After years of consumer retrenchment, especially on big-ticket purchases, the improving U.S. housing market is fueling demand for household appliances such as dishwashers, refrigerators, air conditioners, ovens, stoves and washing machines.
Imports accounted for 70.5 percent of the 43 million units of major home appliances shipped in the U.S. last year, according to Laura Spingola, founder and president of Trade Resources, a Chicago-based market development company. The number of units imported increased 11.1 percent last year. The top six supplier countries account for 99 percent of those imports.
“China is the big elephant here,” Spingola said. “Even if we think they are not shipping as much to us, in fact they are.”
China accounts for 74 percent of U.S. appliance imports, followed by Mexico with 14 percent; South Korea, Canada, Malaysia, all with 3 percent; and Thailand with 2 percent.
U.S. unit sales of six major appliances, including washers, dryers, dishwashers, refrigerators, freezers, ranges and ovens, increased 5.5 percent year-over-year in the first quarter of 2013, according to data provided by the Association of Home Appliance Manufacturers. But imports fell 1.6 percent in the quarter, Spingola said.
“There might have been inventory issues. The second quarter will tell us a lot more,” she said, adding she expects imports to grow this year in line with the increase in housing starts and as consumers start replacing and upgrading their appliances.
U.S. exports of appliance units increased 8.3 percent last year. The top six overseas markets, which account for 78 percent of U.S. appliance exports, are Canada with 56 percent, Mexico with 10 percent, Venezuela with 4 percent, Australia and Saudi Arabia, each with 3 percent, and China with 2 percent. “China is coming on as a buyer as its middle class grows,” Spingola said.
During the downturn in appliance sales following the Great Recession, appliance-makers hunkered down and cut costs. Some U.S. manufacturers shifted production to lower-cost locations out of the U.S., while others relocated foreign production to the U.S., where they retooled factories to cut costs with capital-intensive robotic production lines.
Whirlpool, one of the five biggest appliance-makers and No. 21 on the JOC’s ranking of Top 100 Importers, closed some manufacturing facilities in North America and moved to lower-cost countries such as Mexico. But GE, which sought but failed to find a buyer for its appliance division in 2008, invested $800 million to breathe new life into what was a moribund Appliance Park in Louisville, Ky., where the 16th-largest U.S. importer uses robotics to produce washers and dryers. Swedish manufacturer Electrolux, the JOC’s No. 31-ranked importer last year, invested $190 million in a new plant in Memphis that makes ovens and ranges with robotics on its assembly line. It replaces the Electrolux plant in Quebec.
At the same time, imports of appliances made overseas are making significant inroads into the U.S. market. Lowe’s, a big retailer of home appliances and No. 5 on the Top 100 Importers list, is seeing increasing demand for products produced by South Korean manufacturers LG and Samsung.
“We’re rolling out LG in our stores, Lowe’s President and CEO Robert Niblock said at a UBS conference this spring. “A number of customers have come into our store … asking for the LG brand, and we didn’t have it. It’s the fastest-growing brand in appliances, followed by Samsung, which we already have. So we think it’s going to be a great success.”
Arch-competitor Home Depot, the No. 3 importer, is introducing Electrolux appliances in its store this year, including ovens, refrigerators, freezers, dishwashers and laundry machines under the Frigidaire and Electrolux brands.
In anticipation of a sales slump caused by last year’s congressional impasse over the fiscal cliff, retailers reduced appliance inventories in the fourth quarter. But once that hurdle was resolved in December, retailers started restocking inventories in the first quarter of this year.
“Industry sell-through for the quarter was actually in line with our expectations and our full-year industry guidance of plus 2 percent to plus 3 percent,” Whirlpool North America President Marc R. Bitzer said in the company’s first quarter earnings conference call.