Vacuum firms ponder merger effects
Vacuum manufacturers are hesitant to forecast the effects of the merger between Federated Department Stores, R.H. Macy & Co.
"It's too early to tell" what's going to happen, commented Bissell vice president of sales Jim Krzeminski. "We don't know how they're going to purchase or the ramifications. They'll be smart enough to know which stores execute the category well."
Vendors are hopeful, however, that the new entity's vac business doesn't go the way of Dillard's, Macy's West and the latest dropout, Federated's Lazarus chain, which complained of slumping floor-care sales.
"We feel they're both so strong at this point--they're pretty good, quality organizations--that in our minds we don't see them coming out of floor care in the joint merger," a source said. "We don't see it in the best interest [of Federated] to get out of a classic category that has demonstrated strong traffic if done right .... Traditionally, department stores have been in floor care."
Department stores have fallen from a combined 10 percent of overall floor-care sales in 1992 to 8 percent of the $2.7-billion business in 1993, according to statistics compiled by HFD. The channel's increasing disenchantment with floor care comes down to margins, which are at risk because of cut-throat competition from mass merchants. Macy's metropolitan New York stores, for example, retail Bissell's Big Green Clean Machine for $299, while neighboring Caldor aggressively advertises the extractor for $199. Rather than fight price erosion, many department stores tuck a negligible vacuum selection in a remote part of the housewares section and seldom advertise the products.
"It seems to me that Macy's has been more aggressive about the floor-care business," an industry source said. "A&S has been aggressive, and Burdines and Rich's have been aggressive at times." Macy's East has served as the launching pad for the Big Green Clean Machine and for Hoover's Steam Vac.
While Lazarus' example may indicate the opposite, at least one industry insider felt the Federated/Macy's merger could signal the return of floor-care to every division. Another suggested that the stores will look to floor-care manufacturers for the co-op advertising needed to float slick mailers and newspaper inserts.
Even if those dreams come true, there is disagreement as to how many manufacturers will be invited to the party. At present, Hoover has SKUs in approximately eight stores (not including Lazarus); Eureka in seven; Bissell in three or four; and Royal in three. Black & Decker hand vacs also are carried in some stores.
An enlarged supplier list, which could afford product differentiation from store to store, "would be directly opposite from any department store concept," a source said. "The concept will be to reduce vendors to become more important [to the vendors and] to become bigger and reach higher goals, such as a higher markup and higher gross margins."
The case is not necessarily cut and dry. "I would say that opportunity for more manufacturers is always there--whether there's a merger or not--if the manufacturers come up with the right products and programs," said Royal vice president of sales and marketing Rebecca Mittler.