Amazon shakes up appliance industry with Kenmore deal

Amazon.com Inc.’s announcement that it will begin selling a full line of Kenmore appliances sent shock waves throughout the retail industry, and for good reason, as the online shopping behemoth continues to take market share and become the dominant player in many categories.

Lowe’s Cos. Inc. and Home Depot Inc. both saw big share price hits on Thursday, as did names like Whirlpool Corp., a competitor to Sears Holding Corp.’s Kenmore brand in the home appliance market.

Sears shares got a nice bump on the news, as Kenmore’s mar- ket share has been declining and the partnership with Amazon will provide some relief. Yet the better opportunity for investors may lie with companies like Whirlpool.

If Amazon is able to achieve a reasonable amount of market share in the appliance industry, Whirlpool and others should eventually participate as well.

J.P. Morgan analyst Michael Rehaut believes that will allow Whirlpool to maintain a meaningful presence in the appliance market, and keep its leadership position in tact.

It’s also worth noting that Whirlpool supplies some products to Kenmore and others as an original manufacturer, although this part of its business accounts for less than five per cent of overall sales.

Rehaut believes Whirlpool’s selloff and concerns about Amazon’s new relationship with Kenmore (which includes Alexa-enabled smart appliances) are overdone.

“… Whirlpool has proven its ability to adapt to a changing retail landscape over the past decade, which we expect will continue to be the case if Amazon becomes a major seller of appliances over the next few years,” the analyst told clients.

Amazon sees an opportunity to expand into appliances, as online transactions in the U.S. account for just 12 to 13 per cent of the market. That compares to 30 to 40 per cent in the U.K. and China.

Given Whirlpool’s leading market share of approximately 40 per cent across the industry, as well as with every major retailer and distribution channel (something it hopes to maintain as part of stated strategy), the ability to adapt is critical.

Rehaut doesn’t expect this approach will change in the wake of the Amazon-Kenmore deal, so expect to see Whirlpool and other nimble players in the appliance space, to boost their presence and partnerships with online retailers such as Amazon and others.