A necessary evil
After launching in Melbourne after 35 years of trading in Sydney, the success of 2nds World typifies this consumer steadfastness – customers know what they want and a scratched Dyson won’t deter them if it means a sizeable reduction in price.
The hotly contested appliances and white goods sector has inspired a raft of marketing strategies, flash sales and competitive pricing from the likes of The Good Guys, JB Hi-Fi and Harvey Norman to grab their share of discretionary income.
Concurrently, 2nds World goes to market with a completely different value proposition and offering. The factory seconds appliance retailer is the beneficiary of manufacturing mishaps, returned refrigerators and cancelled consignments.
“Manufacturers don’t like seconds because it costs them money, so they don’t want a broad industry of seconds,” Peter Hammerman, managing director of 2nds World, told Inside Retail Weekly.
“They’re in business to sell new, first-quality products and we are a by-product of the industry, a sort of necessary evil because they need to get rid of their return products.”
The seconds retailer recently took up a cancelled order for 700 exclusive model fridges by The Good Guys at a discounted price – and sold all 700 fridges without breaking so much as a sweat.
“They decided to cancel the order, the products were already on the wharf and already coming and we were very happy to get them. So it’s sort of, we clean up after the big boys.”
Hammerman said the retailer shares similarities with the DFO style of business, with the formula successful because people look for bargains – arguably now more so than ever.
Major brands available at 2nds World include Asko, Beko, Bosch, Delonghi, Dishlex, Dyson Electrolux, Fisher & Paykel, Fujitsu, Haier, ILVE, LG, Mitsubishi Electric, Panasonic, Samsung Simpson, Sunbeam, TCL and Westinghouse.
“We have our niche in the marketplace – we save people money on appliance products,” said Hammerman. “We sell brand new as well, so we generate the demand and then we allow people to choose the way they save.”
As expected, consumer’s first question when questioning 2nds World’s products are along the lines of, ‘what’s wrong with it?’. But Hammerman said this cautious attitude mostly soon passes, with many customers becoming repeat customers. Customers soon become more accepting of 2nds World’s value proposition, particularly once they’re told that over 95 per cent of products are mark free.
The appliances retailer also services a larger proportion of “savvy” rental property owners and renovators.
“We literally get people that pull up out the front in their Mercedes 500s and AMGs and buy a LG factory second,” said Hammerman. “Or we get the guys who are in a beaten up Toyota, struggling and want to buy a dryer and save because that’s all they can afford. Retail is so transparent with pricing, you can find out anything that you want to, all you’ve got to do is go to the net.”
2nds World customers often will request price-matching with competitors, with price still the single most determining factor in deciding where they spend their money.
“People generally like to come back [2nds World], but then again, they are after the best price and [price] is still the most motivating reason people buy.”
Seconds category gathers steam
The seconds appliances category and consumers’ demand for value has seen major retailers take notice. Winning Group first expanded into the seconds market through the launch of Appliances Online’s clearance division in 2014.
Following a healthy response to the offering, the Group made the strategic decision to acquire Electro Seconds in a bid to consolidate its position in the clearance market.
“Seconds’ customers are very savvy shoppers and we have found that the majority are repeat customers who will return multiple times for different needs,” John Winning, CEO of Winning Group, told Inside Retail Weekly.
Winning said that Winning Group has held long-standing relationships with appliance brands that uphold the, “same quality value that we apply to our service proposition”. These relationships allows the Electro Seconds venture to effectively clear suppliers’ T2 inventory while still representing the brand positively.
“With a strong focus on online channels, the marketing for the brand targets price-conscious customers and ensures the brand is top of mind throughout the different stages of the customer journey,” said Winning. “Word of mouth is also an integral part of our marketing; if you provide a great customer experience, the customer will return again, and tell their family and friends.”
Winning said the retailer had found customers don’t need to see the product despite it being classified as a second. “A second doesn’t necessarily mean there is something wrong with it, a second could be an end of line appliance or an appliance that has been unboxed and never used, or has damage to its packaging.”
The Electro Second stores at Auburn and Erina enjoy enviable foot traffic, according to Winning, with consumers, “equally confident, if not more” to shop online than in person with the retailer.
Convincing online customers that there is not a great deal wrong with products doesn’t seem to be a bugbear for 2nds World either.
“What does surprise me is the number of large items we sell online,” said Hammerman. “And I am talking about side by side fridges, 10 kilo washers, 65-inch TVs and uprights. Our online business is more than equal to one of our stores.”
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