Samsung bets on Bespoke fridges to win millennials

After a boom in sales of refrigerators and cleaners during Covid-19, Samsung Electronics Co.’s home appliance business is looking ahead to the post-pandemic era by focusing on offering personalized devices to younger customers.

The South Korean giant’s home appliance business, which accounts for almost 10% of total revenue, should report a 10% increase in sales for 2020, Jaeseung Lee, president and head of digital appliances business, said in an interview. Demand will continue through the first six months of this year but sales will start to weaken in the second half once the economic effect of subsidies wane and people start getting back to normal life after vaccines roll out, according to Lee.

“We are drawing up contingency plans as we expect a sales slowdown in the second half,” he said at Samsung’s headquarters in Suwon. “There will be another new battle for market share. We will aggressively carry out new product sales for the second half and overcome challenges by providing differentiated products.”

Spurred by stay-at-home demand, the world’s largest memory chip and electronics maker has benefited from strong sales of semiconductors that go into everything from PCs and TVs to data centers as well as digital appliances. Samsung’s home appliance business initially suffered from plant closures when Covid-19 spread to Europe and the U.S. last year but the company swiftly adjusted its global supply chain to meet increased demand for larger fridges to store food and for vacuum cleaners and washing machines.

Looking beyond to the post-Covid era, Samsung plans to target millennial customers who shop online and prefer personalized designs, Lee said. Online sales rose 50% globally in the third quarter, while Bespoke refrigerators that can be customized according to size, material and color -- specialty fridges for kimchi are a popular option -- accounted for more than 67% of the Korean market last year.

“Customers had few options among products made by a traditional manufacturing system,” said Lee. “Our way of manufacturing has to be changed for the personalization of appliances. And that’s a big transition.”

While the shift to order-based production will increase costs, the company is betting that the strategy will create sales opportunities, Lee said. Samsung, whose Bespoke lineup also includes wine coolers and dishwashers, is seeking to open up its production ecosystem to suppliers and furniture studios so that clients can have more design options. It plans to start sales of Bespoke fridges in the U.S., Middle East and Europe this year.

The division is also pushing software customization that will enable its home appliances to offer AI-based solutions to users. While the company’s own Bixby voice assistant is here to stay, Lee said Samsung is open to working with Amazon.com Inc and Alphabet Inc.’s Google to connect their rival systems to its gadgets.

With demand for sterilization and hygiene capabilities on digital appliances rising, Samsung is considering making built-in water purifiers as well as a new version of its Air Dresser closet for shoes, while strengthening the sterilization features in its air purifiers. At an online event for the CES consumer technology show this week, the company will also unveil a new robot vacuum cleaner, called JetBot 90 AI+, with three cameras with LiDAR and 3D sensors that will go on sale globally in the first half of this year.