Freedonia Group Analyst Weighs In on Sears’ Agreement to sell Kenmore Appliances on Amazon

In July 2017, Big-box retailer Sears agreed to sell its Kenmore brand appliances on Amazon, and would begin to integrate Amazon’s Alexa technology in a new line of appliances.  Following the announcement, the stocks of other large appliance retailers, primarily The Home Depot and Lowes, fell sharply. 

Prior to the announcement, Kenmore appliances could only be purchased at Kmart, Sears, and Sears Hometown stores and Internet sites.  Steadily declining traffic in its retail stores led Sears to team up with Amazon in order to reach a larger customer base. 

Amazon, which does not have a retail footprint in the US, will be able to sell these appliances to consumers at a lower price than those purchased at traditional stores, which can be a big factor in consumer purchases.  “One of the biggest impacts this could have on the industry is on pricing,” according to Freedonia analyst Kyle Peters.  “Major appliance retailers have not had to face significant competition from Amazon in the past.  Traditional retailers will need to lower prices to compete with Amazon, which will have an impact on profit margins.”

However, other questions still need to be answered, says Peters, before this deal can be seen as a significant market disruptor.  “Part of the reason that Home Depot and Lowes have strong appliance sales is that both retailers offer in-house delivery and hook-up services for their appliances.  If Amazon only offers delivery (even if that delivery includes it’s free 2-day shipping for Prime members) consumers may still have to find a third party for installation.”  Additionally, the Kenmore brand, while once a common household name, has steadily fallen in popularity over the years as the market has become more crowded.  Kenmore faces stiff competition in a US market where 40 million major household appliances are sold in a year, according to Freedonia.  “If Amazon and Kenmore can’t drive business with their new products, the total impact of this agreement will be minor.”

For more information on this, see Freedonia’s World Major Household Appliances study.

https://www.freedoniagroup.com/industry-study/world-major-household-appliances-3366.htm

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