By Dawn Adams

Suppliers are taking proactive steps to reverse a disturbing downward trend in value recorded by the floorcare category during the past financial year. A 0.7% drop in value was recorded for this segment for the year ending June 2010 compared to the year ending June 2009, according to GfK Retail and Technology Australia. This decline marks a troubling shift in this sector which had enjoyed an upward trend in units sold, value and even average price in recent years. The GfK MAT 2008 results show a vastly different scenario compared to the current retail climate. At that time, sales increased 13.4%, value rose a healthy 16% and average prices increased 2.3%.

The sector's falling value has accelerated during the first six months of 2010. GfK 'leader panel' data reveals a double-digit decline in value and average prices in June 2010 compared to June 2009. Value, at that time, fell a dramatic 15.7% while average prices plummeted 11.8%. May 2010 suffered a 9.9% value dive and 14.7% average price drop compared to May the previous year. The strongest performing months this year were April and  February 2010 which recorded a rise in value at 5.5% and 5.3% respectively.

Concerning is that this segment's resilience to economic downturns, often attributed to a consumer perception of floorcare as a 'need' rather than a 'want', may be splintering. 

And suppliers and retailers will need to adopt innovative strategies rather than try to build profit by increasing average prices even moderately. The latest data suggests any rise in cost to consumers discourages sales in an extremely price sensitive climate. Cautionary words, expressed when the global financial crisis first hit, that excessive discounting could breed a new generation of increasingly price aware consumers appear wise in retrospect. These consumers are far less willing to part with their hard-earned cash unless the price is sharp and the features offered abundant. An unwavering mindset keen to find a discount or value-for-money option is now a trait cemented in the national psyche and will be very difficult to shift. However, there are definite pockets of strength that suggest opportunities still exist in this tough market.

Seismic shifts

The GfK data demonstrates canisters continue to secure the highest number of units sold at 870,333 but their total dominance of the market may be under threat as they recorded falls on all measures. Units sold were down 4.4%, their value share fell 4.9% and average prices dropped 0.6%. Important to note is the seismic shifts evident elsewhere in this market where lie new and exciting opportunities for innovation and building growth. A polarised market reveals significant activity in sales of more affordable floorcare combined with a changing demand for some of the more premium products.

Electric sweepers and handsticks are the standout performers for more affordable options with average retail prices of $77 and  $154 respectively. Electric sweepers enjoyed a phenomenal 32.3% rise in unit sales with consumers attracted to their 9.3% fall in average price. However, the value of this market segment still rose a strong 20%. Sales of handsticks jumped 35.9% with their value increase up a healthy 25.3% due to a 7.7% fall in average price.

The most remarkable growth in the entire floorcare market was delivered by compact vacuum cleaners. Sales of these models increased a remarkable 88.9% skyrocketing from just 23,072 the previous year to 43,593 this year. Unable to withstand sliding price pressures, their average $347 price fell 14% from $403 the previous year. However, their value share rose a noteworthy 62.5%.

Decisions impacted by price

Upright standards endured a 5.6% fall in average price and 3.9% value drop while units sold increased a modest 1.8%. Wet & Dry models suffered a sharp 17.5% decline in average price but a less dramatic 11.3% drop in value due to a 7.5% increase in units sold. 

The only two categories to experience price rises also suffered falling sales. Despite handheld options having an affordable $100 pricepoint, they endured a 2.1% sales fall perhaps influenced by a 9.8% rise in average price. At the premium end of the market, robots experienced a 24.3% average price rise but suffered a 10.3% sales decline and 11.5% value increase.

Building momentum for healthier growth in the floorcare segment presents a significant challenge for suppliers and retailers. "It has been a very difficult trading time for retailers, without the stimulus package enjoyed by consumers last year and with an election looming," said Mark Anderson, Dyson SEA sales director. "However, with a resolution to the election at hand and confidence in the market continuing to grow, we believe spending will follow."

A reluctance for most consumers to accept higher prices will mean retailers and suppliers will, for the moment, have to make do with no-room-to-move margins while they attempt to persuade consumers that added features designed for contemporary lifestyles are a powerful reason to buy. However, despite a cautionary tone in the market, a certain optimism is also being voiced by suppliers preparing for Christmas sales, especially those that have invested in compact floorcare options while offering models at varying pricepoints across product categories.