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Taking center stage: manufacturers capitalize on the void in the midprice upright vacuum arena.

GROWTH IN THE HIGHER-END AND crowding in opening price points has squeezed the midprice upright vacuum arena in recent years, but industry players say this trend is in the process of reversing as manufacturers capitalize on the void in the middle.

"The upright market over the past few years has been very bimodal--extreme low and extreme high. Now we are seeing activity in mid price points, $100 to $300," said Dave Baker, vice president of marketing at Hoover. He expects this trend to continue into next year. "The average sale price rise has been from upscaling into the high end, driven by Dyson," he added.

While unit and dollar sales gains have been relatively flat over a "solid" 2005, the industry is experiencing "a reversal of price erosion," Jim Olstrom, director of home at the NPD Group, told HFN. He said that the average sales price for an upright is currently $127, compared with $122 for the same time last year. He declined to provide any forecast on average sales prices. Olstrom in part attributed inflating price tags to opening-price-point brands that are moving up the ladder and adopting higher price points, as well as the continued success of a handful of premium brands.

The expected growth in the midprice niche may actually lead to the stabilization of rising price points in 2007, said Rob Newcombe, vice president of Electrolux Home Care Products. "Right now, the abundance of successful floor care introductions at both low-end and high-end price points has led to the additional growth of these two categories. As a result, there is significant growth opportunity at the midmarket level, so we are seeing many manufacturers try to enter this category with vacuums at the $100 to $300 price point," he said. "We think that this will cause average price points to remain relatively steady in 2007," he added.

Eiectrolux is gearing up for the January launch of its Intensity upright at roughly $300, which should help it gain share in the midprice segment. The high-powered upright features a compact fold-down design for easy storage. Newcombe claimed that the unit features the upright industry's shortest air path at 3 inches versus standard 30- to 45-inch hoses, which should help it to gain a competitive suction advantage.

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Baker disagreed with Newcombe's average-price-point projection, saying that he expects a continued increase in average sales prices in 2007, which should drive dollar sales upward, despite a projected decline in unit sales. "Even with the contraction in unit shipments, we are now seeing a [percentage] point or two in growth in dollar volume ... I do see the value of uprights continuing to grow in 2007 [from] 4 to 6 percent with units being down 3 to 4 percent," he said. Opening-price-point brands are pushing into the midlevel arena by offering such features as higher-level performance, more hygienic filters and dirt-disposal systems, Baker said. Floor care makers are focusing "less on bells and whistles and more on performance attributes," he added.

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Hoover has keyed in on performance in an effort to grab a share of the midprice market with its new $249 Windtunnel II, which Baker said, "has a very hygienic dirt-disposal system."

Hoover must continue to push its customers to spend up on it brand as its awaits transition to a new owner. Whirlpool previously announced intentions to sell the floor care business by the end of this year. "What the new owner needs to do is give consumers a more compelling reason to purchase. When you have a brand as strongly recognized [as Hoover], there is a big opportunity to create awareness into a purchase," he said. "We have the performance, the key is communication," he added. Baker declined to comment on 2007 sales projections for Hoover due to the uncertainty surrounding a new owner.

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Dave Schiever, vice president of marketing at Royal Appliance Manufacturing Co., manufacturer of the Dirt Devil floor care line, said that the $100 to $200 subcategory was the "only area that saw positive growth in 2006." He said that sales have trended downward in sub-S100 vacuums, "wavered" in the $200 to $300 arena and were stable in the $300-plus ring. Royal via its Vax brand offers a new model in the higher-end range, the X5. He said the general absence of growth is due to the transitional nature of the floor care industry this year. The influx of manufacturers offering higher-end models created a "bit of a transitional effect" on retailers' shelves, he said. Schiever is bullish for 2007, saying "We expect next year to resolve itself--average price points will continue to increase slightly with dollar sales and volume.... Things [should] start to stabilize at retailers' shelves, there should be a solidification at higher price points." The growth in the $100 to $200 range is and will continue to be driven by features such as new filtration technologies and multicyclonic suction technologies," Schiever added.
UPRIGHT SALES
DON'T CLIMB WITH PRICE POINTS

(dollars and units in thousands)

 12-MONTHS 12 MONTHS PERCENTAGE
 ENDED 9/30/06 ENDED 9/30/05 CHANGE

Units 18,293 18,188 -0.6%
Dollars $2,312,963 $2,278,848 1.5%
Average Price Point $127 $122 4.1%

SOURCE: THE NPD GROUP
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Copyright 2006 Gale, Cengage Learning. All rights reserved.

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Title Annotation:FORECAST: FLOOR CARE
Author:Rudnick, Michael
Publication:HFN The Weekly Newspaper for the Home Furnishing Network
Date:Nov 27, 2006
Words:875
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