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147: Danby Talks Appliance Trends Heading Into 2023

Written by Rob Stott

November 29, 2022

Danby independent thinking podcast

Jim Estill, owner and CEO of small appliance maker Danby, highlights some of the trends the company is tracking as the calendar gets ready to flip into a new year. Danby is celebrating its 75th year in business this year.


 

Rob Stott: All right. We are back on the Independent Thinking podcast and diving in right now with one of our appliance vendor partners, Danby. Now, Jim. Jim Estill, CEO of Danby. You are… We talked about this before we hopped on. You’re north of the border in Toronto. Is that where Danby is based as well?

Jim Estill: That’s where head office is.

Rob Stott: Okay.

Jim Estill: But we have four factories in the United States as well. So, we’re-

Rob Stott: North America.

Jim Estill: We sell more in the United States than we sell in Canada. How’s that?

Rob Stott: Got you. Well, Mr. Estill, we appreciate you jumping on the podcast and sparing some time and chatting about the appliance business and independent retail with us. So, we’re excited to have you on here today.

Jim Estill: I’m excited to be here.

Rob Stott: Yeah. Well, let’s start with business. We’re wrapping up, we’re sitting here as we’re recording around mid-November, the years winding down. How have these past few months of 2022 been, and we’ll look ahead too to 23 in a minute too.

Jim Estill: Well, the pandemic was very kind to the appliance business. Everyone needed fridges. Everyone needed freezers. The last few months that started to cool down. I think it’s a little bit of a flip from goods to services. So, people go on holidays, they don’t have enough as much money to buy a wine cooler or a second fridge or freezer. But there are trends that help the appliance industry, like food inflation and restaurant inflation. You go to eat and you say, “Wow, that’s expensive. I better eat at home.” And then you go have a glass of wine out and say, “Wow, I better drink at home.” And next thing you know, need a wine cooler, you need a fridge, you need a freezer buy and bulk to save. So, there are trends that work in our favor, but right now it’s not the glory days of the early pandemic where if you wanted a freezer and we make them, I might be able to get you one in 90 days. What’s that all about? Right.

Rob Stott: No, the wait times are not nearly as long. And I know personal experience, we saw that kitchen renovation projects, things like that. What those wait times are, I imagine it’s got to be comforting that things are getting sort of… I mean the way we’ve been talking about it, what is back to normal, right? So, we say back to the pre-pandemic levels, is that what you guys are seeing as well?

Jim Estill: That’s right. It’s back to pre-pandemic. And that has changed the buying philosophy of the large retail chains. They were in a more or less, if you have product, they’ll give you an order for it. Now they’re saying, “Oh, we need to be… They’re not just in time, but more just in time.” And that ripples through to the independence as well. So, there’s quite a bit of inventory in the channel, but I believe just like most things in markets, people will overshoot. So, there’s going to be another shortage in six months because it starting from day… If you ordered today a 100,000 pieces to start production today, you don’t get anything for six months. And so, as soon as you say, “Oh, so we’re not going to order,” so basically people are going to hold their orders, they’re going to overshoot it and we’ll have another shortage in six months. That’s just the way things are in business, right.

Rob Stott: And that’s right now, right. There is this a new normal of the ebb and flow of how you see appliances, kind of the business being?

Jim Estill: No, I see that as that’s the way markets are. So, when the markets sort, then they go down the next day when the markets dump, then they come back up. And so, we’re just in a market and I do believe we could be in economic difficult times for the next year and a half or two years. But I’m old enough. I’ve lived through a lot of economic cycles. I don’t think this one’s going to be particularly bad.

The fundamental numbers are still pretty strong. So, I think it’s all survivable. Is it going to be the boom time? No, it’s not going to be the boom time, but it will be a little tough. I’m also old, so I always figure it never hurts to be conservative.

Rob Stott: Sure.

Jim Estill: What’s the worst case? I’m wrong. And it’s boom time, in which case, okay, I have to run a little faster to catch up. Right.

Rob Stott: Yeah. Well, it’s funny you mentioned the fundamentals and things like that. And you’re that not specifically appliance bait related, but you look at the NRF just had their holiday retail forecast what they expect and still, I don’t know the last time you could look back at the quote recession type era and their 6% to 8% holiday retail sales growth during that like while it’s going on so, and we’re nearing what a trillion dollars spent during the final two months. It’s interesting to say the least.

