Dallas, TX -- (SBWIRE) -- 01/24/2012 -- After what appeared to be a return to economic growth in 2010, the Canadian economy performed unsteadily in 2011 as the recovery was threatened by a host of factors which included high energy and raw materials costs, as well as unstable international financial markets. The weak economic climate in 2011 was felt in the consumer appliances industry, with most major appliances seeing declining sales over the year as an increasing number of consumers chose to hold back on new purchases of consumer appliances. The inflationary impact of food and energy prices also put a further pinch on consumers’ pockets, many of whom had already seen the need for belt-tightening as they adjusted their spending habits to more limited budgets.

Energy efficiency remains an important factor

Consumer surveys conducted by Ipsos-Reid in collaboration with Whirlpool Canada reveal that 96% of Canadians rank Energy Star rating as important when they consider buying a major appliance. Moreover, the increasing prominence of energy-efficient products is reflected in the greater share of Energy Star products in the assortment offered at retailers such as Sears. It is important to note, however, that Energy Star products tend to be significantly more expensive than their non-energy-efficient counterparts. In the current uncertain economic climate, and with consumers less willing to pay extra for appliances, customers have to strike a balance between the higher ticket price of energy-efficient products and the lower energy costs associated with these products in the long term.

Rising energy and raw materials costs put a squeeze on margins

A series of price increases were announced by manufacturers in 2011 as a result of higher costs at the factory gate. These higher costs were directly as a result of the increase seen in energy and raw material costs worldwide. At the same time, retailers, conscious of the importance of offering competitive prices to consumers in order to boost demand and maintain sales at a time of waning consumer confidence and spending, looked to maintain or even increase promotional activity, as well as keeping price increases forced on them due to higher costs for manufacturers to a minimum. The combination of these trends saw a squeeze on margins throughout 2011.

Shift in distribution channels becomes increasingly evident

The shift seen in terms of retail distribution channels in Canada continues as mass merchandisers and DIY and hardware stores increase their presence in the consumer appliances market at the expense of more traditional department store retailers such as Sears. Although department stores continue to emphasise their wider product selection and superior customer service in an effort to retain customers, consumers are instead increasingly drawn to the lower prices offered at mass merchandisers and DIY and hardware stores.

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