millions)           $516.79                   -1%                       $522.01


 KiTcHen TexTiles                           Channels of Distribution                                    baTH accessories                          Channels of Distribution
                         Other                                                 Other                                   Catalogs                                                     Other
                          1%                                                    2%                                       1%                                                         1.5%
                                                                                                                             Other                                        Catalogs
                Catalogs                                                                                                      3%                                           2.5%
                  4%     Department                                  Catalogs                                                        Department                                        Department
                           stores                                      6%              Department
                                                                                         stores                                        stores                                            stores
                           10%                                                                                                         10%                                               12%
                                                                                         14%
                                                                                                              Specialty                                            Specialty
                                                                                                               stores                                               stores
      Specialty stores                                                                                         26%                                                  23%
          37%                                               Specialty stores
                                                                33%
                               Mass merchants                                          Mass merchants
                                   48%                                                                                          Mass merchants
                                                                                           45%                                      60%                                         Mass merchants
                                                                                                                                                                                    61%




 Retail Sales            2005                   % cHange                       2004                     Retail Sales            2005                % cHange                        2004
 ($ millions)           $543.27                     5%                        $517.40                   ($ millions)           $329.51                    0                        $529.51


29 HFN / February 27, 2006                                                                                                                                                                        hfnmag.com
                                                                                                                             textiles the markets
Bathroom                                                    cessful because they worked to expand their portfolio          These slow sales were the result of several factors,
There were no major fluctuations in the bath business       and introduced products such as those that filter out        including an internal tug-of-war between the soft
in 2005, despite a year dominated by higher material        harmful light.                                               and hard window categories, in which the hard win-
costs. The category that did see an increase was the bath     The soft window coverings business, however, suf-          dow manufacturers have been winning over more
towel business, which accounted for sales of about $2.22    fered the biggest loss in 2005. Its sales dropped 7.5 per-   buyers through advertisements in shelter maga-
million, a 1.3 percent increase from $2.19 million in       cent to $2.63 billion, from $2.91 billion in 2004.           zines. n
2004. That lackluster growth,
vendors said, had to do with a
shrinking market.
  The bath accessory business
held on to its $329 million in
sales, in spite of tougher over-
seas competition. The category
also had to cope with a series
of raw material cost increases
for resin-based products that
have a petroleum component.
The mass merchant stores
were the retail outlet of choice
for bath accessory shoppers—
60 percent of the market
share—followed by specialty
and department stores. Cata-
log companies came in dead
last with only 1 percent of the
business.
  Shower curtain sales, how-
ever, dipped slightly in 2005 to
about $516 million, from the
$522 million in 2004, a 1 per-
cent decrease.The slowdown in
this category was attributed to
“more and more competition”
and the eroding price points.

Kitchen
The kitchen business finished
2005 on a positive note.
   The sale of kitchen textiles
saw some of the greatest overall
gains in the textiles business.
The category saw its sales grow
to $543 million, a significant 5
percent increase from the $517
million in 2004. The channel of
distribution pie in the kitchen
textiles business was more
evenly split, with mass mer-
chants owning 48 percent of the
business, followed by specialty
stores, 37 percent; department
stores, 10 percent; catalogs, 4
percent; and other retail out-
lets, 1 percent.
   Table linens also showed
some growth: 0.5 percent. The
category saw its sales move
slightly higher to $543 million
from $517 million the previous
year.

Window Treatments
Hard window treatments
reigned in 2005 when com-
pared to the lackluster sales of
soft window treatments. The
category saw a 3 percent in-
crease with sales totaling $4.4
billion. Again specialty home
stores ruled, occupying 36 per-
cent of the market share. In a
category, where innovation is a
must, manufacturers were suc-

hfnmag.com                                                                                                                                        February 27, 2006/ HFN 30
   the markets floor covering

     macHine-maDe area rugs Channels of Distribution                                                  HanDmaDe area rugs                               Channels of Distribution

                      Other 1%                                                Other 1%

                                                                          Catalogs                                    Catalogs                                                Catalogs
                Catalogs     Department                                     7%                                          8%                                                      5%
                 13%           stores                                                    Department                                                                   Home
                                                                                                              Home                 Department                      improvement              Department
                               15%                                                         stores                                    stores
                                                                  Home                     20%             improvement                                               centers                  stores
                                                               improvement                                   centers                 23%                              14%                     24%
          Home                                                   centers                                      15%
       improvement                Mass merchants                  20%
         centers                     & clubs                                                                                                                   Furniture stores
          20%                                                      )                                                                                              & chains
                                      20%                  Furniture stores                               Furniture stores            Mass merchants                 )                      Mass merchants
                                                                                     Mass merchants                                                                 15%
                                                              & chains                                       & chains                    & clubs                                               & clubs
                                                                 8%                     & clubs                18%                        19%                                                   17%
                                  Flooring                                               33%
              Furniture stores     stores                              Flooring                                                                                           Flooring stores
                 & chains          11%                                  stores                                         Flooring stores                                         25%
                   20%                                                  11%                                                 17%



    Retail Sales           2005               % cHange                            2004                Retail Sales             2005              % cHange                          2004
    ($ millions)       $1,591.28                   3.3%                      $1,541.19                ($ millions)           $1,108.39                 -3.8%                  $1,151.57




     accenT rugs                   Channels of Distribution                                           wasHable rugs                        Channels of Distribution

                       Other 1%                                               Other 2%                        Catalogs 3% Other 1%                                  Catalogs 3% Other 1%

                            Department                                                                            Home                                                  Home
                              stores                                                     Department         improvement           Department                      improvement
                                                                                                      )          centers                                               centers
Flooring   Specialty stores    9%                   Flooring                               stores                                   stores                                                  Department
                                                                 Specialty stores          16%                      5%                                                    5%
 stores         19%                                  stores           17%                                                           19%                                                       stores
  1%                                                  2%                                                                                                                                      24%
                                                                                                          Specialty stores
                                                                                                               18%                                              Specialty stores
                                                                                                                                                                     20%


                      Mass merchants                                          Mass merchants                             Mass merchants                                           Mass merchants
                         & clubs                                                 & clubs                                    & clubs                                                  & clubs
                          70%                                                     63%                                        54%                                                      47%




    Retail Sales           2005               % cHange                            2004                Retail Sales             2005              % cHange                          2004
    ($ millions)       $1,067.95                   -1.5%                     $1,084.21                ($ millions)           $799.86                   -3%                        $824.60




   Gaining Ground
   By Jennifer Quail                                             of that situation and advertise their fiber accordingly.                 of the business, rather than hand-knotted.
                                                                    Another big addition to the industry was the Las Vegas                   “Tufted rugs are a very large part of the industry,”
   new yorK–The rug industry has a positive outlook for Market. Many rug vendors were already signed on for the                           said one executive. And many others noted consumers
   the coming year. Executives said business                                   first building and temporary locations for the             are intrigued by the idea of a rug being made by hand
   began picking up quite a bit in the spring             STATE                very first market in July, and even more had               in any form and often don’t get into, or really under-
   of 2005, turning the year’s final numbers of tHe industry signed on by the time last month’s show came                                 stand, the difference between a rug being hand-knotted
   into ones the industry was satisfied with                                   around. The consensus among them is the                    or hand-tufted.
   and expects to see grow in 2006.                              market has hit with a bang and is not to be missed. It has                  Hand-tufted is also seeing the benefits of last year’s
      Big issues for the year were, of course, the non-stop opened the doors to new customers, bringing some of these                     astronomical oil prices. The rise in barrel costs so affect-
   monitoring of oil prices and all the other costs it affected. vendors to the West Coast retailers for the first time.                  ed synthetic products, that many are saying the timing
   From raw materials to gasoline to freight, the snowball          Mass merchants continue to be a force for this category               is ripe to promote wool and its natural benefits, not to
   effect seemed out of control. Now that the issue has lev- as they up the quality and assortment of product offered.                    mention the fact it no longer costs a great deal more.
   eled somewhat, there is the aftermath to deal with: the Vendors are also expecting a consumer interest in higher-                         With regard to hand-knotted, importers recently
   making up for lost profit, the return to something more end goods to play into business for the coming year.                           said one of the biggest problems for that business is the
   normal.                                                                                                                                fact there is just not as much available as in the past.
      The industry has said last year’s rising prices for syn- Handmade Area Rugs                                                         What used to be a craft passed on through families from
   thetic fibers have paved the way for a wool revolution, Catalogs and mass merchants gained some ground here                            generation to generation is being abandoned for an
   and expect purveyors of wool products to make the most this year, likely evident of growth in the hand-tufted end                                                          Continued on page 36

   The industry looks to continue on the path that started to take shape at the end of last year
   31 HFN / February 27, 2006                                                                                                                                                                    hfnmag.com
the markets floor covering

                             Gaining
                             Ground
                             Continued from page 34
                             education and careers in business, among other things.
                             While importers are supportive of the educational pro-
                             cess, they are also beginning to fear the heritage of the
                             hand-knotted tradition may be fading away.

                             Machine-Made Area Rugs
                             Two big factors are hitting the machine-made rug busi-
                             ness at present: the impact of overseas production and
                             the closing of the pricing gap between wool and syn-
                             thetic products.
                                Vendors at recent shows stressed that pricing has
                             become a key issue. In the aftermath of last year’s oil
                             prices, vendors have been making tough decisions with
                             regard to how many increases they can take themselves
                             before passing the cost along
                             to their dealers. Retailers,           STATE
                             on the other hand, are say- of tHe industry
                             ing they would rather see
                             one double-digit price increase, as opposed to multiple
                             smaller ones they are likely to swallow themselves. Pric-
                             ing promises to be an issue going forward this year, as
                             machine-made synthetic rugs are reaching, and some-
                             times surpassing, prices for hand-tufted wool rugs. The
                             issue now moves heavily to the consumer. Executives
                             agree, when faced with a wool rug versus nylon or poly-
                             propylene, a consumer will lean to the wool choice if
                             the price tags are similar. The question is: How do they
                             keep the synthetic prices down?
                                On the production end, the story remains the same.
                             Domestic production is losing the battle, and more
                             business is going to China where technique and ability
                             seems to improve daily.

                             Accent Rugs
                             Accent rugs saw just a tiny decline, with mass mer-
                             chants picking up business once held by the depart-
                             ment stores. This fact further illustrates what vendors
                             have been saying with regard to mass retailers: When
                             it comes to smaller-ticket items, they have become the
                             place to be. Consumers are more crunched for time, and
                             the mass merchants are increasingly working to help
                             them save it, and some hard-earned dollars to boot.
                                Accent rugs have gained new players in recent years,
                             creating more buzz and selection in the category as
                             well. It’s also a category that benefits from consumers’
                             interest in keeping their homes seasonal, as character
                             and holiday-themed product continues to sell well.

