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Tech Wars in the Appliance Aisle

By Olga Kharif Most folks know the Maytag repairman, that gruff older guy who complains that his company's washers and dryers "are built to last, which makes him the loneliest guy in town." The character has been used in Maytag's ads since 1967. He's a familiar face, as little changed in appearance over the years as the clunky household appliances he promotes. After all, the dishwashers you see today don't look that different from the ones you bought 10 years ago.

That's about to change. A slew of new, mostly Asian rivals are arriving on American shores, plotting to move into American homes and take on mainstays like Sears' (SHLD) Kenmore line, Whirlpool (WHR), and Maytag (MYG). Along the way, they promise to drastically alter the appearance and capabilities of basic household appliances, bringing good old-fashioned refrigerators, stoves, and microwaves into the Information Age.

Here's what's cooking: Newcomers, including giants LG, Sharp, and Samsung, which have already made a name for themselves in cell phones and flat-panel TVs, are bringing their high-tech expertise into the world of dishwashers, ovens, and refrigerators. Among the innovations: turning an ordinary fridge into one with a built-in TV, and a plain oven into a food defattening machine (see BW Online, 12/9/04, "High-Tech Tools for Fighting Fat").

"INNOVATE OR DIE." Such contraptions, many of which are just coming out, are expected to be a hit with male geeks as well as affluent women in their 20s to 40s who are as fond of gadgets as anyone. LG, Sharp, and the others believe their sales will rise much faster than the overall appliances market, recently pegged at $23.2 billion and growing at 4% to 5% a year.

As these companies search for growth, household appliances should see more innovation in the next 12 months than they've seen in years. With the new rivals increasing the pressure, industry old timers are throwing more resources into developing innovative new products than ever. "I think it's going to force the entire market to get better," says Peter Greene, an analyst with consultancy NPD. "It's going to be: Innovate or die."

That's particularly the case since the U.S. housing market, on a growth spurt for the past several years, may be slowing down. The appliances industry will need to rely more on consumer replacements vs. new construction, says Mike Deneen, an analyst at research consultancy Freedonia Group in Cleveland. To induce consumers to upgrade their current dishwashers, manufacturers will have to up the ante on cool new features.

WEB CHECK. If they do, chances are consumers will buy even the pricier household toys. "If you deliver the right solution, customers are willing to pay for it," asserts John Alexander, vice-president and general manager of the Whirlpool brand in Benton Harbor, Mich. And stores from Best Buy (BBY) to Home Depot (HD) are clamoring for the high-tech stuff.

Samsung has already tested the waters in the U.S. by offering a $5,000 refrigerator equipped with a removable Internet-access screen, through Best Buy (Samsung figures that since you start your mornings by heading to the refrigerator, you might as well check the weather and the news as you retrieve that carton of milk).

Last fall, Samsung showcased in a few stores a line of dishwashers and ranges equipped with liquid-crystal displays, the kind it already manufactures for flat-panel TVs. "The feedback has been very positive," says Doug Scheer, national sales manager for Samsung America in Ridgefield Park, N.J. So now, it's planning an all-out appliances launch for 2006, and it's in talks to produce its products for the U.S. markets in Mexico, he says.

REMOTE CONTROL. Another Korean challenger, LG, already sells a $2,999 TV-refrigerator at Best Buy and will soon offer its appliances through Home Depot as well (see BW, 1/24/05, "Korea's LG"). It's in the process of developing an Internet-enabled dishwasher and a microwave, too. The idea is to connect all appliances to your home Internet network, so you can activate the dryer or turn up your air conditioner remotely, say via a PC at work.

Critics argue that a pricey refrigerator with a TV isn't likely to have mass appeal (after all, a conventional refrigerator of the same size can be had for less than $400), but LG says part of this product's mission is to establish it as an innovative company. "For a new brand, products make a difference in marketing," says Daniel Lee, director of marketing for digital appliances at LG Electronics USA in Englewood Cliffs, N.J. "This is a great marketing tool."

Indeed, LG's marketing effort is about to hit top gear. LG plans to spend about $100 million on advertising its appliances in the U.S. over the next three years, says Lee. Its goal? To grab a double-digit percentage of market share in refrigerators and several other market segments within the next two years.

CLEAR CASING. Indeed, as LG, Samsung, Sharp, and others roll out new product lines, one of these companies could move into the ranks of top five appliance makers within three years, believes Lisa Bonnema, editor in chief of Appliance Magazine, a trade publication that conducts industry market research.

The threat from these newcomers is forcing the U.S. industry's old-timers to respond. Maytag's Jenn-Air brand, for one, recently went high-tech, with models in which the fashionable stainless steel is replaced with glass panes. "We've been hearing this year that designers have been looking for the new stainless steel," says Jenn-Air Brand Manager Kingsley Shannon. "We think this is it. We've heard nothing but rave reviews [for our glass]." These tempered glass appliances, which will become available at the end of April, can be cleaned with regular glass cleaner.

Indeed, increased convenience is something that established appliances brands believe is key to keeping consumers happy -- high-tech gadgetry is a lower priority. So Whirlpool will soon come out with a $2,199 refrigerator with a water dispenser that will fill your cup at twice the speed of a standard model. The dispenser also features a slide-out tray to make it easier to fill coffee pots. "Consumers are looking for solutions that are relevant to them, not great gadgets," says Alexander.

FAT DRAIN. And this summer, KitchenAid, a Whirlpool brand, will release so-called refrigerating drawers. Basically, this would allow you to have multiple 27-in.-wide refrigerators installed throughout your kitchen to replace the big bulky one. That way, you could keep your spices in a cool drawer located conveniently by the stove, where you need them most.

Of course, the consumer-electronics giants claim their new products are a lot more than high-tech gadgets -- they're highly functional, too. This spring, Sharp Electronics will introduce the world's first fat-busting oven. The device, expected to sell for $1,300, turns water into steam heated to more than 500 degrees Fahrenheit. At that temperature, fats melt and drip into the oven's lower drain. As a result, consumers get healthier, lower-fat food.

The battle for the U.S. appliances market is only starting, and the industry's mainstays won't disappear any time soon. "They're as American as apple pie, I don't think they're going anywhere," says Bonnema.

However, Whirlpool, Sears, and Maytag clearly face a mounting threat. And this time around, that repairman's image -- reliable, fun, but old -- might work against the Maytag. But if this scuffle encourages innovation, consumers will end up the undisputed winner. Kharif is a reporter for BusinessWeek Online in Portland, Ore.

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