They had been trade partners for more than 100 years, but inability to reach agreement going forward has led to a decision by Sears Holdings to throw that century long partnership onto the trash heap saying the retailer will no longer carry any Whirlpool corporation products once all inventory is sold.
An internal memo being shared widely with national media outlets tells Sears employees, “Whirlpool has sought to use its dominant position in the marketplace to make demands that would have prohibited us from offering Whirlpool products to our members at a reasonable price.” That price dispute and other changes in the general marketplace will end one of the storybook relationships in the history of retail and manufacturing relations dating back to the very earliest days of the appliance maker.
Whirlpool forerunner, the Upton Machine Company of St. Joseph sold its first washing machines to Sears 101 years ago in 1916.
Sears has been struggling mightily, and some are questioning the decision to cease one of the most lucrative relationships in the history of both firms. The decision means that once current inventories of Whirlpool, Maytag, KitchenAid, and Jenn-Air appliances among others are depleted, customers of Sears will no longer have those products to choose from.
Sears was once a dominant force in the retail appliance market, holding 40-percent or more of the market as recently as 15 years ago. That rate had plummeted to barely half that earlier this year. The decision also impacts Kmart appliance sales, because they are owned by Sears Holdings.
With Sears and Kmart closures nationwide multiplying dramatically in recent years with hundreds of stores shuttered forever, Whirlpool CEO Marc Bitzer told Wall Street analysts this morning that Sears had fallen to only about 3-percent of global revenue. He told analysts on the company’s earnings conference call this morning, “In terms of impact of shifting that, to be honest it’s not a whole lot.” While he shied away from how or why the two long term partners had failed to arrive at amenable terms to continue the relationship, Bitzer said that Whirlpool actually informed Sears back in May of their decision to stop providing products to the retailer.
Reality for Sears is that they have been losing market share in the appliance realm to rivals such as Lowe’s, Home Depot and Best Buy among others.
At least one source has indicated that Whirlpool will continue to make products for the Sears Kenmore brand line, and Bitzer told analysts that Whirlpool would continue to supply about 10 branded products to them.
In the quarterly earnings report distributed last evening, Whirlpool addressed pricing issues themselves, noting that they will be raising prices in response to the higher costs for raw materials they’ve been facing. Pricing was also a point of contention between the appliance maker and Sears according to the internal memo shared with the Wall Street Journal, Bloomberg and other national media outlets.