Jim Estill: That’s right. And there’s a little bit of a move from online buying back to in-store buying. People want to go into store and buy it so. And that helps the independent retailer because they’re an in-store experience and appliances are pretty a little nicer to buy in-store than they are to buy online because you can’t really tell the feel of a product from a picture. I mean you get reviews, but then are the reveals views real or fake? And so, nothing beats going into a real store where you can touch it, feel it and say, “Hey, this door closes like a Mercedes, or this door closes like a lata.” Right.

Rob Stott: Yeah. Right. Well, one of the things you mentioned that I keep thinking back to is the sort of how consumers these last two years have bought, they’ve bought appliance, the business has it boomed during the pandemic. And what we saw, is there an opportunity, I imagine as all these new appliances are now out in the market in consumers homes service, the servicing of those appliances, is there an opportunity there for independence and making sure that consumers are experiencing the best of those appliances that are in homes?

Jim Estill: There’s not as much opportunity as you used to be because appliances are so reliable these days that basically if it’s working, it’s probably going to work for a decade. And if it doesn’t work for a decade, then you didn’t buy a quality appliance. And so, a company like mine, I say we failed. If we sold it. If Danby makes a product, doesn’t last for 10 years, we’ve failed.

And so, the service end, I don’t think there’s as much opportunity for independent retail where there is opportunities on the service end is people do want delivery and put in place because this is big, bulky, heavy stuff. Most people can’t fit it in their cars and most people don’t have a truck. And if they do have a truck, how many friends do they have to borrow to move it into the house and do they have the right dolly where if you go with a good independent appliance dealer, they’ve installed a 100 of these things and a 1,000 of these things, they know how to move them and not hurt themselves. And so, that’s a real niche and an opportunity that people want and need.

Rob Stott: Yeah. Absolutely. And we see a lot of that retailers putting an emphasis on that because that’s sort of, I mean not only is it saving the customer the agony of having to haul that appliance and get rid of the old one as well. That’s the other side of it too. Bringing in the new appliance, taking out the old appliance, but then also a lot of heavy lifting and manual labor, maybe those free pizzas for their friends they have to sway to come help them. And that sort of side, it’s those last couple of feet that really can make or break the experience for the retailer or for that customer.

Jim Estill: That’s right. And taking away the old appliances. The other point is all responsible independence, recycle them appropriately so it won’t go into a landfill where it’s going to get bad gases released to the atmosphere and stuff like that. Appliances should be recycled by a proper appliance recycler and all the independents would have facility to do that, which you don’t have that facility, you go set it out on the curb. And that’s not the environmental friendly way to do that.

Rob Stott: Certainly not. Well, you gave the recap of how things have been. As you’re looking in look ahead to 23. Is there anything in particular that stands out to you as what you’re looking forward to about the next year or what opportunities that could present themselves?

Jim Estill: Well, so when you look at the overall economy, I believe that people will be housed in slightly smaller units. So, it’s not going to be the boom for the 3000 square foot home, it’s going to be the boom for the 700 square foot apartment and condo and townhouse and basement apartment. So, that means in the appliance business there will be more of a trend towards European sizing and smallish, smallish large appliances. The other trend we talked about is the food inflation will cause more people to buy freezers. So, the number of people who had standalone freezers pre-pandemic was about 35%. That moved up to 50% in pandemic. And I believe that’s going to keep going up. And the other thing that happens once you have a freezer, you almost always have a freezer. And that happened with microwaves. 98% of the people have microwave, they will always have a microwave.

And that that’s just the way and they think that is the only way to live is to have a microwave. And if you’re moving out, your son’s moving out or your daughter’s moving out, well they need a microwave. Same thing is going to be true of some of the appliances. The other growth area, I see wine coolers and the reason for wine coolers, they’ve become more of a norm in houses and it’s still only a couple of percent of the people that have wine coolers.

So, we can double to 4% or triple to 6%. That’s huge growth in the industry. But it can do that. Where my example of microwaves, it can’t double.

Rob Stott: Right.

