Vacuum sales clean up as discounters tap high-ticket price category

CHICAGO -- Over the past five years, the vacuum cleaner business has gone through dramatic changes as the $2.5 billion to $3 billion a year industry has become a major part of the appliance sector.

This growth is the result of aggressive behavior on the part of discounters, which are eager to tap the category's plump retail prices--usually more than $100 per item. In item most cases, retailers have greatly expanded the size of their floor care departments, pumped up sku counts and vendor lists and moved the merchandise off the back wall to a more visible, high traffic main isle location.

As a result of this activity, industry experts now estimate that discounters control more than 50% of the vacuum cleaner market. Even that figure is expected to grow, fueled by popular brand names, selection, price, convenience and advertising support.

Discounters "are pretty committed to the category and do a lot of advertising, which draws traffic through the doors," said Leo Cadelo, executive vp, Eureka Co. "I think their market share will continue to increase."

Vacuums are simply "a hot product," noted a senior executive with a major discounter, who asked not to be identified. "The manufacturers are doing an excellent job of developing products and promoting them. They've gotten people to buy things they didn't have before and there's a need for that. The market has been expanded by filling a consumer need."

Overall, the market has been growing at about 5% per year for more than a decade, according to Jim Holcomb, vice president of marketing and strategic planning with Cleveland-based Royal Appliance Manufacturing. He noted that the actual volume is very large and "there's a lot of money available."

According to industry pricing data, 72.6% of upright vacuums sell for more than $99 while 22.6% sell for more than $199.

With those kinds of prices, vacuums are "a pretty big bite for discounters to ignore," Holcomb observed. "They don't have a lot of categories with a price tag of more than $100."

While the industry consensus is that product margins on most vacuum cleaners are, at best, modest, discounters cannot overlook the volume. Sales of uprights, stick, canister and hand-held vacuums jumped 41.5% to 19.22 million units in 1993--the latest year for which figures are available--from 13.58 million in 1984, according to Appliance Magazine.

The brightest performer during that period was uprights, which experienced a whooping 111.6% increase to 9.25 million units--nearly half of the total sales--from 4.37 million units in '84.

The popular and convenient hand-held units, both rechargeable and electric, now account for about one-third of all sales, which have been on slide since 1990. Sales of the bulky, heavy-duty canister vacuums have lost their edge too, having dropped to 1.7 million units in 1993 from about 3.1 million in 1984. It seems that consumers now look for lighter, easier-to-use models.

Stuarts, Franklin, Mass, is planning to tap the vacuum cleaner market this year with a major expansion program, following the lead of such retailers as Kmart, Hills and Service Merchandise.

Newt Hildonen, merchandise manager with the 14-store chain, said Stuarts is planning a major expansion this year, which will see increases in the floor space, skus, price points and advertising.

Stuarts used to have a "less than $100" policy to serve the needs of its customers but plans to sell a number of vacuum cleaners with a price tags of more than $100.

Hildonen said the decision to boost the vacuum cleaner department was prompted by an increase in sales of vacuums and accessories such as bags and belts.

"Basically, you have a customer buying a $69 vacuum cleaner and it makes sense that the next purchase will be higher than that, which justifies increasing the price points," he said, nothing that sales volume offsets modest margins.

Hildonen said stick brooms and upright vacs are popular because many people use them as second units for second-floor rooms.

However, Eureka's Cadelo expects a resurgence in canister sales as more consumers install hardwood floors, tile and vinyl in their homes.

This should be good news for Kenmore -- and Sears -- which holds a large market lead over Hoover and Eureka in the category.

While its competitors might disagree, many retail executives credit Royal with revitalizing the vacuum cleaner category with its Dirt Devil lines of products. The bright red cases and aggressive marketing program for Dirt Devil helped the industry shake off its sleepy image, which saw minimal marketing and little excitement prior to the introduction of its program.

"It was a neat product and once our rivals started to notice, they did the same thing, which helped boost consumer awareness," Holcomb said. "The consumer now thinks about the category and it makes it easier for retailers to sell the product. The product isn't' pre-sold, but the disposition is there."

Clifford Wood, executive vp of the Vacuum Cleaners Manufacturers Association in Canton, Ohio, agreed that heavy advertising has been a major factor in boosting consumer demand.

He also credits the development of different types of vacuum cleaners with supporting the industry's steady sales growth.

More good news is coming in the general floor cleaning area as manufacturers and discount retailers have become optimistic that the next "must-have" floor cleaning products will be steam cleaner and carpet extractors. These machines carry higher price tags and margins than do vacuums.

Sales of these floor care products have been climbing steadily since 1991 and will hit an estimated 1.75 million units this year, sources report.

About 10% of all households now own a steam cleaner or carpet extractor.

Hoover, which shipped its first such units last March, has been heavily promoting the category in newspapers, magazines and on TV.

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