CUT COSTS, WIN CUSTOMERS WITH ENERGY- EFFICIENT APPLIANCES

CUT COSTS, WIN CUSTOMERS WITH ENERGY- EFFICIENT APPLIANCES

CUT COSTS, WIN CUSTOMERS WITH ENERGY-EFFICIENT APPLIANCES INTRODUCTION Energy-efficient appliances have the joint benefit of a reduced environmental footprint and low operating costs two top priorities for new homebuyers and renters. Because household appliances generally account for 90 percent of residential electricity consumption, energyefficient appliances are among the first things both Millennials and Baby Boomers want in a new home, according to the latest McGraw-Hill Construction report [1]. With Baby Boomers seeking retirement housing and Millennials entering the housing market, there is a new emphasis on energy-efficient appliances in homes. To accommodate this demand, builders and property managers have an opportunity to appeal to customers and to benefit stakeholders by choosing the most efficient appliances and equipment for their properties. Learning to promote and market these features, though, will be the differentiator. Energy efficiency is top of mind for builders in every part of the country, says Kevin Morrow, Director of Energy and Green Building for the National Association of Home Builders (NAHB) in Washington, D.C. But they aren t necessarily good at talking about this trend and the value it brings to a home. SEARS COMMERCIAL HAS A LONG HISTORY OF WORKING WITH ENERGY STAR AND WITH OUR MANUFACTURERS TO MAKE SURE WE MEET OR EXCEED ALL OF THEIR SPECIFICATIONS. TOM PUCHALA, SEARS HOME SERVICES Organizations such as Sears Commercial are working with industry groups, including NAHB and the U.S. Environmental Protection Agency (EPA), with its Energy Star certification rating program, to develop appliances and other products that demonstrate energy savings without sacrificing features or functionality. They are also partnering with utility companies and other manufacturers to ensure commercial customers have access to the latest energy-efficient appliances. In addition, Sears Commercial provides consumers with the environmental and financial benefits these appliances can bring to a household, making it easy for builders to pass along this information to their target markets. ENERGY EFFICIENCY IS A TOP PRIORITY Unlike stainless steel appliances or marble countertops, energy efficiency is much more than just a design trend. It has become a primary and permanent criteria for buyers and renters looking to lower their energy costs and reduce their impact on the environment. This concern is growing steadily in the face of rising energy costs across all income brackets. Households earning less than $50,000 per year, for example, spend an average of 20 percent of their after-tax income on energy up from just 12 percent in 2001, according to the American Coalition for Clean Coal Electricity [2]. That s comparable to the amount spent on food, housing and health care. As a result, consumers expect any new home they consider to have energy-efficient features that will help drive operating costs down, says Michael Gestwick, a Denver-based senior engineer at the National Renewable Energy Laboratory and a technical manager with Building America, a U.S. Department of Energy (DOE) research and development program for the residential building industry. The anticipated long-term savings even caused demand for energy-efficient features to remain strong through the recession. When the market suffered in 2008, and homebuilders faced tough competition, energy efficiency helped many builders differentiate themselves, Gestwick notes. One of the most successful ways we ve seen this play out is

