Government Looks to Stimulate Appliance Sales
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appliance sales are down about 15 percent this year so it comes as no surprise
that manufacturers and sellers are enthusiastic about the start of a new
federal program, administered by the states, that will provide consumers
with rebates up to $200 for buying new, more energy efficient models to
replace older units.
The Association
of Home Appliance Manufacturers (AHAM) in June provided a strong
endorsement of the program, funded at $300 million as part of the
federal economic stimulus program, saying it would “stimulate demand
for home appliances, provide consumers with tremendous savings
on the initial purchase cost and long?term utility costs of appliances,
and will also provide an important
environmental benefit by way of a significant decrease in energy
consumption.”
Jill
Notini, a spokesperson for AHAM, told CNBC, that a consumer replacing
an eight-year-old washer with an Energy Star model can save about $78 dollars
a year in water and electricity.
According
to a Wall Street Journal report, the $300 million for the program
was originally approved as part of energy legislation in 2005 but never
funded by the government. Because the program is being administered
by the states, each had to confirm their participation by Aug. 15. Now
that all 50 states have opted-in, they will have until Oct. 15 to draft
details on its execution. Funds provided by the federal government
are calculated by the population of each state.
Discussion
Questions: Will the federal rebate program stimulate home appliance sales?
Is this sort of public funding necessary? What can retailers do to use
this program to stimulate even further sales activity?
Who thought there would be a rush for cars when the “Cash for Clunkers” program began?! The sales surge we saw was an indication of pent-up demand.
I think we’ll see the same reaction for appliances. Letting consumers know it’s OK to make that purchase and justifying it with perceptions of money saved will encourage sales.
From a marketing perspective there will be increased awareness of what’s out there to buy. News coverage of the program will drive awareness on one level. Retailer and manufacturer promotion will push the buttons regarding product benefits, brand equities and customer expectations.
Yes this will stimulate sales. But only in the short term. My fear is that, like Cash for Clunkers, people will turn in perfectly good appliances to buy new ones they don’t really need. There will a short term boost in sales only to have a huge drop off. Its like when FEMA passed out Food Stamps to every living being after Hurricane Katrina and supermarket sales went through the roof in Louisiana. People who didn’t need or deserve them simply stocked up on everything, because they could. Then they didn’t buy groceries for months. That wasn’t much fun for the retailers.
I wish the government would send me some stimulus dollars. Maybe to help me pay my health insurance premiums or send me on vacation.
Based on the “Cash for Clunkers” program, there was tremendous pent-up demand that is likely to be followed by a sales slide now that the program is over. But without the program, would there have been a surge in demand at all? Not very likely. It’s hard to say whether the car program will have any sort of ripple effect on overall consumer spending, but at least it puts laid-off auto and partsworkers back on the line to replenish inventory.
So “Cash for Appliances” may have a similar benefit, as long as it’s explained more clearly and administered more smoothly than “Cash for Clunkers.” (Hmmm…maybe that 20-year-old wall oven with a broken timer light qualifies?) $300 million in the scheme of things is a small price to pay for the likely benefits, although anti-interventionists will argue that any price is too high.
A lot of what Retail Prophet is seeing and hearing suggests that we’ve entered an era of increased responsibility. Consumers are looking for retailers, products and programs that can help them to be more responsible both financially and socially.
The degree to which this program prompts incremental sales is anyone’s guess but I do think it will have a positive influence.
I’d like to know where these programs will end. You can always make an argument that the funds are both stimulating the economy, and at the same time, helping better the planet in the long run. In the case of Cash for Clunkers, it helped sell cars, and helped take older cars off the street that might be causing air pollution. In this new program, it sells more appliances, and cuts energy usage. But can’t all industries make an argument for a stimulus package?
The book industry could argue that selling more books will create smarter people.
Health clubs can argue funding gym memberships will create healthier people.
Bars can request a stimulus package because people who drink might be happier and friendlier to one another.
