A view from the top: LG

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A relatively new brand on the UK market, LG has already established itself as a product leader in both CE and DA sectors. Andy Mackay, LG commercial director, CE, Home Appliances & Home Entertainment, told Anna Ryland how the company reached its current market standing and what its plans are for the future.

Founded in Korea in 1947, LG  became active in the UK twenty years ago, growing particularly rapidly during the last decade.

“In the post-millennium period the LG brand has come of age –  from being a relatively low end CE manufacturer of mostly AV products to a brand which is linked with design and innovation, and in whose portfolio are now domestic appliances and mobile communications,” explains Andy Mackay.

“The company’s first notable innovation was the ‘chocolate’ phone (named after the original colour and design) 50 million units of which were sold worldwide. “Yet, the launch of the Direct Drive washing machine in 2002 moved the brand into a truly innovative area. Meanwhile in CE, the brand was developing large screen TVs and this year launched the Cinema Screen TV with its dramatic aesthetics. Our first break into the premium TV was a year ago when we launched Cinema 3DTV. This means that LG is growing rapidly in the over £500 TV segment as opposite to our previous domination of the mid-range market. Our passive 3D proposition, which we believe is more convenient and accessible for the whole family, is our USP. The LG passive 3D panel now has many patents globally.

“In domestic appliances area, LG now accounts for a quarter of the premium laundry market (over £550). LG’s share of the total laundry market doubled over the last six years: growing from 2.5% to 6.2%.  It’s worth remembering that LG have no presence in the first half of the market – the entry level.”

The perception of the brand

“We have to accept that the brand is only entering the replacement market – it is still the first generation purchase,” admits Andy. “We don’t have the heritage of the well know British and German brands. However LG is seen perhaps as a more technologically innovative brand than some longer-standing brands.

“However our 11kg washing machine now has Which? Best Buy accreditation (June 2011). This means we are starting to attach the performance values to our modern designs. But, of course, we still have a long way to go.

“In spring this year we established an association with Prada and launched the Prada phone. We have also been the official garment sponsor of the London Fashion Week (in 2011 and 2012) – this attaches the brand to different demographics.

“In the domestic appliances our distinctiveness is related to making a wash load larger: washing more, less frequently. Our laundry developments came in layers: first we released the Direct Drive motor, and then put steam into the drum expanding it at the same time; now we have the 6th Motion technology. There were clear consumer benefits behind these developments. LG products, particularly laundry appliances have a signature look – a distinctive modern design

“Our main challenge now is to move from product leadership to a market leadership position. We are accelerating our manufacturing, using LG’s industrial base in Poland, to target the middle and premium area of the market, aiming for a stronger market position than we had before. I expect that in a year or two we will be able to reinforce our market position in this way.

“The next step would be to challenge for the market leadership – some of the most established and strongest brands.”

Market dynamics

With 25 years in the electrical industry, Andy Mackay is in a good position to comment on the state of the electrical market and offer insights into the latest trends.

“The UK white goods market is in  reasonable health. During the last couple of years the market has shown the stability which it hasn’t exhibited before. In 2007, at the beginning of the recession not only the market was under pressure but there was still price deflation. But in most areas, particularly in washing and cooling, which fundamentally are replacement markets, there is now price stability. At present there is a very strong brand line-up in this market: there are new Asian brands with plenty of innovation such as LG, Samsung and Panasonic and a set of strong Germanic brands which are a good benchmark for brand values. These brands are adding value and investing in product innovation. Also the arrival of Arcelik with the Beko brand had a profound impact of the market – since the brand took share at all levels of the market.

“One of the most important trends is the polarization of the white goods market. The market is being squeezed in the middle. As a result there is a larger entry market than before, but there is also a more sizeable premium market. The brands and products in the middle are under the greatest pressure. The brands operating at both ends have lost market share but not necessary sales at the same time.

“LG is trying to establish itself in different areas of the market and uses its differentiated portfolio to achieve this. We have one brand, not a portfolio of brands, so this is a challenging task.

“In the CE market, there hasn’t been any recent encroachments from own label manufactures. All leading brands have already won consumers’ trust. They maybe gaining and loosing market share from each other but the market trust is there. The brand and branding is now more important than ever before.

“At the retail end, the recession gave rise to very strong independent companies. We are almost looking at an elite group who came through the most troubled period who managed to withstand the arrival and departure of Best Buy in the UK. They are, however, deeply affected by the growth of online sales and the fact that quarter of all sales are done online.”

LG and the independent

­“We have never had a more suitable product range for the independent channel than the current one – both in the DA and CE areas. The range we are bringing to the market is more premium than before and the independent is the best distribution channel for discerning customers. We are still under-indexed with the independents but our faster growing business is in the independent channel, particularly in relation to white goods. In 2008, independents’ share of our laundry business was 0.8%, by 2011 this figure increased to 8.5%.

“We have strong relationships not only with leading independents but also with the buying groups, such as CIH. At the CIH show in April we launched an 8kg Direct Drive washing machine offer which is exclusive to CIH members. It has some LG premium features but it has been developed to generate volume sales. We are also investing heavily in PoS solutions for independent stores.”

Finally, Andy offers a piece of advice to LG’s independent partners: “Independents should look for and expect support from their suppliers and should challenge them to give them a competitive edge, either in a form of products, training or merchandising. Independent retailers have core values (such as community presence and reputation for professionalism) that larger retailers often lack and they should be playing to their strengths.”

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