ENERGY-EFFICIENCY MARKETING TIPS Research shows that homebuyers and renters Millennials and Boomers in particular demand energy-efficient appliances. Builders and property managers who don t properly communicate with these target markets are potentially missing out on sales. Here s how to best market the cost-saving and environmentally friendly benefits of energy efficiency. 1. Don t oversell it. How much money homeowners will save thanks to energy-efficient appliances depends on many factors, including behavior, local energy costs and how often they use the appliance. There are a lot of variables, so you want to be careful about making specific claims, says Kevin Morrow, Director of Energy and Green Building for the National Association of Home Builders (NAHB). Instead of citing a specific dollar amount, he encourages builders and property managers to reference a baseline, using data from independent sources to give customers a sense of potential savings. An easy tool to establish such a baseline is the Energy Star savings calculator, which is offered on the Sears website. The simple tool figures out the financial and environmental savings that can be generated from a specific appliance over its lifetime, based on location, appliance type and anticipated use. 2. Point out the energy-efficient features whenever and wherever you can. Use every customer touch point, including home brochures, marketing materials, signage and conversations, to showcase the energy-efficient options you offer in your homes. Energy efficiency is important to consumers, which means these features are very marketable, says Tom Puchala, Director of Product Management at Sears Home Services. It should be among the first things you highlight. 3. Show them how it works. The best builders have innovative demonstration homes that showcase the energy efficiency of their products, says Michael Gestwick senior engineer at the National Renewable Energy Laboratory. In a walk-through of a demonstration home or rental unit, consumers can see the Energy Star label and talk to the property manager or builder about the anticipated savings they can expect in such a home. This is a great opportunity to engage consumers and explain how energy efficiency and whole house performance will benefit them personally, Gestwick says. Great sales platforms connect emotionally with homebuyers. 4. Take a Certified Green Professional course. These two-day NAHB classes, which are open to anyone in the homebuilding industry, including suppliers, provide participants with a background in green building methods, as well as the tools to talk to consumers about green building benefits, Morrow says. It is a great place to learn how to educate your own customers about energy efficiency. with a core focus on efficient, comfortable homes with low maintenance costs, he says. In fact, 9 out of 10 buyers would choose a highly energy-efficient home with lower utility bills over one costing 2 to 3 percent less without those features, according to NAHB s 2013 report, What Home Buyers Really Want [3]. The research also shows that 94 percent of homebuyers rate Energy Starcertified appliances for the kitchen, bath and laundry as essential or desirable in their new home. This is particularly true among Millennials, who are interested in both the cost savings and the environmental impact. The technology Millennials most seek in a new home is an energy-efficient washer and dryer, according to a Better Homes and Gardens Real Estate report [4]. Baby Boomers also factor energy efficiency into home decisions as they transition into retirement. In the McGraw-Hill report on green construction, Texas homebuilder Don Ferrier reported that his older clientele are deeply motivated by their anticipated energy costs. They ll pay more up front to have something that uses a third or a fourth of the energy than a conventional house because of their fear about energy prices, Ferrier said [5]. Builders are seeing regional trends as well, particularly in areas that experience extreme temperatures. In the Northeast, for example, nearly 40 percent of buyers said heating and cooling costs were their single greatest concern, according to a 2013 study by the National Association of Realtors (NAR) [6]. And more than 75 percent of builders and remodelers in the West North Central region see wide temperature rages, driving greater interest in energy efficiency, according to the McGraw-Hill Constructions report [7]. I don t know anyone who isn t a fan of saving money, Morrow notes. ENERGY STAR: A TRUSTED CERTIFICATION The Energy Star label is at the core of this trend, says Paul Campbell, Director of Sustainability and Green Leadership for Sears Holdings Corp. in Hoffman Estates, Illinois. The logo is very well recognized, and customers clearly understand the difference between an Energy Star-certified product and one that is not. Energy Star certifications have been around for more than 20 years, and the logo has become a symbol that consumers actively seek out to verify the efficiency of the appliances they choose. Awareness of the Energy Star

label has grown dramatically over the years, according to the EPA. In 2002, roughly 30 percent of consumers were familiar with the label, compared to 87 percent today. Whether or not a home has recognizable energy-efficient features, including Energy Star appliances, is the number-two influencer of purchase decisions, NAHB research shows [8]. The only other factor more important to buyers is having enough living space to meet their needs. And while buyers are interested in other energy-efficient features, such as insulated wall panels and double-pane windows, appliances with prominent logos are the most noticeable examples of energy efficiency in any home. These appliances dominate the kitchen and laundry room, allowing homebuyers and renters to immediately identify energy-efficient features when they visit a property. Appliances are visible, Gestwick says. It s easy for a sales rep to point to the Energy Star label on the washing machine and it s a no-brainer cost-wise. That s likely why adding Energy Star appliances is a top consideration for most builders as they embrace the energy-efficiency building trend, Morrow says. Appliances are one of the first things they think about. high-end elite models. This means that builders and property managers can accommodate tight budgets, while still outfitting their spaces with the energy-efficient appliances consumers demand. That s a real benefit for builders, says Kevin Horkey, Vice President of Key Land Homes, a residential builder in Minneapolis. Sears Commercial has created such a good price range, that even our basic Kenmore package now includes stainless steel appliances and side-by-side refrigerator/freezers, and everything is energy-efficient, Horkey says. Sears Commercial can locate all applicable state and utility rebates, and leverage this information to inform customers about local incentives that can reduce their investment by 30 percent or more, Puchala says. We work with our customers to identify these sources of funds when they choose products to make sure they are getting the greatest efficiency at the best price, he explains. Once appliances are purchased, customers can have the confidence that it will be delivered on time, any time, because Sears Commercial has distribution centers HELPING BUILDERS WIN CUSTOMERS Unlike many retailers who have only recently caught on to the trend, Sears Commercial has been an active participant in making energy-efficient appliances widely available for more than two decades. Sears Commercial partnered with the EPA in 1992, the year Energy Star was launched, says Tom Puchala, Director of Product Management at Sears Home Services in Hoffman Estates, Illinois. Working with the EPA team, they improved the energy design features in appliances, and made sure to promote the environmental and fiscal benefits of Energy Star certification to commercial and retail buyers alike. We are already working closely with our partners to have cost-effective products in every price category, Puchala says. This longtime relationship with the EPA means Sears Commercial can offer builders and property managers added value. Sears Commercial ensures all of its partners understand new and impending specifications for Energy Star appliances to ensure products meet or exceed those requirements. Over the past several years, the company has introduced Energy Star appliances that range from entry-level products to ENERGY COSTS ARE RISING. 12% 2001 20% 2013 The amount of money households earning less than $50,000 per year are spending on energy has jumped substantially in the last 12 years. Appliances account for 90 percent of residential electricity consumption. Sources: American Coalition for Clean Coal Electricity and McGraw-Hill Construction HOMEBUYERS ARE WILLING TO PAY MORE UP FRONT FOR ENERGY EFFICIENCY. 9 out of 10 The portion of buyers who would choose a highly energy-efficient home with lower utility bills over one that cost 2 to 3 percent less without those features AN ENERGY-EFFICIENT WASHER AND DRYER The technology Millennials most seek in a new home Sources: National Association of Home Builders and Better Homes and Gardens Real Estate