Jim Estill: Because 98% of the people have them and maybe a very rare few might want a second one, but at the end of the day, no you can only go up that 2% plus replacement. So, that’s not going to be a huge growth market. And now, as an innovator in the space, I’m saying yes except, people, we have a five-in-one microwave that does air frying and convection oven and so all of a sudden people want air fryers and convection oven. So, there’s still growth opportunities in every segment.

Rob Stott: Yeah. You mentioned that, I mean there’s some of those, the products that you see out there that the standard four piece, right. You get the four pieces of the kitchen, but those items are still being innovated. And you mentioned that. So, I was going to follow up and ask you on some of that innovation. Is there anything that you guys are doing in your products that you see that sort of those new trends or new ways of using these appliances that are kind of exciting you or getting you a fired up about this appliance space more than you already are?

Jim Estill: So, I love the five in one microwave because everyone wants an air fryer, but nobody has extra counter space or covered space to have an air fryer. And it is a healthier way to cook. And then a convection oven because I don’t want to even turn on my oven to do something because I don’t tend to be baking that big of stuff. But a convection oven may… It’s just a different way to heat. So, that’s a trend. Another trend is a trend towards electric away from gas.

Rob Stott: Yeah.

Jim Estill: Some cities are saying they can’t, you can’t put gas in even and some places they’re just not doing gas anymore. So, there’s trend towards that. I think induction will be big but not that big this year. That’s a future and that’s simply because induction is lower energy consumption and faster. But the problem right now is of course it’s double the price, so it’s very expensive.

Rob Stott: Got you. Oh, go ahead. Anything else?

Jim Estill: No, that’s good.

Rob Stott: Well, that’s a lot of trends to cover and a lot of exciting stuff in this space. And we talked about the brand and we’ll do some more of that because you got some pretty exciting some news this year that you guys are celebrating. But I want to give the chance for the listeners out there get to know you a little bit. We didn’t get to know Jim Estill and your background and path to becoming CEO of Danby. So, tell us about you.

Jim Estill: Well, when I was in universities, it goes along back way back, I am an engineer and I wanted to design circuit boards. I needed a computer, got a better deal if I bought two of them. So, I bought two and sold one, then I needed a printer and next thing you know I’m buying and selling computer hardware, software and peripherals. And I built that business to a couple billion in sales. I sold it, retired, and I sat on the board of Danby appliances and then I was retired for almost five years, but I retired too young. I did what I thought I was supposed to do, grow a big company, sell it for a lot of money, retire. And then, I learned retirement’s not for me and the CEO resigned. I said I could go in and run Danby.

So, I started running it for six months, this is my next decade gig, that’s what I’m going to do. And then, they said they wanted me to sell the company and I said, “Well, how much for?” And they told me and I said, “Okay fine, I’ll take it.” So, that’s how I ended up owning Danby appliances. It’s kind of from the back. So, I’m not backdoor, I’m not really a longtime appliance guy. I was on the board for five years before I became CEO and then I’ve owned it for another five years. But Danby itself has been in business since 1947. I was quite young in 1947.

Rob Stott: Well, what is it, you mentioned not a longtime appliance guy, but what is it about the space that sort of attracted you to it?

Jim Estill: I like running a company of a certain size and so I was dabbling in a bunch of startups, a bunch of tech startups and stuff like that. Technology has come to appliances and everything has chips. We learned that in the pandemic. We couldn’t make freezers because we couldn’t get chips like that. And then you say, “Well, let’s use old thermostats.” Well, then you can’t meet energy standards so you can’t even do that. So, everything’s a chip these days. So, I like running a company of a certain size and Danby makes about 2 million appliances a year. So, that’s good size for me and I like running a business and so it’s great.

Rob Stott: Well, and it’s cool too because yeah, I mean you think in just my own experience of seeing Danby at our shows like PrimeTime and what you guys bring to the table, there’s a number of appliance brands there, but some of the product that you guys, the retro looking things that sort of stand out and it’s sort of a real differentiator. And then you look, I mean I look through the website and all the other areas that you dabble in. It’s cool to see so many different… I mean it’s obviously all appliance based but you see the air filtration, so the climate control stuff, the humidify, there’s a lot going on there and a lot of innovation as well. And like I said sort of the retro things. And so, there’s just a unique sort of portfolio of things I think to keep you interested in and anyone looking at, certainly interested in what’s going on with the brand.