                             Washable Rugs
                             Washable rugs saw another decline this year, follow-
                             ing a 5 percent drop during the year prior. Much of the
                             blame here falls to the same reasons as the machine-
                             made category: The cost of raw materials has made
                             doing business a tricky operation. As is the case in
                             accent rugs, mass merchants are picking up business
                             here and department stores are the ones suffering the
                             consequential loss for the second year in a row. Again,
                             the convenience factor outweighs many other deci-
                             sion makers. And with mass retailers making strides
                             to bring in the highest-quality goods in their price
                             range, the choices have started to rival those of some
                             department stores. n

32 HFN / February 27, 2006                                              hfnmag.com
 upHolsTereD FurniTure Channels of Distribution




                                                                                                                      After the storm
                   Other                      Mass merchants                Other     Department     Mass merchants
                               Department                                    9%
                    9%           stores          & clubs                                stores          & clubs
                                 13%               6%                                   13%               3%
                                                                Specialty
       Specialty                                                 stores
        stores                                                   13%
        17%


                                                                                                                      HFN Staff Report                           best be described as a tepid year. Top-
                   Furniture stores                                         Furniture stores                                                                     ranked Furniture Brands International
                      & chains                                                 & chains
                        55%                                                      62%                                  new yorK–As was the case for many saw its sales fall 2.5 percent as its mid-
                                                                                                                      home furnishings categories, one of the priced divisions struggled. Furniture
                                                                                                                      biggest impacts of 2005 came by way of a Brands has restructured its top man-
                                                                                                                      natural disaster.                          agement and combined three former
 Retail Sales            2005                   % cHange                            2004                                 Hurricane katrina, the event itself divisions—Henredon, Drexel Heritage
 ($ millions)        $22,790.14                     -0.6%                        $22,935.4                            and the aftermath, had                                 and Maitland-Smith—into
                                                                                                                      quite an effect on the fur-          STATE             the newly named HDM, all
                                                                                                                      niture industry, attacking of tHe industry in an effort to stop the slow
 reaDy-To-assemble Channels of Distribution                                                                           everything from trucking                               slide. Meanwhile, Furniture
                                                                                                                      to oil to polyurethane foam production. Brands’ closest competitor is poised to
                        Other                                               Other
       Specialty stores 3%           Department stores     Specialty stores 4%          Department stores             Not to mention the shuttering—some take over the top manufacturing spot,
             4%                            2%                    5%                           3%
                                                                                                                      temporary, some permanent— of count- as Ashley Furniture Industries posted
Home improvement                                    Home improvement
    centers                                             centers                                                       less stores in the gulf region. Many in overall sales of $2.6 billion in 2005.
      5%                                                  6%                                                          the industry consider the natural disas-     In case goods categories, formal din-
             Electronics                                                                                              ter to have had the largest overall impact ing lost even more ground last year as
               stores
                9%
                                                                Electronics                                           on the industry’s results for the year.    consumers continue their love affair with
                                                                  stores
                                       Mass merchants              10%                     Mass merchants                Anti-dumping as a subject of concern open-plan homes and more informal set-
                                          & clubs                                             & clubs
                                           45%                                                 41%                    basically went away in 2005, proving to tings. The gainers continue to be bed-
                   Office
                superstores                                             Office                                        be a non-issue for the year. Although, room furniture, spurred by lower-priced
                   24%                                               superstores
                                                                        23%                                           only two months into this year, the issue imports, as well as the super-hot juvenile
                           Furniture stores                                     Furniture stores                      is starting to heat up again. And imports bedroom furniture category.
                              & chains                                             & chains                           continued to be a focus of great concern,    The big stories in 2005 for case goods
                                 8%                                                   8%
                                                                                                                      as the threat of overseas production fur- were raw materials costs, pricing and
 Retail Sales               2005                % cHange                            2004                              ther ravaged the industry.                 plant closures. Hurricane katrina’s im-
                                                                                                                         On a brighter note, the industry wel- pact was felt in the case goods segment
 ($ millions)          $3,438.92                     3.6%                        $3,318.62
                                                                                                                      comed the Las Vegas Market to its show as much as it was in any other, but price
                                                                                                                      calendar. While some of the biggest increases also hit lumber supplies, pinch-
                                                                                                                      names have yet to sign on, a growing list ing manufacturers between higher costs
 casual FurniTure Channels of Distribution
                                                                                                                      of companies from all areas of the home and low prices demanded by retailers.
                                                                                                                      furnishings market are quickly filling up That, coupled with the continued pres-
                       Other                                                    Other
                        4%                                                       4%                                   future buildings. And show management, sure from imported goods from China
                                                                                                                      as well as current tenants, are convinced and other countries, forced even more
            Home                                                     Home
         improvement                                              improvement                                         the market is here to stay and will prove plant closures in the United States, with
           centers                                                  centers                                           to be a model for future market centers.   shut-down announcements posted al-
            18%                                                      17%
                                                                                                                                                                 most every week throughout the fall.
                                  Mass merchants                                           Mass merchants
                                     & clubs                                                  & clubs                 Case Goods
                                      47%                                                      48%                    The case goods segment of the home Upholstered Furniture
       Specialty stores                                         Specialty stores                                      furnishings industry had what can Of the five categories of furniture
            27%                                                      27%
                                                                 )
                     Furniture stores                                         Furniture stores
                        & chains                                                 & chains                              maTTresses Channels of Distribution
                           4%                                                       4%

                                                                                                                                      Other 2%                                Other 5%
Retail Sales                2005                % cHange                            2004
($ millions)            $4,709.47                   3.8%                        $4,537.06                                                      Department                                   Department
                                                                                                                                                 stores                                )      stores
                                                                                                                                                  7% Mass                                      8% Mass
                                                                                                                                                      merchants                                   merchants
                                                                                                                                                        & clubs                                     & clubs
 case gooDs Channels of Distribution                                                                                                                     12%                                          9%
                                                                                                                                 Specialty                                 Specialty
                           Department                                                Department                                   stores                                    stores
                             stores                                                     stores                                    42%                                       40%
                   Specialty 6% Mass                                          Specialty 7% Mass
                    stores        merchants                                    stores                                                             Furniture stores                            Furniture stores
                                                                                              merchants                                              & chains                                    & chains
                    13%             & clubs                                    11%             & clubs
                                     12%                                              )                                                                37%                                         38%
                                                                                                12%




                      Furniture stores                                          Furniture stores
                         & chains                                                  & chains                            Retail Sales            2005             % cHange                   2004
                           69%                                                       70%
                                                                                                                       ($ millions)          $8,044.58               7%                $7,518.3



 Retail Sales                 2005              % cHange                            2004                              The impact of Hurricane Katrina shook up
 ($ millions)           $26,724.56                   3.7%                       $25,779.32
                                                                                                                      the furniture, lighting and decor industries
33 HFN / February 27, 2006                                                                                                                                                                          hfnmag.com
                                                                                        furniture & lighting                                       the markets
tracked by HFN, upholstery was the only      year, as it gains momentum from 2005.      its components and accessories. And as       allowing them to migrate from the kitchen
one to show a decline in retail sales dur-   The larger, flat-panel screens have been   that RTA category expands, it fills in the   table to the bedroom. RTA manufacturers
ing 2005. The main culprit for this de-      coming on strong and dropping in price.    relatively flat growth of computer work-     have been partnering with more home
cline, of course, was Hurricane katrina’s    And those dimensions have led to a de-     stations. Wireless laptops and keyboards     hobbyist retail stores, providing compact
enormous impact on the polyurethane          mand for home-entertainment furniture      have subtly been freeing up consumers to     workstations with foldout surfaces and
foam industry. Oil was having its own        to house this merchandise, along with      work where they want around the house,                           Continued on page 42
impact on the category, but the
refineries that convert that oil
to the chemical that makes the
polyurethane foam were all
based in the gulf Coast.
   There was also the factor of
ever-increasing pressure felt by
retailers to lower their prices in
the face of cheaper imports, just
as they, in turn, pay less for manu-
factured goods from vendors, who
have been suffering “horrendous
price suppression,” as noted by
the head of a Canadian furniture
manufacturers association.
   Deflation and imports were
not the only news of the uphol-
stery market in 2005, but they
were significant. Imports of the
category grew more than 12 per-
cent during the year—reaching
more than $2.3 billion—and an
astounding 98.6 percent since
2000.
   Other key developments dur-
ing the year included the recom-
mendation of new upholstery
flammability standards by the
staff of the Consumer Product
Safety Commission.

Casual Furniture
“When it’s warm, it’s busy in
the store, but when it’s cold,
there’s no one here,” comment-
ed a casual furniture retailer in
Williamsport, Pa., on the role of
weather in influencing sales of
the category.
   Weather has always been a
key determinant of sales, and
2005 was no exception.
   Above-average temperatures
beckoned more shoppers to their
“outdoor rooms” and therefore
to new furnishings.
   And the products they pur-
chased were more than tradi-
tional seating combos, as con-
sumers sought out bar sets,
gazebo canopies and deep-seat-
ing sofas, among other items.
   In addition to buying more
and different, they bought more
upscale, moving away from
so-called “pool furniture.” As
noted by Craig Chapello, presi-
dent of the Casual Furniture
Retailers Association, “Con-
sumers are upgrading to nicer,
more unique styles and more
full collections that go beyond
just tables and chairs.”

Ready-to-Assemble
Look to television to continue
to drive the growth in RTA this

hfnmag.com                                                                                                                                      February 27, 2006/ HFN 34
the markets furniture & lighting
After the storm
Continued from page 41                       RTA vendors, via big-box retailers, also    Mattresses                                  er and a touch of pizzazz, to boot. This
storage areas for sewing and other skills.   continued to grow this past year and show   What’s in a name? Apparently a lot if the   past year has seen an influx of designer
Direct-ship programs to consumers from       no signs of letting up.                     name has credibility with the consum-       names, primarily female, that are tied
                                                                                                                                              to mattress lines that drive the
                                                                                                                                              mid to luxury levels of bedding.
                                                                                                                                              kathy Ireland, with her own
                                                                                                                                              growing multicategory offer-
                                                                                                                                              ings, entered the mattress fray
                                                                                                                                              last fall with her own line from
                                                                                                                                              Therapedic Sleep Products and
                                                                                                                                              got a positive reception with
                                                                                                                                              the grand unveiling at the Las
                                                                                                                                              Vegas Market in January. At-
                                                                                                                                              tracting the growing Hispanic
                                                                                                                                              market is Lady Americana’s
                                                                                                                                              Casa Cristina collection, driven
                                                                                                                                              by Hispanic talk show diva and
                                                                                                                                              author Cristina Saralegui. And
                                                                                                                                              Serta has begun catering to the
                                                                                                                                              bridal industry with its collec-
                                                                                                                                              tion by bridal designer Vera
                                                                                                                                              Wang.
                                                                                                                                                 Price points for all mattresses
                                                                                                                                              are in a state of flux and have

                                                                                                                                                        STATE
                                                                                                                                                    of tHe industry
                                                                                                                                              been since last fall when Hur-
                                                                                                                                              ricane katrina destroyed some
                                                                                                                                              key raw material sources for
                                                                                                                                              cushioning foam. Coupled with
                                                                                                                                              escalating steel prices and fuel
                                                                                                                                              prices, bedding manufacturers
                                                                                                                                              are scrambling to keep prices
                                                                                                                                              somewhat in line and look for
                                                                                                                                              more imaginative ways of build-
                                                                                                                                              ing beds. Retail channels of dis-
                                                                                                                                              tribution for bedding have also
                                                                                                                                              broadened, perplexing tradition-
                                                                                                                                              al brick-and-mortar retailers.