WHAT CUSTOMERS WANT Through its 20-year partnership with Energy Star, the U.S. Environmental Protection Agency s certification program, Sears Commercial s designers and manufacturing partners understand how to build the most efficient and reliable features into its product lines. The Sears Commercial team also works closely with customers to make sure the features they invest in provide the most value, says Tom Puchala, Director of Product Management at Sears Home Services. For example, while many dishwasher manufacturers focus on making their models quiet, Sears Commerical s customer research shows that speed to clean, and water and energy efficiency are more important, he says. Those kinds of insights drive us to make better products that are more appealing to consumers. This is why Sears Kenmore brand is regularly ranked number one by independent product research companies, including J.D. Power & Associates. BUYERS ARE SEEKING OUT ENERGY STAR APPLIANCES, INCLUDING BRANDS SUCH AS KENMORE. 94% The percentage of homebuyers who rate Energy Star-certified appliances for the kitchen, bath and laundry as essential or desirable in their new home TOP INFLUENCERS OF HOME BUYING DECISIONS: 30+ percent 1. Having enough living space to meet my needs 2. Whether or not a home has recognizable energy-efficient features, including Energy Star appliances Sources: American Coalition for Clean Coal Electricity and McGraw-Hill Construction SAVVY BUYERS KNOW HOW TO SAVE MONEY. The amount of savings from rebates and incentives the Sears Commercial staff can easily locate for builders and property managers across the country, he adds. Sears Commercial is able to leverage that logistics infrastructure to ensure customers get their appliances delivered and installed the day they need them even if the property is in a remote location, Puchala says. Our competitors don t have that kind of reach. CONCLUSION Energy prices will continue to rise, and consumers will continue to demand that any new home whether it s an apartment, a starter home or a lavish mansion features energy-saving appliances. Builders and property managers can gain a competitive advantage and differentiate themselves by not only featuring these appliances prominently in their properties but also targeting Millennials and Boomers, Morrow says. It s a mistake not to market your investment in energy-efficient features, he says, because if you don t communicate the value and the payback, you won t have as much success. ENDNOTES [1]: New and Remodeled Green Homes: Transforming the Residential Marketplace, McGraw-Hill Construction SmartMarket Report, 2012. Based on a survey of 416 National Association of Home Builders (NAHB) members in November and December 2011. http://www.nahb.org/news_details. aspx?newsid=15269 [2]: Energy Cost Impacts on American Families, 2001-2013, American Coalition for Clean Coal Electricity, 2013. http://www.americaspower.org/sites/default/ files/trisko%202013.pdf [3]: What Home Buyers Really Want, NAHB Economics and Housing Policy Group, May 2013. Based on a survey of 3,682 recent and prospective homebuyers in 2012. http://www.nahb.org/generic. [4]: Better Homes and Gardens Real Estate Survey, Better Homes and Gardens Real Estate, 2013. Based on a survey of 1,000 U.S. adults between the ages of 18 and 35 conducted by Wakefield Research in December 2012. http://www.bhgrealestate.com/views/mediacenter/news.aspx?id=3058 [5]: New and Remodeled Green Homes, McGraw-Hill Construction SmartMarket Report. [6]: 2013 Profile of Home Buyers and Sellers, National Association of Realtors (NAR). Based on a survey of 8,767 recent homebuyers and sellers in July 2013. http:// www.realtor.org/reports/highlights-from-the-2013-profile-of-home-buyersand-sellers [7]: New and Remodeled Green Homes, McGraw-Hill Construction SmartMarket Report. [8]: What Home Buyers Really Want, NAHB Economics and Housing Policy Group.