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More than 2,000 members of the Nationwide Television and Appliance Association gathered here at the Wyndham Anatole Hotel last week for the $8 billion buying group's biannual PrimeTime! meeting and vendor show, dubbed "Footprints to Success."
The mood of the mostly white- and brown-goods dealers was cautiously optimistic during the four-day event. Despite considerable gains by the home improvement channel, business for the independents had largely held up during and after a challenging holiday season that took Sears and many publicly held CE chains to task.
Still, the threat of terrorism and the likelihood of war with Iraq hung over the proceedings like a damp chill, as merchants weighed the consequences of both for their families, their businesses and the nation.
But a rousing PrimeTime! agenda built around inspirational pep talks and football themes helped raise spirits. As director Ed Kelly explained, "With the uncertainty in the marketplace right now, we were a little concerned about member response to this year's PrimeTime! So, we pulled out all of the stops with some of the industry's top speakers and authorities and worked with our vendor partners to create some outstanding show specials."
As a result, he said, the event turned out to be "our biggest show ever in both attendance and vendor sales."
Kicking off the program was former Dallas Cowboys quarterback, now motivational speaker, Roger Staubach, who reminded members that effective retailing "comes down to service."
"They trust you, they respect you," he said, which gives independent dealers a decided advantage in the marketplace.
(Staubach also told attendees how he inadvertently coined the term "Hail Mary pass." Asked by a reporter how he pulled off a game-winning toss to Drew Pearson in a 1975 showdown with the Minnesota Vikings, he replied, "I closed my eyes and said a Hail Mary.")
Then, taking a page from the Knute Rockne playbook, Nationwide president and director Lee Guttman delivered a rousing half-time pep talk in which he outlined market opportunities and big-box weaknesses, and exhorted members to guard against complacency.
"More than $5 billion in appliance sales has disappeared from the scene due to laziness and complexity," Guttman said, citing such former majap powerhouses as Highland, Lechmere, Silo, Sun TV, Tops and Wards. "They all had the best buyers, they were all astute merchants, but they went public. They became too complex. They had money and they wanted to sit back and enjoy it."
Guttman next assessed the strengths and weaknesses of the top national chains, which account for better than two-thirds of all majap sales. Among his observations:
Best Buy: Despite the chain's "unbelievable" traffic of one million customers per week, and its superior use of extended credit promotions, "There are holes in their inventory and weaknesses in their sales force.
"I recently visited a Best Buy and asked the sales gal what the difference was between the $397 G.E. and the $499 Maytag. She told me, 'A hundred dollars.' "
"They don't care about appliances," he continued. "They lose one-third of their appliance sales after they write them. Either the item is not in stock, or the salesman wrote up the order wrong or it was an unqualified sale."
Circuit City: "They had 3,000 salespeople with the finest training available, and 1,700 were cross-trained in electronics and appliances. But they can't work for $8 to $12 an hour."
Home Depot: "They have excellent parking — big, clean and well lit — and store managers are paid on the basis of how well they're maintained." In a procedure borrowed from The Walt Disney Co., "They actually measure the age of the cigarette butts. If they're older than 48 hours, the manager gets a demerit. But they have no agility, the stores have no local autonomy, they've cut back on sales training, and their product mix is weak. And women hate it."
Lowe's: "They'll spend $379 million in print advertising and open 160 new stores this year. Seventy-seven percent of their laundry products sold for less than $329. But their displays are weak and they have holes on the floor. And they only have 250 appliances in stock. They have what they call 'just-in-time inventory,' which is a subterfuge for the manufacturers. It's actually 'just-in-case inventory,' which means 'In case a customer wants to buy something, we have it.' "
Sears: "They don't know how to brand manage. They have all five brands, but are supposed to sell Kenmore. We know how to manage brands. We know how to juggle."
Wal-Mart: "They have a predatory way of doing business," Guttman said. "Over Thanksgiving weekend they sold 1.17 million DVDs for $48 and 612,000 27-inch TVs at $248. They sell more color TVs than anybody in the U.S. by far. How? By stacking them up.
"One million customers visit their stores each day," he continued, "and their total U.S. sales are greater than the next eight largest retailers combined. That's power."
Guttman stressed that to stay in the game, Nationwide members must mount a counter-offensive. "Go see your competitors," he implored them. "Sit there and see their whole game plan. Find their weaknesses and attack them."
Among his strategic suggestions:
Price aggressively: "You can't give away any more market penetration. Meet their ads and beat them. Sell a $600 cost projection TV for $599 and say 'Here Best Buy, stick this in your ear.' "
Give credit: "We offer all kinds of credit programs, but you don't take advantage of them. We have 50 months — 50 months! — and only three people out of 2,000 retailers are participating."
Buy smart: "Advertise on one or two radio stations rather than blanketing the market." Likewise, "Focus on two vendors, and be dominant in a category. You don't need 800 models and you don't need all that inventory."
Attract women: "They make the purchases, so make your stores bright and cheery, and the aisles wide enough so tushies don't bump. That alone could boost your sales by 50 percent. And hire saleswomen. You can find them in restaurants — waitresses know how to talk to people, and you'd be giving them a chance to make some money."
Try something new: "Get into different products — get back into consumer electronics, go into higher-end appliances, get into outdoor grills. What are you afraid of?"
Embrace builders: "The contractor business is available to you. Host a wine-and-cheese party for all the builders in your area."
Pick partners: "You need to sit down with your vendors as equals," Guttman said. "You're not a feudal serf. Tell them you need advertising, spiffs, credit financing and better deliveries. In exchange, be important to them. Take truckloads, provide correct data and meet forecasts."
Those same themes were hammered home in a keynote address by local fixture Jim "Mattress Mac" McIngvale, founder and principal of Gallery Furniture, a $170 million, single-site furniture store in Houston. McIngvale attributed his success to basic blocking and tackling, and a laser-like focus on the customer.
"Your customers are not an inconvenience," he reminded the crowd. "Imagine a world without them."
Completing the football metaphor, and wringing any remaining complacency from the room, was a visit by the Dallas Cowboy cheerleaders, who performed for the appreciative dealers and opened the convention floor. There, 135 vendors ranging from Apex, Bosch and Cerwin Vega to Toshiba, Whirlpool and Yamaha offered their latest wares and continued commitments to the independent channel.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.