By Michael Rudnick
As consumer spending continues to be pressured from all sides—high fuel costs, housing worries, credit market troubles and a possible recession—the growing high-end floor care segment could face challenges.
Ever since Dyson broke the $400 price barrier with its entrance into the U.S. floor care market about four years ago, vacuum makers have been stretching price tags with some degree of success. Average vacuum price points for the 12-month period ended Nov. 30 increased 5 percent to $98.40 over the prior-year period, according to The NPD Group. However, this upmarket floor care push could face an uphill challenge this year due to the aforementioned economic conditions.
While higher-end vacuum sales may not be impacted by the housing slowdown, it is indeed tied to other outlying economic factors, said Chris Gurreri, president of TTI Floor Care North America. “We have budgeted a tighter year in Dirt Devil and growth for Hoover [which comes off easy 2007 comparisons],” he said.
Rob Newcombe, vice president of marketing at Electrolux Home Care Products North America, said he expects growth to slow somewhat in the high end. The niche will see growth nonetheless, as this floor care segment is somewhat insulated from economic conditions, due to the upper and upper-middle-class demographic that it serves. “The higher end will still have growth, but maybe not as much as in the past,” he said. “Consumers buying higher-end items will pay more for innovation. … That consumer is higher income and is willing to look at the higher end.”
The intensified competition for shrinking consumer dollars has made specialization and differentiation at the higher end all the more important. “Multifunctionality and specialization are big drivers [in floor care],” said Peter Goldman, president of home at The NPD Group. He explained that vac makers are hoping to foster big spending with features such as wet/dry functionality, HEPA filtration, and other healthy-home oriented technologies and pet cleanup attachments. Brands such as Bissell, Dirt Devil and Electrolux have recently focused on the pet owners market in a bid to grab this growing consumer niche, as earlier reported by HFN. Bissell late last year launched its first full-size vacuum designed for pet hair pickup; Dirt Devil at the same time unveiled its Purpose for Pets carpet cleaner; and Electrolux this year is looking to launch a line of Eureka uprights designed for pet hair cleanup.
German luxury vac maker Robert Thomas LP, which entered the U.S. market late last year with its ultra-high-end $1,295 Rotho Twin TT canister vacuum, is banking on differentiation amid the difficult retail environment. “It is a tougher environment, that’s why we are offering specialties and doing smarter marketing,” said Thomas Slusarek, product marketing manager at Robert Thomas LP. He said that it is particularly important to create a “product with a lifestyle around it,” noting that lifestyle products tend to be more immune to economic trends, pointing to companies such as Dyson and Apple.
Robert Thomas is attempting to foster a healthy home lifestyle with its new line, which features a water filtration system that traps dust and eliminates it from entering the air. The filtration system also doubles as a humidifier during use, further improving the indoor air conditions.
The Twin TT’s $1,000-plus price point also helps to insulates it from economic pressures as it targets a less-vulnerable, upper-income consumer niche. Slusarek said the company anticipates double-digit sales growth this year, declining to provide further specifics. Dyson, the high-end vacuum pioneer, does not anticipate a sales slowdown due to prevailing conditions. “[The economic slowdown] doesn’t mean much to us—people are buying us because of the performance of our product,” said Gordon Thom, Dyson’s president of U.S. operations. Dyson expects to log sales gains in 2008, Thom said, declining to provide specifics. The bulk of the sales increases should come from its “bread and butter” full-size upright line with its relatively new hand vacuum units and its recently launched DC-24 and DC-25 ultra lightweight uprights providing an added boost, he said.
High-end vacuum makers that do not compete on price are also swimming against the retail current this year as floor care departments have become increasingly promotional. During the post-holiday sales period, retailers have become noticeably promotional. Linens ’n Things earlier in the month ran a national floor care spectacular on the front page of its Web site and in stores in which it offered a free $10 to $50 gift card with purchase of select floor care. Kohl’s was also in on the act, offering 10 percent to 60 percent discounts on floor care as part of its year-end sale.
Linens ’n Things promoted floor care in January in an effort to reach consumers that are in post-holiday cleanup mode. “Now in post-holiday it is our job to remind the customer that it is time to clean up,” Bob DiNicola, chairman and chief executive officer of Linens ’n Things, told HFN. “The beginning of the first quarter of the new year revolves around cleaning and storage,” he added. As part of this push, Linens had highlighted cleaning and storage categories in the front of its stores in January,” he added.
“It’s amazing how much promotional activity was focused on floor care,” said Jeffery Collins, vice president of sales and marketing with Halo Co. “The competitive activity in the stores was unbelievable—it was more then we expected,” he added.
Halo late last year unveiled its $499 Halo UV-ST ultraviolet vacuum, which uses ultraviolet light to kill bacteria and other microbes. The company has resisted promotional activity and price wars, as it positions the vacuum in the high end due to its unique germ-eliminating function. However, Collins did note that “the promotional environment makes it more difficult for a higher-end player like ourselves.”