                                                                                                                                              Lighting
                                                                                                                                              The lighting market is clearly
                                                                                                                                              showing the effects of raw
                                                                                                                                              material increases as the busi-
                                                                                                                                              ness remained flat in fixtures
                                                                                                                                              and declined in lamps. Ven-
                                                                                                                                              dors most frequently cited
                                                                                                                                              the prices of raw materials as
                                                                                                                                              the biggest issue they’re fac-
                                                                                                                                              ing in the industry, along with
                                                                                                                                              the increasing demand in the
                                                                                                                                              Chinese market. “With the
                                                                                                                                              shortages of raw materials,
                                                                                                                                              as Chinese domestic demand
                                                                                                                                              increases, U.S. manufacturers
                                                                                                                                              are negatively impacted,” one
                                                                                                                                              fixture company executive said.
                                                                                                                                              Lighting company executives
                                                                                                                                              cited other factors they see as
                                                                                                                                              challenges to the industry, in-
                                                                                                                                              cluding rapidly rising fuel and
                                                                                                                                              energy costs, improved qual-
                                                                                                                                              ity of Chinese-produced goods,
                                                                                                                                              Chinese labor costs and a pos-
                                                                                                                                              sible slowdown in the housing
                                                                                                                                              market.
                                                                                                                                                 The business continues
                                                                                                                                                        Continued on page 44

35 HFN / February 27, 2006                                                                                                                                        hfnmag.com
the markets furniture & lighting
After the storm                                                                                                                      ligHTing FixTures Channels of Distribution

                                                                                                                                           Department stores
                                                                                                                                                               Mass merchants
                                                                                                                                                                  & clubs                     Department stores
                                                                                                                                                                                                                   Mass merchants
                                                                                                                                                                                                                      & clubs
                                                                                                                                                 1%                 3% Furniture stores             2%                  3% Furniture stores
Continued from page 42                                                                    Wall Decor                                                                        & chains                                            & chains

to show a shift in the channels                          STATE                            While alternative wall decor showed
                                                                                                                                                                              2%                                                  4%

of distribution, which will show of tHe industry significant gains and sales of framed
even more shifts as home centers                                                          mirrors were up as well, framed art
increase their distribution business. “Home declined nearly 6 percent, reflecting the price                                              Home improvement          Lighting &               Home improvement
                                                                                                                                             centers             specialty stores               centers               Lighting &
centers are starting the distribution chain and compression in the market and the competition                                                49.5%                  44.5%                         48%               specialty stores
taking out the middleman,” said a lamp com- by other forms of wall decor.                                                                                                                                                43%

pany executive. Home improvement chains                                   Sales of the three businesses showed some shifts
gained distribution again in 2005 in fixtures as well. Alternative wall decor, which increased 5
and lamps.                                                             percent in 2005, showed increases in department
                                                                                                stores and mass merchants/
                                                                                                clubs. But furniture stores, spe-    Retail Sales        2005                 % cHange                       2004
 lamps Channels of Distribution
                                                                                                cialty stores and “other,” which     ($ millions)     $3,136.30                     0.2%                   $3,128.48
                  Other Department stores
                   3%
                                                             Other Department stores
                                                              2%
                                                                                                includes the Internet, declined 1
                                 3%                                         3%
                                                                                                percent. In framed mirrors, de-
                                                                                                partment stores declined while       FrameD mirrors Channels of Distribution
             Home                                        Home
          improvement                                 improvement                               mass merchants and clubs
                                                        centers
            centers           Mass merchants
                                 & clubs                 16%
                                                                         Mass merchants
                                                                            & clubs
                                                                                                gained a tremendous share,                            Other
             18%                                                                                                                                                                                           Other
                                  22%                                        22%                accounting for nearly half the                         5% Department
                                                                                                                                                                                                            8%      Department
                                                                                                business in 2005. Furniture                                 stores                                                    stores
                                Furniture stores                           Furniture stores                                                                  7%                                                       10%
                                   & chains                                   & chains          stores and specialty stores de-
                                      9%                                        10%                                                       Specialty
                Lighting &                                Lighting &                            clined only slightly. The framed           stores
                                                                                                                                                                                               Specialty
                                                                                                                                                                                                stores
              specialty stores                          specialty stores
                   45%                                       47%                                art business gained in mass                29%                                                  30%
                                                                                                                                                               Mass merchants                                          Mass merchants
                                                                                                merchants and furniture stores,                                   & clubs                                                 & clubs
                                                                                                but department stores were flat.                                   48%                                                     40%
                                                                                                                                          Furniture stores
                                                                                                Specialty stores showed the big-             & chains                                              Furniture stores
 Retail Sales          2005                % cHange               2004                          gest loss of business, declining 6             11%                                                    & chains
                                                                                                                                                                                                        12%
 ($ millions)       $2,021.96                   -1.2%         $2,047.55                         percent. n

                                                                                                                                     Retail Sales        2005                 % cHange                       2004
                                                                                                                                     ($ millions)      $804.43                      1.3%                   $793.85


                                                                                                                                     FrameD arT Channels of Distribution


                                                                                                                                                      Other                                                Other
                                                                                                                                                       6% Department                                        7% Department
                                                                                                                                                            stores                                               stores
                                                                                                                                                            12%                                                  12%
                                                                                                                                          Specialty
                                                                                                                                           stores                                              Specialty
                                                                                                                                           24%                                                  stores       )
                                                                                                                                                                                                30%
                                                                                                                                                                Mass merchants                                         Mass merchants
                                                                                                                                                                   & clubs                                                & clubs
                                                                                                                                                                    35%                                                    31%
                                                                                                                                           Furniture stores
                                                                                                                                              & chains
                                                                                                                                                23%                                                   Furniture stores
                                                                                                                                                                                                         & chains
                                                                                                                                                                                                           20%



                                                                                                                                     Retail Sales        2005                 % cHange                       2004
                                                                                                                                     ($ millions)     $1,050.73                     -5.5%                  $1,111.88


                                                                                                                                     alTernaTive wall Decor Channels of Distribution

                                                                                                                                                      Other
                                                                                                                                                       5% Department                                       Other
                                                                                                                                                                                                            8%      Department
                                                                                                                                                            stores                                                    stores
                                                                                                                                                             7%                                                       10%

                                                                                                                                          Specialty                                            Specialty
                                                                                                                                           stores                                               stores
                                                                                                                                           29%                                                  30%
                                                                                                                                                               Mass merchants                                          Mass merchants
                                                                                                                                                                  & clubs                                                 & clubs
                                                                                                                                                                   48%                                                     40%
                                                                                                                                          Furniture stores
                                                                                                                                             & chains                                              Furniture stores
                                                                                                                                               11%                                                    & chains
                                                                                                                                                                                                        12%



                                                                                                                                     Retail Sales        2005                 % cHange                       2004
                                                                                                                                     ($ millions)      $453.18                       5%                     $431.6



36 HFN / February 27, 2006                                                                                                                                                                                            hfnmag.com
sTainless-sTeel FlaTware Channels of Distribution
                       Other 2%                       Catalogs 4%        Other 1%
                                                                                                                                   tabletop the markets
    Catalogs 3%




                                                                                              flat is Where it
  Supermarkets/                                   Supermarkets/
     drugstores                                      drugstores
            2%           Department                                         Department
                           stores                           3%                stores
                           16%                                                17%

  Specialty stores                                Specialty stores




                                                                                              Appears to Be At
       25%                                             24%


                       Mass merchants                                    Mass merchants
                          & clubs                                           & clubs
                           52%                                               51%


                                                                                              By Carla Webb O’Connor and Allison Zisko
Retail Sales            2005                % cHange                       2004
                                                                                              new yorK–The increase in tabletop as a whole was so slight in 2005 over 2004—only a
($ millions)           $829.25                2.3%                       $810.36
                                                                                              mere 0.3 percent—that for all intents and purposes, the category remained flat. Again,
                                                                                              housewares dinnerware, acrylic and melamine, and glassware were the winners, but the
sTerling-silver FlaTware Channels of Distribution                                             increases in these subcategories either did not meet or did not surpass the bars that were
                                                                                              raised last year. One surprise: Stainless-steel flatware, a category that has experienced
                                                                                              slight decreases the past few years, saw an increase in sales of more than 2 percent. A thriv-
                                                                 Other
                                                                                                                         ing set business and new and innovative designs in the category,
             Other
             12%          Department                             11%        Department            STATE                  as well as new players, could be responsible for the growth. Some-
                            stores                                            stores
                            18%                                               19%             of tHe industry thing that wasn’t a surprise, however, was the drop in siverplate,
                                                                                                                         which lost one-fifth of its 2004 market share in 2005, leaving some
    Catalogs                                          Catalogs                                to wonder what the future, if any, is for the product.
     22%                                               22%                                       Retailers’ private-label programs, interest in direct importing and demand for exclusive
                                                                                              designs in all areas of tabletop continue to erode the panache of brand names and create
                                                                                              a competitive field for manufacturers who are trying to outdo each other with innovative
               Specialty & jewerly stores                        Specialty & jewerly stores
                          48%                                              48%
                                                                                              design and lower price points. Meanwhile, licensing programs have grown in popularity, and
                                                                                              suppliers are expanding into other areas of the home, such as cookware, kitchen gadgets and
                                                                                              table linens, to grow their businesses and become one-stop shops for their customers.

                                                                                              Dinnerware
Retail Sales            2005                % cHange                       2004               It looked like the pendulum was slowly swinging back to formal the past few years, with up-
($ millions)           $116.00                0.0%                       $116.00              stairs dinnerware growing slightly. However, 2005 might have proved that theory wrong, as
                                                                                              the category suffered a 2.6 percent decline over 2004. Meanwhile, housewares dinnerware
                                                                                              gained 2.2 percent in 2005 over 2004.
silverplaTe FlaTware Channels of Distribution                                                    Of course, the “emerging consumer’s tendency toward casualization and minimization,”
                                                                                              as one supplier put it, might have been a strong influence on the decline in the formal din-
                                                                                              nerware category. “The consumer no longer shops the same way” is another executive’s
                                                                                              take on the situation. This includes where they shop. According to an upstairs dinnerware
         Other 17%                                        Other 17%
                                                                                              manufacturer, “the increase in comfort level of consumers using e-commerce has affected
                            Department                                        Department      the department stores sales.” Also affecting sales for that channel, which is the primary
                              stores                                            stores
                              25%                                               25%           retail source for formal dinnerware, is store consolidation. “Similarly, specialty stores are
                                                                                              becoming more of a part of the market share, taking from the catalog market,” continued
  Catalogs 23%                                    Catalogs 23%
                                                                                              the manufacturer. This can be seen in the increased presence Bed Bath & Beyond has had
                                                                                              in the category, growing its number of high-end concept stores, as well as the number of
                        Specialty stores                                  Specialty stores    suppliers who are represented. For example, Richard ginori just signed on to join the other
                             35%                                               35%            formal brands represented at Bed Bath & Beyond.
                                                                                                 Store consolidation is also a factor for housewares dinnerware in some ways, but as
                                                                                              most of its dollars come from the mass channel, this has not been as much of an issue
                                                                                              for the category, possibly contributing to its increase in sales last year. However, there
                                                                                              are several obstacles facing the category, many of which are the same for most home
Retail Sales            2005                % cHange                       2004
                                                                                              furnishings categories, such as rising fuel costs and the movement of retailers toward
($ millions)           $34.51                -20.0%                       $43.14              private-label lines and direct importing. The “lack of focus and direction among retail-
                                                                                              ers, prisoned by policy and not allowing buyers to make intuitive decisions” is another
upsTairs Dinnerware Channels of Distribution                                                  obstacle, according to a supplier.

