The ART Of Business

Even Oreck Vacuum Cleaners Can't Clean Up This Mess

Well, it’s official now: Oreck, a high-quality U.S. vacuum cleaner manufacturer, has been finally ground into the carpet.

I’ve been writing about this company for more than a decade -- in both my books and here in this column.

For forty years, it was the kind of company that business students and emerging entrepreneurs are taught to emulate: an innovative, domestic manufacturer -- supported by a direct sales strategy -- that kept control of its products and brands.

I even once met David Oreck, the gregarious founder, when he spoke at our university several years back.

He was rightfully proud of what he had spent half a lifetime to build.

Hardworking Americans were paid a good day’s wage making his products at the factory.

He shunned the big boxes at every turn -- calling Wal-Mart “China Mart.”

Exclusive franchises and corporate-owned stores kept the brand equity high. They only sold Oreck products.

Many models were over $1,000 with a 25-year warranty -- something unheard in the industry.

Television commercials featuring Mr. Oreck with a bowling ball over his head being held in place by one of his vacuum cleaners became cult favorites.

The business grew. The brand got stronger. Franchisees and consumers became ever-stronger believers in the product.

And, then, Mr. Oreck got old.

He sold the company in 2003, to some geniuses in private-equity.

They proceeded to wreck the company: cannibalizing the solid distribution channels Mr. Oreck had built over decades. And, instead, pursued the poison of the big boxes.

No one would pay $1,000 anymore for a vacuum cleaner that was now sold like a commodity at Target, ET. Al.

The Oreck fanatics were thrown aside; sacrificed at the altar of big volume.

As the company now goes into bankruptcy, the current leaders of the firm have the chutzpah to blame the company’s demise on not selling out to the big boxes fast enough.

Today’s Wall Street Journal reported, ”Oreck officials said they struggled to compete with rivals and the transition in how they distribute vacuum cleaners -- by selling through large retailers instead of directly to customers -- took longer than expected.”


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