The point is this. All of these programs make sense, but they seem to be short-term fixes, and one has to question if the government should continue to fund these projects. If they do, what will happen when they decide to stop the funding? It will be interesting to see.
Of course it will–for a little while and by encouraging people who can already afford to buy and would eventually to do so sooner–but to nowhere near the level that a 1% increase in home construction would.
The economic conundrum is that perception is reality, but only for a little while. People do spend more when they believe there is an advantage to doing so, and the economy does get better when people spend more. But it is all a tiny tempest inside the larger teapot of a predictable and understandable economic cycle. A cycle that neither knows nor cares that federal elections are held every two years or that CNN and FOX both publish new opinion polls every night.
I have a melon that’s getting a bit overripe. How about a “Cash for Cantaloupes” program?
This is getting to be too much. We’re not stimulating the economy, we’re subsidizing foreign manufacturers.
It is the way that our country continues to move. We are conditioning customers to wait for the government, retailer, and/or employer to give you some sort of subsidy before you purchase.
We could call this program “Assistance for your Antiquated Appliances.”
Why is it that when the government hands out money, people are surprised that consumers take it? Yet, the public has conversely lost much of its appetite for more bailout programs. Can the government stimulate appliance sales? Sure. Will it last longer than the funding for it? Nope. Will the auto industry continue to spike in sales now that the clunker program has stopped? And, yes, most of the appliances are not made in the US.
Bottom line, we need a higher-level, more strategic and longer-term plan. We are addicted to oil. That is the one major factor that trickles down to so many other issues in our economy. I know it won’t happen here because we’re simply trapped by our own politics. However, Norway, Japan and other nations are making real progress with getting off the oil addiction. It wouldn’t take much to do that here, maybe $20B tops, which is a drop in the bucket nowadays. If we didn’t have to pay what we do for gas, heating oil, etc, consumers would have more to spend on larger things, like appliances.
For now, they’ll fix the old fridge for $300 rather than spend the money on a new one.
The “Cash for Clunkers” did not stimulate “Demand” per say. It perhaps advanced the purchase date of a car by a number of months. The Automotive Industry is likely to see a shortfall in future sales from these same consumers–Consumers are not going to go out and purchase yet another car in 9 to 12 months.
At any point in time, when Consumers are asked if they plan on purchasing an Automobile, Truck, or SUV in the next 6 months, somewhere between 9% and 11% answer affirmatively. And, they reliably follow through on their intentions as over 8 years of monthly BIGresearch validates.
This type of stimulus program–both “Cash for Clunkers” or the proposed Appliance stimulus–will not create added sales of Big Ticket items that need to be replaced. The Appliance companies and Automotive companies receive a short term (a quarter or two) of added revenue/profits, and then they’ll pay for it in the future lost revenue/profits.
If the American taxpayer agrees, the Federal government can continue these types of programs. They just need to know that it is not building the economy back to strength, it’s draining the Treasury.
An appliance stimulus is a wish and dream in someone’s eyes. It simply will not happen. The message being sent to Washington is stop spending. Auto got the stimulus as the government owns two of the three American manufacturers and they are trying to save union jobs. All that it achieved was to bring future sales forward. Appliance sales are tied to housing and the government does not yet own the builders.
My old clunker auto is now smashed,
Washington pols said it should be trashed.
That car fumed and used too much energy
Doing harm to clean air synergy.
So I drove to my dealer and got cashed.
Depressed sales now spotlight on appliances
Signaling Congress to give more reliances.
And as I type my comments via this twitter
I wonder if DC is now our economic baby sitter
And if government will demand new compliances.
Self reliance is free enterprise’s goal
Handing out bail outs will finally take a toll.
Right now the golden freebie pot is drying out.
Taking charge of our lives will be next our bout
And those future make-up taxes will test our soul.
What will the next Bail Out temporarily salvage?
Well I need a new refrigerator and I had intended on going out this weekend and buying one. But I’m not going to buy it now!