                                                                                              Flatware
               Other                                             Other                        Flatware galloped along for the beginning of this decade, but in recent years it has slowed
  Catalogs     10%                                Catalogs       10%                          down to a trot. Last year, stainless-steel sales were up slightly, sterling silver was flat and
      5%                                              5%                                      siverplate was way down. Distribution channels remained fairly stable; department stores
                                                                                              lost a very small percentage of their share in the category.
                             Department                                         Department       Sets dominate this business. They account for a large portion of stainless-steel sales,
                               stores                                             stores      and they have furthered the erosion of the sterling-silver and siverplate business. But pric-
                               45%                                                47%
                                                                                              ing continues to be a hot-button issue; set prices have been kept down, despite high raw
                                                      Specialty stores
    Specialty stores
                                                           38%                                material and manufacturing costs for the better part of last year. Stainless-steel prices
         40%
                                                                                              have stabilized over the past six months, however, which may relieve some of the pres-
                                                                                              sure on manufacturers. Indeed, there appears to be some renewed vigor in the category,
                                                                                                                                                                       Continued on page 46


Retail Sales            2005                % cHange                       2004
                                                                                              while there were some surprises in the seg-
($ millions)           $797.18                -2.6%                      $818.46              ments, the industry as a whole remained stable
hfnmag.com                                                                                                                                                    February 27, 2006/ HFN 37
the markets tabletop
flat is Where it Appears to Be At
Continued from page 45
as manufacturers experiment with different materials, finishes and handle
treatments, as well as varied storage and display options. More manufactur-
ers have stepped into or expanded their flatware business; godinger entered
                          the fray and is moving full speed ahead; and WMF
    STATE                 is moving into the set business, where once it only
of tHe industry offered place settings.
                             Alas, the same cannot be said for siverplate and
sterling-silver flatware. With the exception of a very few successful manufac-
turers on the high end, such as Christofle, siverplate is all but dead in the
water. The promotional siverplate business has virtually disappeared and
the middle ground is headed for the same fate. Once a thriving business, con-
                                                          Continued on page 50

 Housewares Dinnerware Channels of Distribution
                        Other 2%                                          Other 2%

      Supermarkets/                                    Supermarkets/
         drugstores                                       drugstores
                4%          Department                           4%         Department
                            stores                                          stores
                            8%                                              8%

   Specialty stores                                Specialty stores
        26%                                             26%


                            Mass merchants                                 Mass merchants
                               & clubs                                        & clubs
                                60%                                            60%




 Retail Sales               2005             % cHange                       2004
 ($ millions)         $1,013.83                2.2%                        $992.15

 glassware Channels of Distribution

                    Other                                           Other
                    4% Department                                   4% Department
                          stores                                          stores
                          4%                                              4%


  Specialty stores                                    Specialty stores
       30%                                                 30%


                         Mass merchants                                     Mass merchants
                            & clubs                                            & clubs
                             62%                                                62%




 Retail Sales               2005             % cHange                       2004
 ($ millions)         $1,327.35                1.0%                       $1,314.21

 crysTal Channels of Distribution

                    Other                                           Other
                    5%                                               4%
         Catalogs                                           Catalogs
           8%                                                 8%


                                Department                                      Department
                                  stores                                          stores
                                  45%                                             47%
     Specialty stores                                  Specialty stores
          42%                                               41%




 Retail Sales               2005             % cHange                       2004
 ($ millions)           $644.51                -3.0%                       $664.44

38 HFN / February 27, 2006                                                                   hfnmag.com
the markets tabletop
flat is Where it Appears to Be At                                                                                                                                             STATE
                                                                                                                                                                         of tHe industry
Continued from page 46                                          silver, which has squeezed retail margins so tight that          Although it is the most robust tabletop category, even
sumers no longer have any interest in higher-priced,            several retailers are reportedly considering abandoning          larger companies were struggling with it by the end of last
harder-to-maintain products that still convey a sense           that segment of business altogether.                             year. Rising fuel and energy costs were one reason; retail
of old-fashioned stuffiness. The same can be said for                                                                            consolidation and direct importing also had an impact, as
sterling-silver flatware. But the biggest concern in that       Glassware                                                        it has in other categories. “Price erosion has adversely af-
business has been the dramatic increase in the price of         Overall glassware sales inched up ever so slightly in 2005.      fected growth for a couple of years,” said one vendor.


 acrylic beverageware Channels of Distribution                                              melamine Dinnerware Channels of Distribution


                         Department                              Department                                         Department                                   Department
           Specialty     stores                     Specialty    stores                               Specialty     stores                          Specialty    stores
            stores       5%                          stores      5%                                    stores       5%                               stores      5%
            17.5%                                    15%                                               17%                                           15%




                 Mass merchants                             Mass merchants
                    & clubs                                                                                 Mass merchants                                 Mass merchants
                                                               & clubs                                         & clubs
                    77.5%                                       80%                                                                                           & clubs
                                                                                                                79%                                            80%




 Retail Sales           2005          % cHange                   2004                       Retail Sales          2005             % cHange                     2004
 ($ millions)          $114.66          5.0%                    $109.20                     ($ millions)          $70.64               5.0%                     $67.27




39 HFN / February 27, 2006                                                                                                                                                     hfnmag.com
                                                                                                                            tabletop the markets
   “Retailers lack exciting product to get the consumer’s     acrylic has continued to be used in many design-driven       ry and rising fuel costs, the numbers speak for them-
interest,” said another.                                      and fashion-forward lines, such as Jonathan Adler, Bar-      selves: Melamine and acrylic are no longer the ugly
   Entertaining sets and barware, particularly specialty      bara Eigen and Colin Cowie.                                  stepchildren of the tabletop category, instead becoming
drinkware, drove this business, and will likely to continue      While the categories face many of the same obsta-         the next generation of innovative materials that many
to do so for the foreseeable future. Thematic designs, par-   cles as the rest of tabletop, including a shrinking retail   manufacturers are employing to grow lines and, hope-
ticularly card and other gaming motifs, were a popular        landscape, competition from new players in the catego-       fully, sales. n
trend, but one that is waning.
Color is still key in this business.
Lighting (candlesticks, votives,
hurricanes and oversized pieces)
and giftware should boost the
business this year, vendors say,
while improvements in quality
and design may propel the cate-
gory further in 2006. “I foresee a
strengthening at the higher end,
which will result in improved
sales and margins for retailers
and vendors over the next few
seasons,” said the vendor.

Crystal
Crystal sales continued to slide,
dropping about 3 percent last
year, suffering from the same
factors that prompted a 2 percent
drop the year before: dwindling
consumer interest in expensive,
formal tableware and competi-
tion from direct retail importing,
as well as glassware counterparts
who are succeeding with well-
designed, fashionable goods at
lower prices. Increased fuel and
transportation costs also had a
negative impact. “Retailers are
increasing the practice of deeply
discounting products earlier and
earlier in the critical fourth quar-
ter,” said one vendor. “Less in-
terest overall in lead crystal will
continue to erode the market,”
added another.
   Crystal manufacturers are
trying to combat this by play-
ing up offerings in barware,
which continues to boom; light-
ing; and other giftware items.
Clean, simple looks hold sway
over highly cut, more tradition-
al pieces.

Acrylic and Melamine
Acrylic and melamine continue
to be the little engine that could
in tabletop, chugging along year
after year and continually gain-
ing market share. Last year was
no exception, as both acrylic
beverageware and melamine
dinnerware and accessories
both grew 5 percent over 2004.
From the categories’ humble
beginnings as patio and pool-
side goods adorned with bright
summer motifs, the materials
have now become part of the
tabletop industry’s nomencla-
ture. Despite the lion’s share
of sales coming from the mass
channel, melamine has made
its way upstairs, showing up in
lines from gien and Sabre, and

hfnmag.com                                                                                                                                          February 27, 2006/ HFN 40
the markets housewares                                                                                           blenDers Channels of Distribution




the Costs of
                                                                                                                                    Other          Department                             Other           Department
                                                                                                                                    15%              stores                               16%               stores
                                                                                                                                                     15%                                                    15%

                                                                                                                        Specialty                                             Specialty
                                                                                                                         stores                                                stores
                                                                                                                         16%                                                   15%




doing Business
                                                                                                                                            Mass merchants                                        Mass merchants
                                                                                                                                               & clubs                                               & clubs
                                                                                                                                                54%                                                   54%




                                                                                                                 Retail Sales 2005                                % cHange                         2004
new yorK–Slowly but surely, things seem to be merchants and club retailers lost a portion of their               ($ millions) $492.47                                4.3%                       $472.02
looking up for the housewares industry, despite plen- share, with department and specialty stores picking
ty of factors that could spell trouble.                              up some of the business and other types     coFFeemaKers Channels of Distribution
Overall, sales in most categories in 2005        STATE               of retailers gaining the rest. The estab-
experienced minor increases, and most of tHe industry lishment of a food processor as a “must-
                                                                                                                                                                                                  Other
                                                                                                                                                                                         Catalogs 4%
                                                                                                                                     Catalogs                                              4%
                                                                                                                                       3%
fared better than they did in 2004.                                  have” on a bridal registry kept sales                                       Other
                                                                                                                                                  7% Department                                           Department
   But it’s no cause for celebration yet. Industry strong, even as some vendors reported that Ameri-                                Specialty
                                                                                                                                                       stores
                                                                                                                                                                     Supermarkets/ Specialty
                                                                                                                                                                      drugstores    stores                  stores
                                                                                                                                                       15%                                                  15%
players continue to be beleaguered by the twin cans may be losing interest in cooking at home.                   Supermarkets/
                                                                                                                  drugstores
                                                                                                                                     stores
                                                                                                                                     10%
                                                                                                                                                                         4%          8%

problems of rising materials and freight costs, and                                                                  4%

increased pressure from retailers on prices. What’s Toasters
more, the continued retail consolidation means The growth of the toaster category was spurred by                                                Mass merchants                                Mass merchants
that there’s an ever-shrinking pool of customers. consumers seeking replacement units at discounted                                                & clubs
                                                                                                                                                    61%
                                                                                                                                                                                                 & clubs
                                                                                                                                                                                                  65%
To combat this problem, manufacturers must look prices, although innovations of “counter-worthy”
for other means to grow their sales.                   styling, such as trendy colors and materials also
   Bright spots in the housewares world were food added interest to this product category. While there           Retail Sales                    2005               % cHange                       2004
processors, toasters, room heaters, air cleaners and has been a little innovation in the category, such as       ($ millions)                   $537.74               4.7%                      $513.76
wire storage products, while certain categories, multiple functions, and advances in toaster ovens,
such as carpet extractors, cutlery and women’s elec- vendors say there is still room for more excitement
tric shavers, saw sales decreases.                     to drive the category and encourage replacement           FooD processors Channels of Distribution
                                                       and trade-up sales. Mass channels have relinquished
Blenders                                               some of the business, with other retail channels,                             Other
                                                                                                                                                                                              Other
                                                                                                                                                                                              9%
                                                                                                                                                                                                          Department
Sales of blenders experienced an incremental such as the Internet and direct-response outlets,                                       16%            Department
                                                                                                                                                      stores
                                                                                                                                                                                 Catalogs                   stores
                                                                                                                                                                                   7%                       16%
increase of a few points, with little change in the picking up the slack.                                               Catalogs
                                                                                                                          5%
                                                                                                                                                      18%

