Media & Marketing and Real Estate & Retail

Appliance biz heads north: Clark to open Castleton store, compete with H.H. Gregg Fine Lines for high-end customers

January 23, 2006

The high-end appliance retailer Clark Appliance Showcase will open a store practically in the back yard of its closest competitor in early March.

Does the move signal a turf battle between two local retailers that cater to homeowners willing to pay luxury car prices for a kitchen?

Not really.

The local market for products such as $10,000 Viking ranges is growing so fast that executives at Clark and H.H. Gregg think there's room for both on the northeast side.

"It's the fastest-growing segment of the appliance business," said Dennis May, H.H. Gregg president. In fact, sales of what some call "kitchen jewelry" have doubled as a percentage of total business in the past 10 years, according to data from manufacturers, May said.

In addition to its 67 traditional retail outlets that sell low- to mid-priced stoves and freezers, H.H. Gregg operates its sole H.H. Gregg Fine Lines at 4161 E. 96th St.

The new Clark Appliance location will be less than 5 miles away, at 5415 E. 82nd St. The company's other retail-focused store is in Greenwood. (It also operates four stores that primarily attract home builders. Consumers are welcome at all the stores.)

Clark Appliance chose the new site because of the deep pockets in the neighborhood.

"It's where the high-end remodel is going, no question," said Bob Clark, president.

According to a demographics profile prepared for IBJ by the local office of St. Louis-based Colliers Turley Martin Tucker, the average family income within five miles of the new store is in the low-six figures. Six percent of the population within a five-mile drive has a household income of more than $200,000.

If anything, retail experts think the proximity of the new store to Fine Lines might help both companies.

"Synergy is very important in the retail business," said Don Williams, senior vice president and manager of retail for Colliers Turley Martin Tucker.

The stores will offer many of the same Ferrari-quality products, but they'll each offer a few brands the other lacks. Fine Lines sells Jade, a high-end restaurant brand. Clark Appliance offers Sub-Zero and Wolf. Both stores display products in full-size kitchens and have trained, noncommissioned sales staff.

Both have also enjoyed an increase in their traditional target market-people with mortgages in the mid- to upper-six figures.

In 2002, real estate agents played a role in selling 387 houses worth more than a half million dollars in the 13-county area, according to the Metropolitan Indianapolis Board of Realtors. By 2004, that number had grown to 589. In 2005, 781 such properties changed hands.

"High-end kitchens are the things that sell high-end homes," said Claire Belby, spokeswoman for MIBOR. "When you get into those higher-end properties, those things are standard. If they don't have them, it hurts the property."

Making a better dishwasher

Ironically, a brand known for durability may have started the boom.

Diane Ritchey, editor of Home Appliance magazine, dates the trend to 1997 when Maytag unveiled its Neptune washer and dryer. The front-load appliances came with an array of simple features designed to make laundry chores quicker and easier.

"Other manufacturers have picked up on it," Ritchey said. "Whirlpool will spend hours and hours in somebody's kitchen looking at how many times they open the refrigerator" so they can calibrate the cooling system most efficiently.

They're not the only ones with employees who wear lab coats.

"We're investing substantially-probably more so than at any time in our history-in innovative features that we feel consumers want to buy," said Kim Freeman, a spokeswoman for GE's appliance line.

The company has designed a dishwasher that does everything short of clearing the table. Users pour an entire 45-ounce bottle of detergent into the machine once every two months. The dishwasher dispenses the detergent based on the hardness and soil level of the dishes.

"Consumers like products that save them time," Freeman said.

Not to mention, a lot of the high-tech gadgetry at Fine Lines and Clark Appliance is energy-efficient, said Ritchey, which means it also saves money.

Safety in niches

Even better for H.H. Gregg and Clark Appliance, big-box retailers don't have immediate plans for joining the fray.

"At this point, I'm not aware of any intentions for [either Home Depot or Lowe's] to expand into the ultra-high end," said Michael Cox, senior research analyst at Minneapolis-based Piper Jaffray, who follows both companies. "The issue comes down to the narrowness of the niche."

Yet he wouldn't rule out either company selling the Rolls-Royce of microwaves at some point.

"Moves by these companies in appliances and other areas would suggest they are open to pursuing high-end and at times ultra-highend product categories," Cox said.

Home Depot already sells a gas grill that costs $5,000 and its target market-middle-class consumers-is increasingly buying higher-priced appliances.

"We've seen a lot of high-end appliances in houses that might not be in the upper echelon," said Greg Cooper, who sells luxury homes on the northeast side as a broker with the Richwine Real Estate Group of Century 21 Realty Group I.

Clark agreed. Lately, more of his appliances end up in homes worth around $250,000.

The possibility of the heavyweights getting in the ring doesn't deter executives at H.H. Gregg or Clark Appliance.

Clark said his company already has its eyes on one market outside of Indiana, although he declined to say which one. He also plans to remodel the company's Carmel store this spring to spruce up its appearance. Clark said the store already sells more high-end appliances than any store in the Midwest thanks to contracts with local builders.

Meanwhile, business is "going great" at Gregg's Fine Lines stores and has "exceeded expectations" since opening in late 2004, May said.

That's why the company will cut ribbons on two new Fine Lines stores this month: one in the ritzy Easton Town Center in Columbus, Ohio, and one in Charlotte, N.C. It plans to open one in every major market where it does business. That means shoppers in Louisville, Cleveland, Cincinnati, Atlanta and Nashville may soon be firing up the convection ovens.
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