Vacuum Cleaners Discussions

Dyson has this week released details of their end of year 2009 performance and generally paints a positive picture. Highlights include:-

• Despite the recession, global sales for the company increased 23% to 770m GBP
• Operating profits more than doubled from 90m to 190m GBP
• The Dyson Air Multiplier is a top seller in Australia; within 6 weeks, representing 64% of the market for desk fans, by value.
• In the UK and US markets, the updated 'ball' range represents more than half of the Dyson cleaners sold.
• In the UK, the company has a total market share for vacuum cleaners, by value, of 40%.
• Dyson is the market leader for vacuum cleaner sales (by value) in the UK, US, Canada, Australia, France, Belgium, Spain, Switzerland, Ireland and New Zealand.

Looking ahead, the company talks about new product launches scheduled towards the end of 2010 - a fair number of which (my speculation) are likely to continue the trend of offering a completive advantage by using digital motor technology. Ironically, a technology originally developed for use in their full-size vacuums, while all current models continue to use traditional motors.

http://www.independent.co.uk/news/business/news/dyson-profits-double-thanks-to-rd-investment-1983841.html

http://www.themanufacturer.com/uk/content/10603/Dyson_cleans_up

http://www.managementtoday.co.uk/channel/Entrepreneurship/news/1006022/sales-vacuum-dyson-gadgets-cost-worth-paying/

http://www.eurekamagazine.co.uk/article/25296/Dyson-doubles-operating-profits.aspx - note: this has the statement 'The company has also confirmed plans to launch a robotic version of its bagless vacuum cleaner' - dunno if that's significant, but I haven't seen it reported elsewhere.

CarmineD wrote:
I try to keep an open mind about pricing. I have to price up products for my own business - adding value and working out how much the market will take.

For the Dyson Fan At 300 USD, there's certainly a big margin between the combined component, assembly and shipping costs and the selling price. Clearly, Dyson's research and general overheads need to be factored in but, could we say that the product would still have a reasonable sales margin for all involved, if it retailed at 100 USD? In which case, Dyson would need to ask - "could we shift at least 4x as many units at this lower price point?"

However, it's not even as straight-forward as that. In selling 4x or more units they'd need have invested in a much larger manufacturing capacity and have well stocked local warehouses - with all the financial risk which that involves. They need to protect against underestimating the public demand, selling out on the first day, making eager buyers wait 3 months for stocks to be replenished, while missing out on 2/3rds of the revenue and all the publicity generated by the launch. Particularly with a highly seasonal line like this, you wouldn't get another good bite of the cherry until the following year.

If the product was say priced at 200 USD and still performing well above average, typically selling out in less than a week and making levels at the central warehouses go critically low, what options do you have to stabilse stock holding and capitalise on the unexpected popularly? Put the price up to 300 USD? You have a unique, patented product - technically, you have no direct competition and yes, you can do this. However, it would be a very unpopular move, with both retailers and the public alike.

The preferred option is to price as high as you think the market will take and keep a close eye on the initial sales figures. If demand is in check with supply, stay as you are. Once manufacturing / stock levels have stabilised and demand has started to fall, you can then stimulate sales with steady prices cuts and look to reach the next level of buyer.

Retailers can promote with offers like '33% off - was 300 USD, now 200' and in the buyer's mind they're getting 300 USD worth of product, with an extra 100 USD in their pocket. The price might go down to 100 USD eventually, by which time you've introduced a new, improved product and can sell both side by side - the latest high-tech product at an 'entry-level' and 'premium' price whilst continuing to get combined margins that eclipse the competition.

M00seUK wrote:

Hi M00seUK,

I don't see that need of a desktop fan requires all the  over-build here or the hked up price.  Yet, I also believe that if you want to sell one and then sell more in worthwhile amounts, consider what it actually is and price it accordingly. There is nothing about this fan that in the least way convinces me that it costs more than ten or twelve American dollars each to mass produce and box up for shipping.

There are venues that we refer to as schlock-shops here in the U.S.  They sell usable goods but none of great speciality or great price. We usually head for "better" stores for the fancy stuff and are more susceptible to influence by way of the type of store to pay more for what we might readily buy for less elswhere.  If, per your feeling, high volume sales may not be of issue and the possibility of this machine's speciality is intentionally being posed to justify price then I think the purposes of all involved are better served by placing the fan in high-end stores like Neiman-Marcus, Bloomingdalse or even Macy's where people with the wherewithal to drop a few hundred bucks on small items are far more likely to be found.

Where is the logic in placing a $300 fan in venues where entire air conditioners are selling at two-thirds the price and far more powerful fans sitting right besided it can be had for one-tenth the price?  Selling speciality items has not only to do with the product itself being sold but where you place it for sale. Presentation means a lot.

Target and Wal-Mart could carry the very same stuff as Tiffany and Company but to what end?  The quality of jewelry sold at Costco is not the same as at a high-end vendor and most people who happen to make a purhcase there do not have the same expectations or make the same execeptions in regard to price as they would if, as an example, they walk into Harry Winston's.

If I walk into an everyday venue, as needed and with no particular urgency of purchase involved, I'm already programmed to think forty bucks or so for a desk fan or blender, maybe $300- 350 for a vacuum cleaner, maybe four to six hundred bucks it there's a good sale on TVs.  That is not written in stone as like everyone else I'm willing to go higher if I see product that appears to genuinely merit its price.  Nonetheless, I don't think that reflects my thinking alone and I don't think it aids Dyson much.

If Dyson's belief is that people everywhere are going to love the fan so much that they'll drop $300 wherever they happen to see it I think they need to think again.

Best,

Venson

Hello M00seUK:

I would agree partially and possibly with some of your arguments IF dyson fans were a year round seller like vacuums with peaks and troughs for consumer demands. 