breakdown of retail distribution. Mass merchants                                                                                                                             Specialty
                                                                                                                                                                              stores
and club stores continue to dominate distribution, Cookware and Bakeware (metal only)                                   Specialty
                                                                                                                         stores
                                                                                                                                                                              14%

selling more than half of all blenders, while depart- After a tough 2004 in which the category declined                  15%                     Mass merchants
                                                                                                                                                                                                   Mass merchants
                                                                                                                                                    & clubs
ment stores, specialty retailers and other retailers 3 percent, bakeware made a bit of a comeback in                                                 46%                                              & clubs
                                                                                                                                                                                                       54%
evenly shared the remainder. Vendors noted that a 2005. Meanwhile, cookware remained relatively
related product, the smoothie maker, is declining in flat. Among manufacturers’ concerns for the cook-
sales, and say that more innovation is needed in or- ware category are the costs of raw materials, energy
                                                                                                                 Retail Sales 2005                                % cHange                         2004
der to keep sales and market share from eroding.       and freight; retailers’ demands for branded pro-
                                                       grams and lower prices; the lack of technology to         ($ millions) $151.07                               12.0%                       $134.88
Coffeemakers                                           differentiate one manufacturer from another; the
Coffeemaker sales crept up only slightly, despite shrinking retail landscape; and the maturity of the            ToasTers Channels of Distribution
the plethora of new players and product introduc- market. Bakeware faces the same set of concerns,                                                                                  Catalogs Other
tion in the single-serve realm, and the addition of with the added issue of competition from silicone                                                                                 4% 3%

more premium coffee and espresso machines to the products, prompting one manufacturer to note that                    Catalogs
                                                                                                                        2%
                                                                                                                                       Other       Department
                                                                                                                                                     stores
                                                                                                                                                                               Specialty              Department
                                                                                                                                       12%                                      stores                  stores
market. Vendors had mixed feelings on the future “the real challenge is for innovation.” In addition to                 Specialty
                                                                                                                                                      8%                         9%                      9%
                                                                                                                                                                      Supermarkets/drugstores
of single-serve coffee units, despite the investment working with retailers to grow the category through                 stores
                                                                                                                          9%                                                   2%
in product development, advertising and market- promoting “innovative, premium-price offerings,”                 Supermarkets/drugstores
                                                                                                                          2%
ing that many vendors made. Some reported disap- another manufacturer also felt that category could
pointing sales, while others believe that single-serve receive a boost by “generating impulse purchases                                   Mass merchants
                                                                                                                                             & clubs
                                                                                                                                                                                                Mass merchants
                                                                                                                                                                                                   & clubs
units might challenge lower-end drip coffeemakers, through effective merchandising outside of the                                             67%                                                   73%

and could help to drive sales of higher-ticket items. bakeware aisle.”
Other vendors complained of materials costs, which
forced them to forego improvements of features and Cutlery                                                       Retail Sales 2005                                % cHange                         2004
performance in order to keep prices low. Another Retail sales of cutlery took a dip last year, despite           ($ millions) $371.32                                9.9%                       $337.77
issue this year was the continued driving down of certain innovations and the popularity of the San-
prices on programmable units, which cannibalized toku knife design. Department stores lost market
sales of switch units and squeezed margins for both share to mass merchants, supermarkets and drug-              cooKware (metal only) Channels of Distribution
retailers and manufacturers. The lion’s share of cof- stores, where better-quality knives at lower price
feemaker sales were at mass merchants and club points gave the business a boost. Among the chal-
                                                                                                                                    Other                                                  Other
retailers, while department stores took a slightly lenges retailers face, according to one vendor, is how                           15%
                                                                                                                                                   Department
                                                                                                                                                     stores                                14%             Department
larger share than specialty retailers.                 to differentiate themselves and lure consumers into                                           18%                                                     stores
                                                                                                                                                                                                             22%
                                                       their stores to buy within several categories, as well            Specialty                                             Specialty
Food Processors                                        as how to leverage big-name brands across several                  stores
                                                                                                                          21%
                                                                                                                                                                                stores
                                                                                                                                                   Mass merchants               26%
This category fared the best among kitchen electrics, categories of business. Vendors, meanwhile, must                                                & clubs                                             Mass merchants
                                                                                                                                                       32%                                                   & clubs
driven by dominant players like Cuisinart. Mass                                         Continued on page 56                  Supermarkets/
                                                                                                                                                                                    Supermarkets/
                                                                                                                                                                                                              31%
                                                                                                                               drugstores
                                                                                                                                  14%                                                drugstores
                                                                                                                                                                                        7%

while business appears to be on the upswing in the                                                               Retail Sales 2005                                % cHange                         2004
industry, price factors loom large                                                                               ($ millions) $1,865.84                              1.5%                     $1,838.27


41 HFN / February 27, 2006                                                                                                                                                                            hfnmag.com
the markets housewares
the Costs of doing Business
Continued from page 54
work to balance their respective channels of       baKeware (metal only) Channels of Distribution                                                                 irons Channels of Distribution
                                                                                                                                                                            Home
distribution and the variety of goods within                                                                                          Other
                                                                                                                                       1%                                improvement
                                                                                                                                                                                                                                    Home
                                                                                                                                                                                                                                 improvement
                                                                                                                                                                           centers
them, as well as “how to gain the mind-share                              Other Department
                                                                                                                                                                             3%          Other
                                                                                                                                                                                         4% Department
                                                                                                                                                                                                                                   centers
                                                                                                                                                                                                                                     5%            Other
                                                                                                                                                                                                                                                   4% Department
of consumers and make them search/ask for                                  8%     stores
                                                                                                                              Specialty
                                                                                                                                            Department
                                                                                                                                              stores                    Specialty stores       stores
                                                                                                                                                                                                                               Specialty stores
                                                                                                                                                                                                                                                         stores
                                                                                  10%                                                         11%                                              12%                                                        8%
your products,” the vendor said.                              Specialty
                                                                                                                               stores
                                                                                                                               17%
                                                                                                                                                                            10%
                                                                                                                                                                 Supermarkets/drugstores
                                                                                                                                                                                                                                    8%
                                                               stores                                                                                                                                                       Supermarkets/drugstores
                                                               17%                                                                                                        3%
                                                                                                                                                                                                                                     5%
Kitchen Tools and Gadgets                                                                                           Supermarkets/
                                                                                        Mass merchants
Tool and gadget sales continued on the up-                    Supermarkets/
                                                                                           & clubs                   drugstores
                                                                                                                        22%
                                                                                                                                             Mass merchants
                                                                                                                                                & clubs                                   Mass merchants                                            Mass merchants
                                                                                            42%                         )
swing, generating more business at mass mer-                   drugstores
                                                                  23%
                                                                                                                                                 49%                                         & clubs
                                                                                                                                                                                              68%
                                                                                                                                                                                                                                                       & clubs
                                                                                                                                                                                                                                                        70%
chants and specialty stores at the expense of
department stores and supermarkets. Retail
consolidation and an increase in private-label
                                                   Retail Sales 2005                               % cHange                               2004                   Retail Sales 2005                                % cHange                            2004
                            products and direct
    STATE                   imports negatively     ($ millions) $515.44                                   4.2%                      $494.82                      ($ millions) $364.77                                    6.0%                       $344.12
of tHe industry impacted the cat-
                            egory, as did an
increase in raw material costs. Retail floor
space is also at issue: Innovative products and
clever merchandising are needed to maintain        cuTlery Channels of Distribution                                                                               clocKs Channels of Distribution
the category’s real estate, said one vendor, yet                               Other
                                                                                1%
                                                                                                                                     Other
                                                                                                                                      3%
                                                                                                                                                                                                       Department stores
                                                                                                                                                                                                                                                   Other
                                                                                                                                                                                                                                                    4%      Department stores
                                                                                                                                                                                                             2%                                                   4%
this is a category “that needs to be promoted                                                                                                                                                Other
                                                                                                                                                                                              5%
and merchandised across the store to really                                                                                                                                       Catalogs                                                 Catalogs
                                                                                                                                                                                                                                            10%
thrive.” Tools and gadgets lend themselves to                                            Department
                                                                                           stores
                                                                                                                                                                                   11%
                                                                                                                                                 Department
impulse purchases; this, of course, requires                                               25%                                                     stores
                                                                                                                                                   30%                                                                               Specialty
                                                             Supermarkets/                                           Supermarkets/
proper planning at point of sale.                             drugstores
                                                                 39%
                                                                                                                      drugstores                                             Specialty
                                                                                                                                                                                                        Mass merchants
                                                                                                                                                                                                                                      stores
                                                                                                                                                                                                                                      21%                   Mass merchants
                                                                                                                         37%                                                  stores
                                                                                                                                                                              22%                          & clubs                                             & clubs
                                                                                                                                                                                                            59%                                                 58%
Irons                                                                           Mass merchants
                                                                                   & clubs                                                Mass merchants
The product category that one vendor called                                         34%                                                      & clubs
                                                                                                                                              29%                Supermarkets/                                           Supermarkets/
“a necessary evil” showed slight growth last       Specialty stores
                                                         1%
                                                                                                           Specialty stores
                                                                                                                 1%
                                                                                                                                                                  drugstores
                                                                                                                                                                     1%
                                                                                                                                                                                                                          drugstores
                                                                                                                                                                                                                             3%
year, with department stores and specialty
                                                   Retail Sales 2005                               % cHange                               2004                   Retail Sales 2005                               % cHange                             2004
stores picking up some business at the ex-
pense of mass merchants and supermar-              ($ millions) $395.69                                  -3.0%                       $407.93                     ($ millions) $655.15                                    -1.3%                     $664.00
kets. Vendors say that manufacturers like
Rowenta, which offer high-end and feature-
rich products, are helping to boost sales at
better specialty stores, while margins are
being squeezed on premium items that are           KiTcHen gaDgeTs Channels of Distribution                                                                      wire sTorage Channels of Distribution
discounted at mass retailers. Last year, spe-                         Catalogs Other
                                                                        2% 1%
                                                                                                                                       Other
                                                                                                                              Catalogs 2%
                                                                                                                                2%
                                                                                                                                                                                          Other
                                                                                                                                                                                           1% Department stores
                                                                                                                                                                                                                                                  Other Department stores
                                                                                                                                                                                                                                                   1%
                                                                                                                                                                                                    1%                                                        1%
cialty and department stores saw an uptick
in their share of the category, while mass, su-                                       Department
                                                                                        stores
                                                                                                                                             Department
                                                                                                                                               stores
                                                                                         7%
permarket and home improvement channels                          Specialty                                            Specialty
                                                                                                                                                8%
                                                                                                                                                                                                      Mass merchants                                       Mass merchants
gave up some of the business.                                     stores
                                                                  26%
                                                                                                                       stores
                                                                                                                       24%
                                                                                                                                                                                                         & clubs
                                                                                                                                                                                                          28%
                                                                                                                                                                                                                                                              & clubs
                                                                                                                                                                                                                                                               29%
                                                                                                                                                                                Home                                                    Home
                                                                                          Mass merchants
                                                                                             & clubs                                           Mass merchants                improvement                                             improvement
                                                                                                                                                  & clubs                      centers                                                 centers
Massagers                                                                                     40%
                                                                                                                                                   38%                          53%                                                     51%
                                                                 Supermarkets/                                          Supermarkets/
Sales of massagers grew more last year than                        drugstores                                             drugstores
                                                                                                                                                                                                          Specialty
                                                                                                                                                                                                           stores                                             Specialty
                                                                     24%                                                    26%                                                                                                                                stores
in 2004, but vendors said that business is be-                                                                                                                                                             17%
                                                                                                                                                                                                                                                               18%

