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Five forces shaping power tools

Pricing and innovation — more power, less size — drive the market
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As founder of the home channel’s leading Internet retailer of power tools, Don Cohen of ToolKing.com has as good a perspective as any on the trends shaping the power tools market.

His observation: “Faster, smaller, cheaper, better — that’s where products are going,” Cohen said. “There are more technology-enhanced products that are better looking, and better working, than ever before.”

Another sage observer is Bill Palmer, senior merchant at The Home Depot. Asked what is driving the power tools market, he said: “Price — along with innovation — is the main reason for growth.”

Home Channel News spoke with Cohen, Palmer and several other merchants and manufacturers to gather their assessment on the power tools segment.

1. MORE POWER/LESS SIZE

Similar to recent years, the trend is toward smaller and more ergonomic tools that provide as good, or better, power than larger models, according to Palmer. “For sure that’s the way it is going,” he said.

Industry experts said that users have changed what they’re looking for in tools based on how they use them in various environments. Therefore, the need for smaller tools and less weight becomes more prevalent. “Twelve-volt is now the rage, and while these tools will not perform like their big industrial brothers, when DIYers are doing the ordinary jobs or are operating in tight spaces, nothing works better,” said Steve East, VP advertising, Orgill Inc.

The challenge comes when users still require the power and performance levels to complete their jobs in an efficient and effective manner. In all categories, manufacturers are working to optimize the balance between size and weight, East said.

“Twelve-volt lithium ion has been the fastest-growing segment of professional power tools over the last one to two years,” East said. Many professional users see these small, lightweight tools as complements to their 14V, 18V and 20V lines.

“These tools are getting lighter and more powerful at the same time,” Cohen said. “The batteries are holding more charges for longer because of the new technology.”

One significant advantage lithium ion has brought to the power tools market is the ability to pack more power in a smaller package. For example, the average nickel-cadmium cell is about 1.2 volts, whereas the average lithium-ion cell is about 3.6 volts.

Jason McNeil, product manager at DeWalt Power Tools, said with the introduction of lithium ion, “People started wising up to the reality that they don’t need monster power tools to get their applications done. We’re seeing tools and batteries shrink in size, and we’re also seeing users pick a tool that fits their work with less of that overkill, or getting the biggest, beefiest tool on the job site.”

The evolution of lithium ion in the power tools market, some say, is akin to the change consumer electronics users found in shifting from VHS to DVD, or from a Walkman to an iPod. “It’s a very aggressive, defined change in the marketplace,” McNeil said.

2. BATTERY LIFE/TECHNOLOGY

Lithium-ion batteries for power tools were introduced to the market about six years ago. Retail costs came down after the initial introduction but have stabilized over the last 18 months. As robust as lithium battery technology has been, experts say it is still growing, with most pro brands now selling lithium-run tools versus NiCad.

“The lithium performance gives the user more power/torque, improved run time and better performance in colder or hotter temperatures,” said Palmer of The Home Depot, noting that the temperature reference is specific to Milwaukee Red Lithium and Ridgid Hyper Lithium products found in Home Depot stores.

Today’s batteries are longer-lasting and provide quicker recovery battery life. As a result, manufacturers are looking to seize this market opportunity with new offerings. “The increased voltage over 18V that some manufacturers are doing is a direct result of better battery life,” East said.

Porter-Cable introduced an 18V battery status indicator that allows contractors to test battery-charge status quickly and easily, which avoids taking an uncharged battery to a job site. These units include an LED display with a fully automatic state-of-charge indication. An automatic shut-off feature shuts the unit down after 15 seconds without use to limit unnecessary battery drain.

3. PRODUCT INNOVATION

New products are the lifeblood of the industry, and innovation continues to redefine power tools. Palmer pointed to the Ridgid Hyper Lithium and Milwaukee Red Lithium as innovations, as well as new tools that allow users to complete a project easier — such as oscillating or multipurpose tools. “Multipurpose is huge. Innovation is big,” said Tim Hamman, global product merchant, True Value. “Manufacturers are coming out with oscillating tools, multi-cutters, smaller hacksaws — the creation of smaller tools with smaller blades are being introduced into the market.”

Jim Stewart, cordless product manager at Porter-Cable, said his company’s recent innovations described as an inflator and a battery-status indicator “deliver features that are most important to users — speed and ease of use — along with top-notch quality at a great value.” He added that the units can be powered from an 18V Porter-Cable lithium-ion or NiCad battery or a 12V DC power source from a vehicle.

One of the interesting current trends in power tool design, according to experts, is the rapid development of new materials. These materials provide the tools with a more robust and durable look and feel, and they reduce the overall weight. One caveat is that constant cost pressures sometimes limit expansion into new materials or require manufacturers to shift toward resin-based materials. Still, manufacturers are finding ways to be creative and produce a great tool, even when forced to use less expensive materials, Hamman said.

Cohen said enhancements in ergonomics is another trend in power tool innovation, with the goal of ensuring that tools are comfortable and balanced for users who will be spending long hours on a project. New features include grip design, controls and actuators. “A lot of thought has gone into the look and feel of power tools,” Cohen said.

4. VALUE PRICING

Price, along with innovation, is driving the power tool category, with pragmatic consumers looking for value wherever they can find it. “Promotions and aggressive pricing seem to trump new battery technology,” said Mike Clark, senior VP and chief merchandising officer, True Value.

Primarily because consumers continue to search for value-oriented products, NiCad power tools still outpace other battery technologies, observers said. Price is a direct component of this trend, and while the price difference between Li-Ion and NiCad might be narrowing, costs are still increasing for both.

Many of the value-oriented are DIY shoppers, and big brands including DeWalt and Milwaukee are aggressively targeting this market, especially in light of the slowdown in the contractor business. In terms of examples, “lighter models focused on women are coming out, and stick 12V lithium caters to that DIY audience as well,” Hamman said.

“Female users especially prefer smaller, lightweight tools, and 12V lithium-ion tools fit this preference,” Orgill’s East said.

The big names have also launched new and improved programs with a “More for Less” strategy, offering tools with improved ergonomics and longer run times. One example is the DeWalt 20V lithium tools replacing the 18V tools at the same price.

Value isn’t just about products that cost less, however. While price is definitely a leading factor, ToolKing.com’s Cohen said he sees customers spending more by choosing professional-level tools that will retain their value longer than less expensive models. True Value’s Hamman agreed, saying: “These consumers don’t want to have to replace their tools every two or three years. They’re getting more for their money. They understand value.”

5. PRIVATE LABEL

The new market of value-driven consumers has spurred business in private label as well, experts say.

“Private-branded is critical for our retailers right now,” True Value’s Clark said. “These tools offer lower price points and step up features and benefits. Consumers get more tools for less money. Retailers get better margins in a low-margin category. We’ve reinvigorated the brand and rebuilt our merchandise with private label.”

Clark said brands like the co-op’s own Master Mechanic are coming to market with mid-priced quality tools at opening retail price points. He said the products offer many of the features of higher-priced competitors, which he listed as contemporary look, ergonomic compact design, additional features and benefits, toll-free support for service and parts, and lengthy (three-year) warranty. 

 

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