Buying Groups: Strength In Numbers
By Steve Smith -- TWICE, 5/5/2003
The last U.S. economic recession was during the early '90s, when there were fewer new technologies being introduced, manufacturers were singing the blues (and trying to come up with an HDTV standard), and many retailers — independents, regionals and nationals — were all either cutting back, closing or being acquired. Some of the era's buying group execs were preaching doom and gloom.
I'll leave it to the experts on how to describe the economy since 2001, but everyone can agree that we have been in an economic malaise that began before Sept. 11 of that year. While many are predicting a second-half turnaround in the general economy, some say those predictions are based more on hope than reality.
So, where does all of this put the CE industry today? Well, if you took a look at TWICE's April 21 issue, which featured our annual Top 100 CE Retailers report, the big guys are getting bigger. We estimated that the Top 100's revenue exceeded the $100 billion mark for the first time. Wal-Mart has become the No. 2 CE retailer. Are all the independents and regional players who aren't in the Top 100 cowering in fear? Are they withering away? Well, not at all.
I found out first hand recently, as I attended the NATM and MARTA group meetings and spoke to top execs with the other buying groups by phone. While the slide in the audio business is a concern for some, and the war in Iraq hurt store traffic and sales for a couple of weeks, by and large the buying groups report their CE business is doing fine.
The major driving force continues to be digital TV, as plasma, LCD and direct-view flat-screen sets bring consumers into stores. And when they do, they either buy or come back soon afterward for DVD players and home-theater-in-a-box systems. Buying group membership, ranging from single-store, family-owned businesses to regional chains, have been training their people so they are more knowledgeable about consumer electronics than ever before. For the record, one has to mention once again that independents and regionals can "sell up," so they have become more valuable to those CE and appliance brands offering higher end goods.
The proof is always in the numbers, so take a look at the "Who's Who Of Buying Groups" chart on page 20 and compare their sales volumes with the TWICE Top 100 CE Retailers list. The PRO Group and Home Theater Specialists of America (HTSA) are the only two whose sales volumes are comprised of CE only. If they were retail chains, the PRO Group and its $1.5 billion would rank No. 17 for the calendar year 2002, right behind Fry's Electronics. HTSA's $450 million would give it 30th place, again if it were a chain.
What about the other buying groups in our "Who's Who" whose sales figures include appliances and furniture? Let's be conservative for this exercise and say on average 40 percent of the total sales of Brand Source/Associated Volume Buyers, MARTA, Mega Group USA/Best Brands Plus, Nationwide TV & Appliance and NATM is CE volume. (Of course, for some it would be even more.) Do the math with me. If these buying groups were retail chains, here is how they would rank in the Top 100: Brand Source, No. 14; MARTA and NATM, tied at No. 22; Mega Group USA, No. 34; and Nationwide, No. 9.
Buying groups' performances give proof to the old adage that there really is strength in numbers. (And strength in expertise and customer service, too.)
One more major, positive factor for buying groups is that unlike 10, 15 or 20 years ago, their members know how to control costs and make better investments in their operations. They have become better business people. That helps them, their suppliers and, hopefully, their customers.
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