Heavy demand, disruptions keep appliance customers waiting

Retailers are having difficulty keeping up with an onslaught of customer demand for appliances, particularly refrigerators and washing machines, as the industry recovers from a series of pandemic-related disruptions. CREDIT WIKIMEDIA COMMONS

It started with toilet paper and hand sanitizer. Now the list of pandemic-related shortages is growing longer, with a months-long backlog of undelivered appliances causing frustrations for Americans riding out the crisis at home.

A surge in demand as consumers nest in place – and wear out aging appliances that may have been little-used in the past – has collided with widespread supply disruptions and factory slowdowns at plants across the globe. The result is a perfect storm for the world’s biggest appliance-makers, including Whirlpool Corp., which operates a plant in Amana producing French door, side by side and freezer top refrigerators.

“Right now, across the globe, our order book is about seven to eight weeks,” Whirlpool CEO Marc Bitzer said on an Oct. 22 earnings call, referring to the company’s current backlog, which typically maxes out at one to two weeks. “It’s significantly bigger than any time before, which you can read as good news because, you know, we have strong demand in our sales, in particular as we go into Q4. But at the same time, it’s frustrating because we’re letting consumers down.”

Whirlpool is not alone. Swedish manufacturer Electrolux, which also makes brands such as Frigidaire and Westinghouse, faces a similar struggle, telling investors late last month it was dealing with “unusually low inventory levels” that made it difficult to keep up with strong demand.

“It’s an industry-wide issue that’s hitting a critical point in my opinion,” said Tim Slager, owner of Slager Appliances in Iowa City, which carries GE-brand products, as well as super high-end brands such as Thermador and Wolf. “We have some things on order we probably won’t see until March, April, May of next year.”

Where Slager Appliances once featured 200 refrigerators on its show floor, it now offers eight. Instead of 25-30 dishwashers, six models are on display.

Mr. Slager said he has customers who have been waiting for delivery, with varying levels of patience, since nearly the onset of the pandemic.

“We are getting yelled at everyday by people who ordered stuff back in June, May, even March, and it’s just snowballed,” he said, adding that it has gotten so bad, customers no longer care much about color, style or other factors as long as they can get it now. “There’s no brand loyalty anymore. It’s, ‘I’ll take whatever you have.’”

Craig Knapp, owner of Home Appliance Center in Cedar Rapids, which carries the Whirlpool family of brands, said he is telling customers if they don’t see it in stock, they will just have to wait.

“It’s no different than World War II when we had rations,” Mr. Knapp said. “It’s the new normal of stuff.”

When the pandemic hit and millions of jobs were lost overnight, a coming spike in appliance demand wasn’t necessarily what manufacturers expected. But as the crisis dragged on and people spent far more time at home, a sharp increase in consumers eager to remodel soon followed. So did the failure rate of existing appliances.

“Now everything you never really used in the house was being used three to five times a day,” Mr. Slager said. “Everyone was cooking at home and drinking beer at home.”

Just as demand began revving up, manufacturers were struggling to recover from disruptions in the supply chain and new socially distant practices that had some facilities working at just 25-50% of capacity.

Bringing workers back was also slow going at first, as plants grappled with high absenteeism and an inability to entice furloughed employees back when enhanced federal unemployment benefits were in force. Mr. Slager, who participates in numerous industry calls and Zoom meetings, said he has heard that is a particular problem at the Amana plant, which has always had a smaller population base to draw from than other plants of its size.

“The street rumor is they’re struggling to get any bodies in there,” he said, adding that even much larger Louisville, Kentucky, home to multiple GE Appliance plants, has difficulty staffing given it is now competing with a giant Amazon mega facility, in addition to being a major FedEx hub. “They’re just not able to hire enough humans to work there. There’s a rat race [for workers] and Amana is struggling like everybody else.”

Whirlpool officials did not discuss specific plant performance in their latest earnings call, but Executive Vice President and Chief Financial Officer Jim Peters admitted that production productivity had been “very, very challenging … because, first, you don’t have volume, you have under occupation, and now you’re not working six shifts or six days a week with three shifts, which is the most efficient way to produce.”

Federal Reserve data indicates that production levels of long-lasting consumer goods like appliances largely rebounded over the summer after falling nearly 50% in April from January’s numbers. But it will take some time, Whirlpool executives said, for supply to catch up with still-rising demand.

“And we now see more and more of a demand, still being very strong in the home improvement, but we see it also coming through on the builder side, on the high-end retailer side,” Mr. Bitzer said.

Karyl Bohnsack, executive officer for the Greater Iowa City Area Homebuilders Association, said the long wait times have become an increasing frustration for the local home building industry, which is also coping with higher prices for building materials.

“There are just a whole slew of issues affecting availability and pricing,” Ms. Bohnsack said, adding that those issues add up to the largest gap between sales and new construction since the 1960s. At a time when home sales are up 69% due to low interest rates and a COVID-inspired migration from large cities to less populated areas, new construction starts are up only 6%.

“We need to produce 1.1 million homes to meet demand and that won’t happen until 2023 with the current situation,” she said.

Mr. Bitzer said that amid the enormous backlog, “the only channel which we absolutely still try to prioritize is the construction channel because no consumer … with a finished home wants to wait for appliances. I mean, we’re trying to prioritize as much as we can.”

The avalanche of demand is good news for Whirlpool and other appliance-makers heading into the fourth quarter. But retailers say they expect agonizingly long waits to continue for consumers for months into the future.

Mr. Knapp said he believes Iowans, who are suffering through a pandemic, an economic downturn and the aftereffects of a punishing derecho, will deal with the wait with typical stoicism.

“And this isn’t my first rodeo,” he added. “We lost half a million in 2008, so I’ve been through this before.”