Certainly this is not the case with fans.  Fans are a seasonal seller.  The sales market is at most 30-60 days during the summer season. For example, in Las Vegas, May & June would be the peak months for fan sales with falling off demand in July and August [clearance for clearing shelves for back to school items which tends to be the peak sales season second to Thanksgiving-Christmas-New Year's]. 

All the arguments about stocking shelves with accurate product quantities, shipping trends and costs to tweak warehouse inventories/supplies are moot points for fans.  3 months is the sales season every year barring unforeseen and prolonged Indian Summers.  Tops is 4 months even in the hottest of climates in the USA like Las Vegas.  After that time, it's a done sales deal and the item disappears until the next year's summer season.  Which to my way of thinking makes advertising the Air Multiplier more critical and relevant now rather than later in the USA.  Although it's been for sale since March, and as you say, and if we believe you, is a unique product without competition, it means $300 10 inch fans are more likely a candidate for an advertising media blitz.  Yet, so far at least, nothing done to put the latest and greatest in front of the US buying market.  Who, if we are to taken in by your points, would be running to the stores in unprecedented numbers at this very moment to buy up all the inventory $100-$200 dyson 10 inch fans.   Not in the throes of the worse Recession since the Great Depression of the 1930's in the USA.  With 5 percent of the homes in the US in foreclosure, 11 percent in arrears, and 10 nationwide unemployment.  I know its even worse on your side of the pond. 

Carmine D.

Venson wrote:

Hi Venson:

Agree.  To my way of thinking, dyson/Sir James in good times and bad, can't decide if it should market itself as a niche seller or mainstream seller.  As with vacuums, its mainstay, dyson is and always will be, if its existing brand remains unchanged, a niche market and products company.  Based on the products and prices.  True to its form and content, dyson fans are no different than its vacuums.  [Making SEVERUS' point that consumers associate overprice of its fans with overprice of its vacuums a real risk for advertising].  Dyson fans are very much in the same vein as its vacuums.  Niche sellers.  Period, end of discussion.  From both a product and price perspective.  On this point alone, if there is agreement, all M00seUK's fan points above fall apart.  While they may sound convincing in a Forum post/company sound bite, they are all moot.  Contrarily, your points about dyson, its products, and the current state of consumers' spending, are right on the money.

Carmine D.

Hi,

I haven't shopped at Macy's in years.  Lots of nice stuff that I can get elsewhere for less. At one point in time it had its own charge card but I don't know if the like is still in existence.  Posessing a Macy's charge card was sometimes an some an excuse not to shop around.  Guess they carried your balance longer than most.

In any event check out -- http://www1.macys.com/search/index.ognc?SearchTarget=*&Keyword=dyson

The prices on Dyson vacuums and acoutrements are way up there but I don't think anyone's complaining 'cause it's Macy's.  However, I did not find the Dyson fan.  The site offers no desk top fan at higher than 90 bucks.

Hammacher-Schlemmer, a great place for those with flights of fancy, does have the bladeless fan along with a variety of other brands and models.  Among them HS lists a $40 model as the best desktop fan.

http://www.hammacher.com/Search/Default.aspx?query=fan

Bed, Bath and Beyond is offering the DDyson fan in two colors --

http://www.bedbathandbeyond.com/SearchSKU.asp?order_num=-1&&LIMIT=0&COLOR=0&RNT=0&BTSmode=false&BRAND=162&BRND=0&RN=&IPPsearch=72

Though I thought the fan would be a sure-shot for Sharper image and Nieman-Marcus it appears to be in neither's listings.

Venson

Venson wrote:

Hi Venson:

Interesting findings.  Thank you.

• Macy's carries dyson vacuums BUT not the Air Multiplier.  Raises questions.
• H/S carries Air Multiplier BUT not dyson vacuums. Understandable.
• BB&B carries dyson vacuums and Air Multiplier.  As would be expected.
• Sharper Image and NM both don't carry vacuums and no Air Multiplier.  Understandable for vacuums.  Raises questions for Air Multiplier absence. 

Not sure what the implications and conclusions are other than those already discussed above.  I certainly can see the retailers which carry dyson vacuums also carrying the Air Multipliers too.  Why?  I suspect, regardless of all the posts above, that dyson would encourage its current retailers to accept and sell the Air Multipliers at no risk.  How?  At the end of the summer season, the unsold dyson fans could be returned for dyson credit toward other merchandise like vacuums. 

You're absolutely right.  Sharper Image and Nieman Marcus are ideal retailers for dyson's Air Multiplier.  If I can read the tea leaves on the conspicious absence of dyson's fans at these retailers I'd say both don't think much of the item/pricing and/or both.  Here's where advertising and media blitz campaigns are useful for dyson's Air Multiplier.  If consumers see it and it attracts their interest, as you said, customers of Macy's, H-S, and N-M would probably inquire and possibly the stores would be more likely to carry and sell them.  I suppose the dyson media people would say their target market would see Air Multipliers on YouTube and facebook.  That might be true.  But, realistically the old rich are more likely to be customers of retailers like Macy's and Neiman Marcus and more likely to buy there if at all. 

Carmine D.

CarmineD wrote June 1, 2010:

It's beginning to happen.  June 10, 2010.

Carmine D.

CarmineD wrote:
Add-on sales are always important in retail, allowing you to pitch further products after the buyer has made their decision on the main purchase. Dyson and the retailer could get great millage here by offering the Air Multiplier at a discounted price, when brought at the same time as a Dyson vacuum cleaner. Given the large sales margin on the Air Multiplier product, this could be an effective way to promote both lines whilst gaining increased revenue per customer.

Nah, Dyson should offer free accessories with the fan like different rings to colour match your room of desired use.

IM told that there's going to be news released very soon from DYSON.