ing hurt by price pressures from imported
products, as well as rising costs of fuel and
                                                   Retail Sales 2005                               % cHange                               2004                   Retail Sales 2005                               % cHange                             2004
raw materials. Percussion massagers have
been losing market share to handheld units         ($ millions) $978.89                                   5.0%                       $932.28                     ($ millions) $942.17                                    9.0%                      $864.38
and heat massagers, which vendors say has
affected specialty store market share, since
these products are typically higher-priced
than other styles. The key lies in creating
products that can integrate into consum-           FooD sTorage Channels of Distribution                                                                          launDry care Channels of Distribution
ers’ lifestyle, and getting more creative and                                                              Home improvement
                                                                                                                                                                                              Other
                                                                                                                                                                                              2%
                                                   Home improvement
innovative with product development. One               centers         Catalogs
                                                                                                               centers
                                                                                                                 3%         Catalogs
                                                         3%
vendor also believes that flexible air mas-                              9%                                                   9%
                                                                                                                                                                                    Home                                                    Home
sagers will become more prevalent. Mass                                                                                                                                          improvement
                                                                                                                                                                                   centers
                                                                                                                                                                                                                                         improvement
                                                                                                                                                                                                                                           centers
merchants, supermarkets and club stores                      Supermarkets/               Mass merchants
                                                                                                                   Supermarkets/                                                    21%                                                     22%
                                                                                                                     drugstores                 Mass merchants
increased their market share slightly, at the                  drugstores
                                                                 26%
                                                                                            & clubs
                                                                                             48%
                                                                                                                       19%                         & clubs                                              Mass merchants
                                                                                                                                                                                                           & clubs                                         Mass merchants
                                                                                                                                                    56%                                                                              Specialty                & clubs
expense of specialty and department stores.                                                                                                                                   Specialty
                                                                                                                                                                               stores
                                                                                                                                                                                                            56%
                                                                                                                                                                                                                                      stores                   59%
                                                                                                                        Specialty                                              21%                                                    19%
                                                                          Specialty                                      stores
                                                                           stores                                        13%
Hair Dryers                                                                14%
Sales of hair dryers slipped last year, despite
innovations in technology, such as ceramic,
                                                   Retail Sales 2005                               % cHange                               2004                   Retail Sales 2005                                % cHange                            2004
ionic and tourmaline features. One industry
                        Continued on page 58       ($ millions) $402.45                                   1.5%                       $396.50                     ($ millions) $432.97                                    4.7%                       $413.67


42 HFN / February 27, 2006                                                                                                                                                                                                                               hfnmag.com
the markets housewares
the Costs of
                                                     plasTic sTorage Channels of Distribution                                                               massagers Channels of Distribution
                                                                                                                                                                                   Catalogs                                            Catalogs
                                                                              Home                                                                                                   1%                                                  1%



doing Business
                                                                                                                                    Home
                                                                           improvement                                           improvement
                                                                             centers                                               centers
                                                                               6%                                                                                                                                          Supermarkets/
                                                                                                                                     6%                                Supermarkets/                                         drugstores
                                                                                                                                                                         drugstores                                             9%
                                                               Supermarkets/                                        Supermarkets/                                          11%                Department                                          Department
                                                                 drugstores                                           drugstores                                                                stores                                              stores
                                                                   18%                                                  18%                                       Specialty                     26%                                                 27%
                                                                                                                                                                                                                     Specialty
Continued from page 56                                                                                                                                             stores
                                                                                                                                                                   19%
                                                                                                                                                                                                                      stores
                                                                                         Mass merchants                                                                                                               22%
player pointed out that hair dryers have the                   Specialty
                                                                stores
                                                                                            & clubs                 Specialty
                                                                                                                     stores
                                                                                                                                          Mass merchants
                                                                                                                                             & clubs
                                                                                             61%
highest frequency of use of any personal care                   15%                                                  15%                      61%
                                                                                                                                                                                  Mass merchants
                                                                                                                                                                                     & clubs                                          Mass merchants
product, and when new technology is intro-                                                                                                                                            43%                                                & clubs
                                                                                                                                                                                                                                          41%
duced, consumers are eager to try it. However,
vendors complain that retailers are too in-
tent on offering products for the lowest price,      Retail Sales 2005                            % cHange                            2004                  Retail Sales 2005                            % cHange                        2004
which shortens product life cycles and makes         ($ millions) $1,355.73                               3.0%                    $1,316.24                 ($ millions) $441.24                            4.5%                      $422.24
manufacturing cost increases even more dif-
ficult to bear. The majority of sales activity in    scales Channels of Distribution                                                                        Hair Dryers Channels of Distribution
the hair dryer category continues to grow in                                                                  Home improvement                                                        Other Department
                                                                                                                                                                              Catalogs 1% stores                                  Catalogs
                                                                                                                                                                                                                                             Department
                                                                                                                                                                                                                                               stores
                                                                                                                                                                                                                                    1%
the mass merchant and club channel, while            Home improvement
                                                       centers 3.5%          Other
                                                                                                                centers 2%
                                                                                                                                   Other
                                                                                                                                                                                1%             1%                                               1%
                                                                                     Department
supermarkets and drugstores make up most                                     9%        stores                                      7% Department                               Specialty
                                                                                                                                                                                                                                 Specialty
                                                                                                                                         stores                                                                                   stores
                                                                                       5.5%                                               7%                                    stores
of the remainder of sales.                                                                                           Specialty
                                                                                                                                                                                 6%
                                                                                                                                                                                                                                   7%

                                                               Specialty                                              stores                                      Supermarkets/
                                                                stores                                                20%                                           drugstores                                      Supermarkets/
Hair Styling Appliances                                        17.5%                                                                                                  24%                                             drugstores
                                                                                                                                                                                                                        26%
Last year, hair styling appliances reversed its       Supermarkets/drugstores
                                                                                     Mass merchants
                                                                                        & clubs             Supermarkets/drugstores        Mass merchants                                  Mass merchants                                    Mass merchants
                                                                                                                     4%                       & clubs                                         & clubs                                           & clubs
downward spiral, gaining back some of the sales                4%                       60.5%
                                                                                                                                               60%                                             67%                                               65%
that it lost in 2004. Sales of flat irons, many of
which featured innovative materials or designs,
continue to be a bright spot, as vendors unveiled
new options in curling irons and professional-       Retail Sales 2005                            % cHange                            2004                  Retail Sales 2005                            % cHange                        2004
                                                     ($ millions) $218.74                                 2.5%                      $213.40                 ($ millions) $312.12                            -0.5%                     $313.69




43 HFN / February 27, 2006                                                                                                                                                                                                                   hfnmag.com
                                                                                                               housewares the markets
quality tools to lure consumers to the category. In terms of   markets and drugstores, while other types of retailers,   ing raw material costs, posting a positive sales gain for
retail distribution, the players have remained the same,       such as Internet merchants and direct-response outlets,   2005—particularly impressive following a 10 percent
with mass retailers commanding nearly three-quarters of        also got into the game.                                   dive in the previous year. key issues will continue to be
market share, and supermar-                                                                                              “raw material costs, off-shore competition, a shrink-
kets and drugstores picking up
                                        STATE                  Food Storage                                              ing market base and shrinking margins,” said one ex-
much of the remainder.              of tHe industry            The food storage business weathered the storm of ris-                                        Continued on page 60

Oral Care
Sales of electric toothbrushes
and other oral care products
were relatively flat, with an in-
crease of only one point. One
vendor believes that consumers
are becoming more “oral health-
involved,” with an interest in
whitening and gum health that
goes beyond simply plaque re-
moval and fresh breath. “There
are sizeable upside opportuni-
ties for manufacturers and re-
tailers that thoroughly under-
stand their consumer, and are
able to address these changes
effectively,” said a manufac-
turer. The availability of dispos-
able, battery-operated power
toothbrushes has contributed to
sluggish sales, but other manu-
facturers have countered with
higher-end items, such as the
Intelliclean System by Royal
Philips Electronics. Mass mer-
chants were the clear winner
in the oral care category; the
channel now accounts for half
of product sales, while super-
markets and drugstores, which
used to be the top player, have
declined in market share.

Men’s Electric Shavers
A moderate 3 percent increase
in men’s shavers was nonethe-
less a victory in a category that
reported a sales decrease in the
previous year. Precision and
ease of use continues to be a cat-
egory driver; gillette’s Fusion
shaver raised the bar with a five-
blade shaver; and Panasonic’s
Vortex has a wet-dry capability
and a built-in cleaning system.

Women’s Electric Shavers
Despite the number of new
products being developed that
address their needs, women’s
shavers declined in 2005, per-
haps due to the number of hair-
removal alternatives on the
market, such as epilators from
Emjoi and other companies.
While television-promoted
products drove the market in
2004, this trend did not con-
tinue in 2005, and vendors say
that some of the technology
that has been seen in the men’s
electric shaver category needs
to move over to the women’s
realm. Mass merchants and
club stores relinquished a few
points of market share to super-

hfnmag.com                                                                                                                                         February 27, 2006/ HFN 44
the markets housewares
the Costs of doing Business
Continued from page 59              Clocks                                catalogs, to 11 percent. The “oth-
ecutive. Even with all these pres- The clock market declined last         er” classification increased to 6      Hair sTyling appliances Channels of Distribution
sures, sales increased 1.5 percent year, following several years of       percent—a testament to the grow-                                Other
                                                                                                                                                  Department
                                                                                                                                                    stores                                      Other
                                                                                                                                                                                                2%
                                                                                                                                                                                                         Department
                                                                                                                                                                                                           stores
                                                                                                                                          2%         1%                                                     1%
in 2005. growth came notably in positive growth. The decline is           ing Internet business in clocks.
                                                                                                                                    Specialty                                            Specialty
the supermarket channel, which due to several factors, including                                                                     stores                                               stores
                                                                                                                                      4%                                                   4%
increased 7 points to account for the continued escalation of raw         Laundry Care
more than a quarter of the busi- material prices and falling prices       The laundry care category grew                   Supermarkets/
                                                                                                                             drugstores
                                                                                                                                                                                Supermarkets/
                                                                                                                                                                                  drugstores
ness. This speaks to the trend of due to increased activity in home       4.7 percent, owing to consum-                        22%                                                  22%

