Higher Appliance Prices in Store for Consumers

ATLANTA – U.S. consumers will likely face higher appliance prices next year, but industry watchers do not expect a significant decline in demand for washers and refrigerators as a result.

Costs of steel and other raw materials are cutting into profits at big U.S. appliance makers, forcing many to raise prices. This week, Maytag Corp. (MYG) said it planned a price increase of 5 to 8 percent effective in January.

Maytag's action comes after Whirlpool Corp. (WHR) said last month that it would raise prices 5 to 10 percent. Sweden's Electrolux (search), whose brands include Frigidaire (search), has announced similar price rises, and analysts now expect General Electric Co. (GE) to follow suit.

"With those four companies representing roughly 90 percent of the market, I think we're going to see inflation in major appliance prices next year," said Laura Champine, an analyst at Morgan Keegan.

Sales of appliances have risen over the past few years as home sales reached record levels. U.S. appliance sales jumped nearly 10 percent to $18 billion last year from $16.4 billion in 2002, according to research on the nation's top 100 appliance sellers by TWICE, a trade magazine.

If broad price increases are implemented, demand for appliances is not expected to be markedly hurt, since most appliance purchases are replacement in nature, many said.

"I don't see (increases) affecting the business that much," said Jim Newell, director of marketing for retailer HH Gregg (search), which sells appliances at 59 stores in the U.S. Midwest and Southeast. "We can't do without a washing machine and we're not going to have a refrigerator that doesn't work."

He said retail rivals will help determine price rises. This year, for example, HH Gregg has lowered prices of some appliances in big U.S. cities such as Atlanta because of fierce competition among sellers.

David MacGregor, an analyst at Longbow Research, expects prices to go up mainly on higher-cost appliances with more features. Already this year, price increases have been seen on stainless steel stoves and fridges that are popular among the well-to-do.

MacGregor said a key question will be whether foreign brands such as Korea's LG Electronics (search) or Samsung Electronics (search), which have gained floor space at big U.S. retailers this year, also raise prices.

"If the incumbents are taking their prices a little bit higher, (the imports) will be that much more competitive if they don't follow suit," MacGregor said.

Warren Mann, executive director of Marta Cooperative (search), which represents independent stores that sell appliances, said if the industry is able to pass through higher prices, it would represent a major change, since appliance prices have on average declined over the past few years.

Higher prices could also help smaller appliance dealers whose strength is the time they spend explaining products to customers, Mann said.

"When prices get reset, it gives you a chance to reset profit margins too," Mann said.