Sears Holdings (NASDAQOTH:SHLDQ) used to be the most popular destination for appliance buyers with its premier Kenmore brand and a 40% share of the market. However, as many investors know, time and neglect have withered both Kenmore and its parent company.
Kenmore's market share slipped to less than 13% last year. Surprisingly, Sears was still the leading appliance seller as recently as four years ago, but it has since fallen to third place. As the lead it holds over the next runner-up quickly narrows, it may again fall in the rankings in 2017.
A stodgy business
Consumer electronics industry trade publication TWICE (the name is an acronym for This Week In Consumer Electronics) tracks sales in the appliance market -- both the brands and the retailers that sell them. It's a pretty staid group of companies, considering major appliances don't hold nearly the same flash and sex appeal as consumer electronics. But every now and then, there's a big upheaval in the standings.
Last year, for example, after a 30-year absence from the list, J.C. Penney returned following its decision to enter the appliance market once again, a big enough effort that it was able to land in 23rd place out of the top 50 retailers TWICE tracks.
Meanwhile, the site noted that hhgregg had been the seventh biggest retailer with almost $1 billion in appliance sales until it declared bankruptcy in March.
Over the past few years, though, the top three players in the appliance market haven't changed. After Lowe's toppled Sears for the No. 1 position in 2013, it has remained atop the list. Appliances are its third-biggest product category, accounting for 11% of its total $65 billion in revenue in 2016. Home Depot subsequently surpassed Sears for the No. 2 position, and though it makes most of its money from its indoor plant and garden departments, appliances still represented 7.8% of its $94.6 billion in net revenue last year. Together, the three companies account for 58% of all appliance sales.
However, the top rankings may be set to change once again and not just because Sears might go bankrupt (though that may happen, too).
The incredible, shrinking retailer
Because Sears is closing so many stores, it's losing floor space where it can sell appliances. The top three players have approximately 4,400 stores between them, but with Sears selling or closing hundreds of its stores -- perhaps one of the biggest contributors to the retailer's decline in the standings -- its percentage of the appliance marketplace will dwindle as well.
Last year, there was a sales gap of $1.3 billion between Sears and the fourth-place retailer, which has since been nearly halved to only $743 million. At this rate, it's quite possible Sears will fall once more.
So who will beat it? Best Buy (NYSE:BBY).
Appliances supplanting electronics
Appliances represented 9% of the consumer electronics superstore's total $39.4 billion in revenue last year, a space where it saw comparable-store sales surge nearly 8% on top of a 15% gain the year before, despite the fact Best Buy's total revenue actually declined slightly year over year.
It should be noted that Sears realizes that if it is to survive, appliances will be one category it needs to continue focusing on. The company recently announced that it will be opening a new small-format store concept that focuses solely on two segments: appliances and mattresses.
Whether that is the future for Sears -- a niche retailer selling only a select range of merchandise -- remains to be seen, but since closings of its primary Sears and Kmart stores will vastly outweigh any new store openings, it's clear the retailer's days as a leading appliance outlet are numbered. Best Buy will likely overtake it in 2017, and others will surely eventually surpass it as time goes on.