vendors aggressively pursuing this improvement centers. “With the         ers’ untapped interest in laundry                                     Mass merchants                                           Mass merchants
business, although these goods of- competition from home improve-         room organization and garment                                            & clubs
                                                                                                                                                    71%
                                                                                                                                                                                                            & clubs
                                                                                                                                                                                                             71%
ten are lower-priced                            ment stores, their        care products. The market has
so the total industry         STATE             buyers are looking to     seen a huge uptick in higher-end
does not see correlat- of tHe industry exploit the appeal of              goods—from sorters to hampers
                                                                                                                 Retail Sales 2005                             % cHange                            2004
ing growth. Special-                            decorative clocks by      to ironing boards—and the mar-
ty stores increased 1 percentage eroding prices,” said one execu-         ket shows little signs of abating.     ($ millions) $506.69                                 8.0%                       $469.16
point, accounting for 14 percent of tive. The biggest changes in the      Canvas is a big seller in this busi-
the market. This channel has seen channels of distribution came in        ness and has not been adversely
growth gains in higher-end and a decline in the department store          affected by raw material prices,
specialized items. Significantly, channel, which continues to see         helping the category grow. How-
mass merchants declined 8 per- its share of the business slipping,        ever, much of the products are         oral care Channels of Distribution
centage points, although the chan- down to 2 percent for 2005, and        made from stainless steel, so the                          Other Department stores
                                                                                                                                      4%         3%
                                                                                                                                                                                              Other
                                                                                                                                                                                               4%
                                                                                                                                                                                                         Department stores
                                                                                                                                                                                                               3%
nel still makes up nearly half the supermarkets/drugstores, which         fluctuations in that arena do have
market. Home improvement cen- is down to 1 percent of the market.         an impact. Mass merchants saw
ters were flat, although that might Mass merchants saw only a slight      a decline in share, to 56 percent,
change over the year as the stores gain, but the channel still controls   due to the increased focus on up-                                                                                                   Mass merchants
                                                                                                                           Supermarkets/                                                                         & clubs
in that channel make aggressive nearly 60 percent of the business.        per-end goods. This trend might                    drugstores              Mass merchants
                                                                                                                                                        & clubs
                                                                                                                                                                                                                  35%
                                                                                                                               43%                                                  Supermarkets/
inroads in the storage and home Notably, specialty stores increased       reverse itself as mass merchants                                               50%
                                                                                                                                                                                      drugstores
                                                                                                                                                                                        58%
markets.                            their share, to 22 percent, as did    bring in upscale items. Specialty
                                                                          stores increased their share to 21
                                                                          percent—precisely due to their fo-
                                                                          cus on premium products.
                                                                                                                 Retail Sales 2005                             % cHange                               2004
                                                                          Wire Storage                           ($ millions) $434.74                                 1.0%                       $430.44
                                                                          The wire storage business bounced
                                                                          back from a down year to post a 9
                                                                          percent surge in sales, although
                                                                          some of that increase is likely due
                                                                          from vendors and retailers increas-    men’s sHavers Channels of Distribution
                                                                          ing prices to account for soaring       Supermarkets/
                                                                                                                                                                              Supermarkets/
                                                                                                                                                                                drugstores       Other
                                                                          raw material costs. Still, the busi-      drugstores
                                                                                                                      5.5%
                                                                                                                                    Other Department                               5%            4%
                                                                                                                                                                                                         Department
                                                                                                                                    8.5% stores
                                                                          ness posted a solid gain and sales                                 4%
                                                                                                                                                                                                           stores
                                                                                                                                                                                                            6%
                                                                                                                                                                                  Specialty
                                                                          are nearing $1 billion, credited as           Specialty                                                  stores
                                                                                                                                                                                   12%
                                                                          much to prices as to consumers’                stores
                                                                                                                         10%
                                                                          continued demand for organiza-
                                                                          tion products. The channels of                            Mass merchants & clubs
                                                                                                                                                                                          Mass merchants & clubs
                                                                                                                                                                                                 73%
                                                                          distribution for the business re-                                72%

                                                                          mained little changed, with home
                                                                          improvements continuing to pick
                                                                          up steam and now commanding a
                                                                                                                 Retail Sales 2005                             % cHange                               2004
                                                                          53 percent share. Mass merchants
                                                                          and clubs declined slightly to 28      ($ millions) $184.92                                 3.0%                       $179.53
                                                                          percent, and specialty stores also
                                                                          dropped a bit. The home center
                                                                          share very likely will continue to
                                                                          increase as the channel focuses on
                                                                          storage and put in even more wire      women’s sHavers Channels of Distribution
                                                                          shelving SkUs and displays.                       Specialty Other Department
                                                                                                                                              stores
                                                                                                                                                                                          Specialty Department
                                                                                                                                                                                           stores     stores
                                                                                                                             stores 3.5%                                                    4%         4%
                                                                                                                             2.5%              3%

                                                                          Plastic Storage
                                                                          The plastic storage market took a                                                                      Supermarkets/
                                                                          surprising turn up in 2005, posting             Supermarkets/
                                                                                                                            drugstores
                                                                                                                                                                                   drugstores
                                                                                                                                                                                     20%
                                                                          a 3 percent increase in sales. The                 22.5%

                                                                          increases were due both to vendors
                                                                                                                                             Mass merchants
                                                                          and retailers increasing prices and                                   & clubs
                                                                                                                                                68.5%
                                                                                                                                                                                                      Mass merchants
                                                                                                                                                                                                         & clubs
                                                                          vendors’ aggressive tactics to in-                                                                                              72%

                                                                          troduce more innovative products
                                                                          that could command higher price
                                                                                                                 Retail Sales 2005                             % cHange                               2004
                                                                          points. Most vendors vowed to
                                                                          reduce their focus on commodity        ($ millions) $68.58                                  -4.5%                       $71.81


45 HFN / February 27, 2006                                                                                                                                                                               hfnmag.com
                                                         housewares the markets


                                                                                                          prices—such as $3 totes—and launch
 HeaTers Channels of Distribution                                                                         more niche, higher-end products in
                       Other
                                                                                                          the year. Yet even with all the focus
                                                                          Other
               Catalogs 4% Department
                             stores                               Catalogs 5%
                                                                                Department
                                                                                  stores
                                                                                                          on new and higher-priced products,
                 6%
                              6%                                    7%             4%                     the channels of distribution have re-
                                                                                                          mained completely unchanged.
                                                                                        Mass merchants
               Home
            improvement
                                 Mass merchants
                                    & clubs
                                                                  Home
                                                               improvement
                                                                                           & clubs        Scales
                                                                                            43%
              centers
               41%
                                     43%                         centers
                                                                  41%
                                                                                                          The bath scale business posted a re-
                                                                                                          spectable gain for 2005, up nearly 3
                                                                                                          percent. The market showed growth
                                                                                                          because consumers continue to focus
                                                                                                          on weight and diets, and suppliers re-
Retail Sales 2005                           % cHange                           2004
                                                                                                          sponded with an increasingly broad
($ millions) $327.16                              25.0%                     $261.73                       array of sophisticated and techno-
                                                                                                          logically advanced products, which
                                                                                                          tend to carry higher price points.
                                                                                                          The market has shown some shifts
                                                                                                          in distribution. While department
 air cleaners Channels of Distribution                                                                    stores have lost some ground, mass
       Catalogs                                            Catalogs                                       merchants and clubs have picked up
                       Other                                 5%             Other
         4%
                        8%                                                   6%
                                                                                    Department
                                                                                                          a bit and still account for more than
                               Department
                                 stores                                               stores
                                                                                      15%
                                                                                                          60 percent of the market. Specialty
                                 15%
           Home                                                Home
                                                            improvement
                                                                                                          stores also lost share, but home im-
        improvement
          centers
                                                              centers
                                                               18%
                                                                                                          provement stores have increased.
           20%
                               Mass merchants                                          Mass merchants
                                                                                                          And the “other” category has in-
             Specialty
                                  & clubs
                                   42%
                                                             Specialty
                                                              stores
                                                                                          & clubs
                                                                                           43%
                                                                                                          creased to 9 percent, due to catalogs
              stores
               9%
                                                              10%                                         and the Internet’s ability to sell high-
                                                                                                          er end, feature-filled products that
  Supermarkets/                                      Supermarkets/
    drugstores                                         drugstores                                         require more explanation.
       2%                                                 3%

Retail Sales 2005                           % cHange                           2004
                                                                                                          Vacuum Cleaners
($ millions) $469.80                              9.4%                      $429.53                       The high-end trend kicked-started
                                                                                                          by Dyson helped to bolster floor care
                                                                                                          sales in 2005. One vendor said that
                                                                                                          his company has capitalized on the
                                                                                                          “new trend of sophisticated expen-
 HumiDiFiers Channels of Distribution                                                                     sive [upright] vacs,” adding that he
                                                                               Other
                                                                               2%                         is seeing the bulk of sales growth
                         Other
                                                                                                          in the high-end. Panasonic, for in-
                         7% Department                                   Catalogs Department
                                                                                                          stance, announced a move into the
                  Catalogs     stores                                      6%       stores
                                6%
                    5%                                                              10%
                                                                                                          $299 price range with its MC-V7720
            Home
         improvement
                                                                Home
                                                             improvement                                  upright bagless vacuum featuring
           centers
            20%                  Mass merchants
                                                               centers
                                                                25% )                                     “dirt sensors.” Sticks and handhelds
                                                                                         Mass merchants
                                    & clubs
                                     44%                                                    & clubs       logged the greatest sales gain last
                                                                                             41%
              Supermarkets/                                     Supermarkets/
                                                                                                          year driven in part by gaining popu-
                drugstores
                  18%
                                                                  drugstores
                                                                    16%
                                                                                                          larity of hard floor surfaces. Another
                                                                                                          industry player pointed to the aging
                                                                                                          consumers’ need for lighter weight
Retail Sales 2005                           % cHange                           2004
                                                                                                          vacuums as a driver of stick and
($ millions) $414.75                              3.8%                      $399.44                       handheld sales. “As an industry, we
                                                                                                          saw an awful lot of new products
                                                                                                          with a lightweight marketing mes-
                                                                                                          sage.” Mass merchants look to be
                                                                                                          capitalizing on vacuum sales growth,
 uprigHT vacs Channels of Distribution                                                                    as they stole market share from the
                                                                                                          department store competition. Mass
                               Department
                                                                                                          merchants and wholesales clubs
                                                                       Other
                   Other
                   19%
                                 stores
                                 12%
                                                                       15%             Department
                                                                                         stores
                                                                                                          logged a total average market share
                                                       Home improvement
                                                                                         16%              gain of about 3.7 percent, excluding
                                                         centers 7%
  Home improvement
    centers 8%
                                                                                                          a 7 percent loss in extractor volume.
                                                     Door to door 5%
                                                                                                          A vendor noted that as the floor care
 Door to door 2%
Appliance stores 4%
                               Mass merchants
                                  & clubs
                                                    Appliance stores 5%
                                                                                Mass merchants            category moves upstream, so do
                                                                                   & clubs
 Vacuum shops 4%
                                   51%                Vacuum shops 5%               47%                   the mass merchants. “We are see-
                                                                                                          ing name brands [at the mass]—for
                                                                                                          years, they just had opening price
                                                                                                          points. Overall, the range they offer
Retail Sales 2005                           % cHange                           2004
                                                                                                          is now higher.”
($ millions) $2,499.21                            5.3%                    $2,372.67                                        Continued on page 62

hfnmag.com                                                                                                                                           February 27, 2006/ HFN 46
                               the markets housewares
                             the Costs of doing Business
                             Continued from page 61
                             Home Environment
                             Home environment heated up last year, as sales were led by dou-
                             ble-digit gains in heaters. Manufacturers have inflating fuel prices
                             to thank in part for skyrocketing heater volume. One player said
                             consumers seeking to trim down escalating central heating bills
                             have been turning to electric space heaters. “While the category
                             [sales] took off                                earlier than nor-
                             mal due to the fear         STATE               of fuel cost gains,
                             some fears eventu- of tHe industry ally eased and the
                             winter was mild.”                               Humidifier sales
                             also benefited from the overwhelming need to lower thermostats,
                             said another executive. He explained that increased humidity cre-
                             ates for a warmer home, which his own company actually began
                             to emphasize in its point-of-purchase materials last year. Air puri-
                             fiers enjoyed solid sales gains, as this once specialized category
                             migrated to the mainstream due to rising consumer concerns
                             about health and the desire to eliminate pollutants in the home. A
                             combination of heavy category advertising and magazine cover-
                             age, such as air purifier ratings in the October issue of Consumer
                             Reports magazine, helped to generate awareness and educate con-
                             sumers about these products. n


