For housewares and appliance manufacturers, the good news is consumers continue to spend on products that make home life easier and more enjoyable. The bad news is manufacturers are having a tough time passing on rising costs of raw materials.
``It's a very difficult business climate,'' said Perry Reynolds, vice president of marketing and trade development for the International Housewares Association in Rosemont, Ill. Retailers are reluctant to raise prices, so manufacturers have trouble passing costs on, creating a big mismatch in market economics.
Reynolds estimates U.S. housewares sales grew about 4 percent last year, ``but not everyone was getting that growth.'' Among the fastest-growing categories were garage storage items - a new market apparently filling a need - and floor-care products. The growth followed a 7.4 percent hike in appliance retail sales in 2003, when the U.S. market hit a record $62.2 billion. In 2002, sales were down 4.8 percent from 2001.
Plastics-intensive product sales generally grew in 2003. Closet and storage items, for example, reached $1.14 billion in sales, according to IHA's 2004 State-of-the-Industry Report. Sales for the category grew an average 6.3 percent annually for a five-year period ending with 2003. Plastic dinnerware, however, has not fared as well. The $179.4 million in sales logged in 2003 culminated an average annual decline of 0.2 percent over five years.
Pricing pressure reflects how housewares are sold. Discount mass merchandisers sold 54.8 percent of U.S. housewares by dollar volume, while department stores continued a slow decline in market share to account for 12.1 percent of sales in 2003, IHA stated in its report.
The global housewares market was $265.4 billion in 2003, IHA calculated. Exports are an important part of the U.S. industry, with Canada the main destination. A growing number of IHA survey respondents said they are importing manufactured goods to help compete. About 85 percent said they rely on imports, a figure that has been growing since 1998.
U.S. appliance shipments increased an estimated 4 percent in 2004 but are projected to rise only 0.4 percent this year, according to the Association of Home Appliance Manufacturers in Washington.
Appliance sales have gained from the housing construction and renovation boom.
``On a nationwide basis, the final quarter of 2004 has been a good one for home builders,'' said David Seiders, chief economist for the National Association of Home Builders of Washington. He cited favorable financing conditions, rising home prices and an improving economy for builder optimism.
As in housewares, appliance makers have been pinched by raw material price increases. Cost cutting is widespread to offset the higher prices. Maytag Corp., for example, expects to save $150 million a year from its current restructuring program, which includes cutting 1,100 workers - about 20 percent of its salaried payroll. It also is entering partnerships in Asia to squeeze out costs.
Appliance makers mainly have absorbed higher costs for steel, plastics and other materials. However two majors, Maytag and Whirlpool Corp., have served notice they will try to raise prices 5-10 percent early this year, according to a Wall Street Journal report.
Another cost-cutting opportunity in the appliance supply chain could appear if a new Home Depot Inc. program is successful. The Atlanta-based retailer has begun selling appliances through its Web site.