Jim Estill: I mean we sell a lot of air conditioners and you’re going to say-

Rob Stott: Yeah.

Jim Estill: … what’s air conditioners not an appliance, but the commonality is they have compressors.

Rob Stott: Right.

Jim Estill: So, that’s why we have such a large air conditioning business and I don’t like climate change, but the fact is it’s here and we’re getting hot weather in places that never had air conditioning weather. And that means our air conditioners, which are portable and window air conditioners, that’s what you use when people build new buildings in New York, they put central air in. That’s not our product. Our product is a window air conditioner but we’re finding window air conditioners demand out west in the Oregon. It’s crazy demand for that. And for the independent appliance retailers, what I’ve found is that’s actually an interesting add-on to their business, so they can sell these air conditioners and it’s kind of incremental to the normal kitchen appliances.

The other area that we’re quite strong is we’re strong in second appliances. So, we tend to be your overflow fridge, we’re your bar fridge. We have a bar fridge that has a kegerator function like has tap.

Rob Stott: Yeah.

Jim Estill: So, you can use it as a keg fridge but when you don’t use it as a keg fridge you can use it for your leftovers from Thanksgiving dinner and because most people probably shouldn’t own a kegerator, but that’s too much beer to drink all the time. But you do want to have a party once in a while in which case you turn it into the kegerator for that weekend and then switch it back to the fridge and you’re not using it as a kegerator.

Rob Stott: No, that’s awesome and a great way to think. And you kind of started it there, but you know what if someone’s looking at Danby and kind of what you guys bring to the table, what is that sort of elevator pitch on the brand and what you’re aiming to do or where you kind of fit in the market?

Jim Estill: So, we are leaders in second appliances, leaders in small large appliances. How’s that for small white goods because we don’t actually make great big huge fridges for the huge, huge home. The huge, huge homes were their fridge in their basement, were their fridge in their garage, were the friend fridge in the bar and on the deck, the patio. So, that’s really where we fit. So, we’re very large in secondary appliances and which is often even the wine cooler. So, we’re making wine coolers that sort of fit in with multiple decor, not just… You don’t have to have everything matching to make it fit.

Rob Stott: Well, and you say that’s kind of the niche you’ve carved and it’s a strong one too because the brand’s been around, you mentioned the 47, 1947, right? So, that-

Jim Estill: That’s right.

Rob Stott: … That is a 75 do the math, 75 years is what was being celebrated this year and pretty big milestones. So, what does that… I mean you mentioned it could just a handful of years in comparison to the total life of the brand of being there. But what does hearing that milestone mean to you and to the company and what you guys are doing?

Jim Estill: Well, what’s 75 years speaks to is stability and it speaks to our brand, which is durability and reliability. So, we’re all about durable, reliable since 1947. I mean I get up and talk to the staff and say this decade in the next decade we’ll do this. So, I say in the next 75 years, where will we be in the next 75 years? And that’s what we’ve talked in terms of.

Rob Stott: No, that’s all. And how are you guys doing anything to celebrate?

Jim Estill: Yes, we did a promotion, we’re doing a promotion right now actually with our customers and of course, promotions usually are price base. So, we have some awesome prices on stuff and we’ve done a series of parties with our company and gave gifts to all the employees and stuff like that. Did that, the T-shirts and the jackets and stuff like that. So, it’s all good.

Rob Stott: Now. I’ve got to love it. And certainly, I mean it’s a big deal certainly for sure and we’ve seen a number of our retailers this year celebrating their own milestones and how they use it as an opportunity to get out in the community, connect with their consumers and everything like that. And so, awesome to see you guys are doing it as well. But you know, kind of talked about it throughout, but the opportunity for the independent in this space, in the appliances space. In working with Danby or even vice versa, just seeing what they’re doing as you’re out at events and seeing independent retailers out there, is there an area that you think there’s some opportunities for them to succeed in moving forward into the next year or so?