                                  sTicK/HanD vacs Channels of Distribution

                                                                 Department                                          Department
                                                                   stores                                              stores
                                                     Other          8%                                Other            11%
                                                     22%                                              22%


                                         Home improvement                              Home improvement
                                           centers 9%                                    centers 8%

                                  Door to door 1%                 Mass merchants       Door to door 1%               Mass merchants
                                 Appliance stores 2%                 & clubs          Appliance stores 3%               & clubs
                                       Vacuum shops 1%                57%                   Vacuum shops 2%              53%




                                  Retail Sales 2005                           % cHange                           2004
                                  ($ millions) $309.46                               6.7%                      $290.12


                                  canisTer vacs Channels of Distribution


                                                                                                  )
                                                    Other                                                Other
                                                    24%             Department                           21%
                                                                      stores                                             Department
                                                                      34%                                                  stores
                                                                                                                           35%

                                           Door to door                                         Door to door
                                             15%                                                  20%
                                                                    Mass                                                  Mass
                                                                  merchants                                             merchants
                                                                   & clubs                                               & clubs
                                                        Vacume      15%                                        Vacume
                                                         shops                                                  shops     12%
                                 Appliance stores        10%                          Appliance stores          10%
                                       2%                                                   2%


                                  Retail Sales 2005                           % cHange                           2004
                                  ($ millions) $279.27                               3.6%                      $269.57


                                  exTracTors Channels of Distribution

                                                                 Department
                                                                   stores                                Other          Department
                                                                   10%                                   16%              stores
                                                    Other                                                                 17%
                                                    27%
                                                                                        Home improvement
                                                                                          centers 8%
                                                                                         Catalogs 2%
                                                                    Mass merchants             )
                                      Home improvement                 & clubs            Appliance stores
                                        centers 10%                     45%                      4%              Mass merchants
                                                                                                                    & clubs
                                              Catalogs                                                               53%
                                                4% Appliance
                                                       stores
                                                        4%



                                  Retail Sales 2005                           % cHange                           2004
                                  ($ millions) $525.40                             -10.0%                      $583.78


47 HFN / February 27, 2006                                                                                                  hfnmag.com
                                                                                                  major appliances the markets

Major Gains in 2005
By Michael Rudnick                                         ditioner, which enables consumers to display a pic-
                                                           ture, drawing or any type of printed image.                  cooKing appliances Channels of Distribution
new yorK–Major appliances outperformed all home
                                                                                                                                                                                                 Other
furnishings categories with an 8.8 percent sales gain      Laundry Appliances                                                          Other                                                      3%
                                                                                                                                       10%
last year. White goods makers look to have weathered       Laundry cleaned up last year at retail, propelled part-                                                                    Home
the storm of rising raw material and fuel costs, as well   ly by consumer demand for energy- and water-efficient                                        Sears 33%
                                                                                                                                                                                   improvement
                                                                                                                                                                                     centers                 Sears 36%
                                                                                                                               Home
as a gradual cooling off of the housing market in the      front-loading washers.                                           improvement
                                                                                                                                                                                      23%
                                                                                                                              centers
back half of the year. This is due to a mix of demand         Lg Electronics, a relatively new white goods en-                 26%
created by product innovation; a push in kitchen re-       trant, is focusing its laundry line entirely on front-                                     Mass merchants                    Appliance
                                                                                                                                                           4%
modeling; the lag in bigger ticket home furnishings        loading machines, said Tim kavanaugh, Lg’s director                              Appliance
                                                                                                                                                                                         stores
                                                                                                                                                                                          32%
                                                                                                                                                                                                          Mass merchants
                                                                                                                                                                                                               6%
                                                                                                                                             stores
purchases from record home sales; and a sweltering         of merchandising of digital appliances. “The excite-                               27%
summer, which boosted room air.                            ment in front-loading is energy, water conservation
   As sales gained, so did market share at home im-        and care of clothing, but deep down the consumer
provement retailers. Sears, the leader in three of         likes the new aesthetic,” he said. As laundry moves          Retail Sales 2005                      % cHange                           2004
the four categories tracked by HFN—refrigerators,          out of the basement and into the kitchen, garage and         ($ millions) $3,515.38                        7.3%                     $3,276.22
                          laundry and cooking appli-       bedroom, consumers are seeking more design-friendly
     STATE                ances—did not benefit from       options, which accounts for the addition of new colors
                                                                                                                        reFrigeraTors Channels of Distribution
of tHe industry rising category sales, as it               and stainless-steel models, kavanaugh said.
                          ceded market share to the           Atul Vir, president of Equator, said the emergence
                                                                                                                                                                                                  Other
home improvement centers. Some industry players,           of Chinese manufacturing in major appliances has al-                       Other                                                        3%
                                                                                                                                      10%
in an earlier HFN report, attributed Sears’ major ap-      lowed for the production of less expensive front-load-                                                                    Home
pliances slowdown to its large number of mall-based        ing models, citing gE’s recent move to manufacture a                                                                   improvement
                                                                                                                                                                                    centers
                                                                                                                                                     Sears 34%
stores, a shopping channel that has experienced traf-      front-load line in China.                                           Home
                                                                                                                            improvement
                                                                                                                                                                                    22.5%
                                                                                                                                                                                                            Sears 38.5%
fic downturns in recent years. The department store           A Whirlpool spokesman said front-loading models                 centers
                                                                                                                               26%
giant, however, may temporarily reverse this trend         are 60 percent more efficient in terms of energy and                                                                       Appliance
                                                                                                                                                          Mass                         stores
via its off-the-mall expansion.                            water conservation, adding that capacity is also in-                        Appliance        merchants                      28.5%                Mass
                                                                                                                                                          7%
   While Sears converts, Lowe’s continues to add           creased with these models.                                                   stores
                                                                                                                                         23%
                                                                                                                                                                                                          merchants
                                                                                                                                                                                                           7.5%
square footage, filling that space with new major ap-
pliance brands, such as the recent introduction of         Electric and Gas Cooking Appliances
                                                                                                                        Retail Sales 2005                      % cHange                           2004
Samsung white goods. Home Depot, which is also             The home remodeling trend has helped to cook up
growing square footage at a rapid clip, is allocating      range, oven and cooktop sales over the past year.            ($ millions) $6,588.06                        7.1%                 $6,149.40
more floor space to major appliance displays, Mat-            “The biggest thing is, people are stepping up on
thew Fassler, an equity analyst with goldman Sachs,        kitchen renovation,” Vir said. “For better home resale
said in an earlier HFN report.                             value, they are renovating kitchens.”                        air conDiTioners Channels of Distribution
                                                              Sue Bailey, manager of product development at Vi-
Room Air Conditioners                                      king Range Corp., agreed, adding that “no one is doing                          Other
                                                                                                                                                                                           Other
                                                                                                                                            5%
As the thermometer rose last summer, so did air con-       anything new in ranges; [sales increases] have a lot to do                              Sears 15%
                                                                                                                                                                                           10%           Sears 17%
ditioner sales. After suffering a 15.9 percent sales       with remodeling.” Viking has specifically seen gains in
                                                                                                                                Home
decline in 2004 due to a damp and cool summer, the         the 36- to 48-inch ranges, she added, a clear indication          improvement                                            Home
                                                                                                                               centers                                           improvement
category led all major appliance groups in 2005 with a     that more homeowners are remodeling and upgrading.                   29%                                                centers
                                                                                                                                                                                    28%
15.2 percent volume gain.                                     There may be nothing new in ranges, but some                                          Mass merchants
                                                                                                                                                        35%
                                                                                                                                                                             )                             Mass merchants
                                                                                                                                                                                                               31%
   One industry executive said that while room air         manufacturers are trying to revitalize old tricks, such                Appliance
                                                                                                                                   stores                                                 Appliance
retail sales rose in the double digits due to the hot      as induction cooking, in which magnetic waves are                        16%                                                    stores
                                                                                                                                                                                            14%
weather and weak 2004 comparisons, industry ship-          used to cook food. Induction helped bolster Viking’s
ments to dealers were “actually down because of car-       sales last year, Bailey said, as its new 30- and 36-inch
ryover in 2004,” adding that “sales in 2005 included       cooktops surpassed company expectations by 75 per-           Retail Sales 2005                      % cHange                           2004
2004 carryover plus 2005 shipments.”                       cent. She declined to specify further.                       ($ millions) $1,603.99                       15.2%                 $1,392.35
   Commodity-level pricing driven by low-cost Asian
manufacturing may have helped buoy sales, as this          Refrigerators
phenomenon led to expanded distribution into new           Refrigerator sales, which climbed 7.1 percent last year,
channels, the industry executive said. “Price erosion      have also fared well on the remodeling trend, made           launDry appliances Channels of Distribution
has slowed, but costs and retail pricing remain at his-    evident by the upmarket push in this category.
                                                                                                                                                                                                 Other
torical lows contributing to the continued commod-            Manufacturers are pushing to higher-end bottom                         Other                                                         4%
itization of the category,” the executive added. “Low      mounts, side-by-sides and french door models and                          15%
                                                                                                                                                                                      Home
                                                                                                                                                     Sears 33.5%                   improvement
price points have opened the category to more non-tra-     away from the top-mount design, said Lg’s kavana-                                                                         centers
                                                                                                                                                                                      20%
ditional channels of distribution, like supermarkets.”     ugh. “[Bottom mounts] are much easier to use, offer                 Home
                                                                                                                                                                                                            Sears 40%

   Commodity does not necessarily mean no frills.          easier access to fresh food and the stainless bottom             improvement
                                                                                                                              centers
Manufacturers added features last year, such as En-        mount can be the poor man’s Sub Zero,” he said.                    27.5%
                                                                                                                                                                                     Appliance
                                                                                                                                                     Mass merchants                   stores
ergy Star efficiency, remote controls and new colors.         kavanaugh explained that top-mounts have tradi-                               Appliance
                                                                                                                                                         4.5%                          28%         Mass merchants
                                                                                                                                                                                                        8%
Fedders unveiled a new color—silver—to complement          tionally “sold for less than what they are worth to the                           stores
                                                                                                                                             19.5%
the brushed aluminum look of other consumer elec-          consumer,” due to overcapacity issues. For the past
tronics, as earlier reported by HFN. Lg Electronics        five years, overcapacity has driven profitability out
                                                                                                                        Retail Sales 2005                      % cHange                           2004
is taking design one step further this year with the       of this category, so most manufacturers are seeking a
launch of its ART COOL line, a picture-frame air con-      top-mount exit strategy, he added. n                         ($ millions) $6,528.94                        9.8%                 $5,946.21


white goods stood tall with the biggest sales increase among home categories
hfnmag.com                                                                                                                                                            February 27, 2006/ HFN 48

								
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