Why should I pass up a government subsidy just because I pay taxes? No, I’m going to wait until the government pays me to do something I would have done anyway. One of these days all of these 25 year old MBAs, who have never worked a day in their life but who are writing all these programs are going to find out that a market works best when it’s left alone. Our government has “regulated and stimulated” markets for years and history will attest to the fact that it’s a hit or miss proposition at best.
As simple as he was, George W. gave some good advice when he told people to go out and spend money to get the economy going. As I recall, he even sent us some money to spend and it worked. Yeah, I’ll stimulate as soon as I am stimulated.
There are 5 ways to look at the program.
From a political perspective you are going to be for or against it. Most of the people on this site seem to be against it politically.
From a retailer’s perspective, it will in the short run get people into the stores and get some great PR for more energy-efficient appliances.
From the consumer point of view, most of them are not going to take advantage of the program unless you have an old refrigerator in the garage that you might want to get rid of.
The cost savings in utility bills will most likely not get people to buy more unless they really have an appliance with a problem.
For the manufacturing segment, what good is it going to do the job market since the majority of the appliance are built overseas?
Last point; since the program is controlled by the states, each state is going to have a different program. Isn’t that going to be neat?!
Being a site dedicated to retailing and related businesses, our interest is to look at this opportunity and ways to perhaps build on it. Questions about whether the government should be doing this in the first place are better left for political sites.
It is ironic that this program has been around several years, but is now finding interest. Perhaps, that is a measure of how difficult times are?
However, unlike the Cash for Clunkers program which specified both what clunkers and what new cars qualify, this program doesn’t seem to have any focus. Perhaps with appliances, all old ones are inefficient and all new ones aren’t. The economics of consequence of cutting energy use are well beyond my comprehension. However, my gut tells me that the multiple effect of $200 investments versus annual savings of $78 goes a long way to cutting this country’s grotesque spending on foreign oil and the international borrowing that it necessitates.
In any case, any motivation to generate energy efficiency and at the same time stimulate the economy at this time is probably worth it. The economy has to be primed. There is no entity that has the resources to prime it other than the government. Those that think a better way to stimulate would be to cut taxes will find that there aren’t enough taxes or assurances that they would be spend in order to generate recovery.
Like Ed Dennis, I may use this program–the downstairs air conditioner needs replacing.
Appliance retailers might look to the experience of the car dealers in regard to the slowness of payment and the paperwork requirements. Many car dealers are on the hook for hundreds of thousands. If they can afford to wait months for payment, the program may be great for them, but that might create a cash crunch for smaller retailers.
This is not a cash for clunkers program. Up to $200 is not $4500, and the appliances that qualify for this are limited. This is a good idea that some people will take advantage of, but it is pretty much window dressing. If the government wanted to do the same thing for appliances and energy efficiency, they would offer this as a $500 rebate or even more. Refrigerators, washers and dryers, air conditioners, ovens, etc, are all energy hogs and until we address this directly, we will have problems with these items and their impact on our economy as well as our environment.
I think it will work to an extent. I have a 15 year old fridge that I wasn’t planning to replace unless it died. Now I just might replace it depending on how large the rebate is. It’s like this…with no rebate spending 500+ on an appliance to save electricity didn’t make sense if I am only going to live in my home for a few more years; the cost/benefit just doesn’t add up in my favor. With a rebate though the equation changes so the program will likely bring folks like me into the demand line.
In 1787, Alexander Tyler (a professor at The University of Edinburgh) is reported to have said this to say about “The Fall of The Athenian Republic” some 2,000 years prior.
“A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, (which is) always followed by a dictatorship.”
Well, we had a good run for a little over 230 years. Too bad we don’t want to leave anything for the kids.
I am disgusted with the conversations about “getting my share” while we bankrupt the Republic. What we need is a shot of restraint, productivity, and 20 lbs of moral turpitude. Those of you who wish to perpetuate our demise might also consider “End of Life” counseling for your existing appliances. Good practice for the future.