Jim Estill: Well, the reason that independence can thrive and I mean they’re all always going to be worried. Why don’t people ever buy at Home Depot or Lowe’s instead of buying at us? Well, it’s personal. It’s personal service and speaking to knowledgeable people, so often it doesn’t say on the box enough about what the product is. You need to say what the product is. So, the opportunity is to be personal and to some extent smaller companies can be a little more nimble and so air filters perfect example, COVID happened, why are we in the air purifier business? Well, it’s a thing with COVID people, you buy air purifier so all of a sudden there’s a huge run on them and independent appliance store can just say, “Oh yeah, this is another neat little niche that we go into.” And they can know a little bit more than the national, it’s all about knowledge service, we talked about the deliver in place business because this stuff is big.

Rob Stott: Yeah. Certainly, even if the small big appliances as you say. But no, they still need the help delivering for sure. No, but awesome to hear you say that. Any way you guys are applying that and what you do as well. Taking those things, obviously with getting into the different categories like you mentioned that relate to COVID having been a thing, but that message you’re sharing, how are you guys implementing that or doing that on the Danby side of the business?

Jim Estill: So, we view our job as to help our customers sell product. So, that’s what we try to do is give them the tools and give them the information and help them sell, because I’m successful if they’re successful. And so, our job is to help the independent retailers thrive and win by trying to educate them, give them this information, give them the insights, show them the sexy products. The industry can be a little old and therefore it doesn’t move as fast. But when you start to educate that a lot of people have bar fridges out on their deck now that’s the new thing, which means you need outdoor rated.

Well, you can put an indoor rated fridge out there, but that’s going to get rusty in three years. And by the way, it doesn’t meet electrical certifications, so I don’t think you’ll treat yourself but it’s just gives you more things like garage rated freezers. You want a garage rated freezer is freezers are not good in extreme temperatures either too cold or too hot, it doesn’t work with the garage ready then it can go to 120 degrees in the garage and you’re fine or else it can go down in North Dakota to minus 20 and still do fine.

Rob Stott: It’s funny you mentioned that because I mean obviously these… I don’t want to call them ancillary areas of the home, but the other areas where… Because of the pandemic there was such a focus on getting, maximizing the use of those spaces like the outdoors and the garages that all these extra areas of the home where people are now realizing they can rework and reuse in a way that makes more sense for them while they’re spending more time at home.

So, it means obviously a perfect opportunity for a Danby to come in there and be sort of that appliance in that space. That sort of ups the use case for that, that area of the home. But you mentioned the education side of it and not knowing that there’s certain ways things that, has there been, I’m sure someone’s in the appliance business, they understand these things to an extent, but is there a big education or has there been a big educational curve that retailers or consumers have had to overcome as far as what types of these secondary appliances can go in these spaces?

Jim Estill: Well, I think the independent retailers offer a great service by educating people because otherwise people are just going to, they’re going to go buy a bar fridge and they’re going to put it outside and they’re going to be unhappy because three years from now it’s rusting and whatnot. And a good independent retailer says for $30 more you get this outdoor rated fridge and it’s going to last you outdoors and it’s meant to be outdoors, right. Or saying the garage ready and stuff like that. So, that knowledge definitely adds a service level.

I think the other thing that is definitely true in appliances, nothing like touch and feel. You feel it and touch a product. You really see, if you go online you can look at something and see these two freezers look the same, but when one of them the door is solid, one of them you can’t lift with one hand, one of them you can lift with one hand. It’s nothing like seeing the product.

Rob Stott: Yeah. No, that we can certainly appreciate that and it makes a whole lot of sense and it’s brick and mortar, it’s not going despite what they say out there, it’s not going anywhere. And certainly, we’ll have some staying power here as people, especially now they were cooped up for however many years and stores had to shut down. Now, they’re back open and they’re rearing and ready to go and get out in those stores and shop.

So, we appreciate it and appreciate the insights you’ve been able to share Mr. Estill, and this was a lot of fun. I know we’re up on the holiday season and things are moving quick, so we appreciate you having the availability and time to jump on the podcast and talk with us. I certainly look forward to catching up again maybe in Dallas down at PrimeTime. We’ll spend some time and connect with you guys down there and see you at PrimeTime.

Jim Estill: Okay. Awesome. Thanks, Rob.

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