HES’ Ristow Sees Silver Lining In Turbulent Market

By Alan Wolf -- TWICE, 10/21/2008

Anaheim, Calif. — Dealers who can weather the current economic turmoil will emerge with stronger businesses and increased market share.

That was the message that Home Entertainment Source (HES) executive director Jim Ristow delivered today to members of his specialty A/V buying group, a division of Brand Source, during a special Webinar presentation on the fourth quarter.

Ristow said HES members will need to cut costs, trim inventory, promote aggressively, attach warranties and leverage the buying group’s resources to help ride out the storm, which he warned will be turbulent.

Chief among his concerns is the uncertainty surrounding Circuit City and Tweeter. Whether or not the No. 2 CE specialty chain ultimately downsizes or is sold, Ristow expects that the retailer will be “the most predatory” in its fourth-quarter pricing.

However, should Circuit City and Tweeter opt for liquidation, as did Linens ‘n Things and several other national chains this year, billions of dollars in CE merchandise would be displaced. This would put added pressure on vendors, who are already facing high inventory levels and lowered forecasts from big-box customers, he said.

Ristow believes the economic recovery will take quarters, rather than weeks or months, and that weaker dealers across all channels — independents, regionals and nationals alike — will either consolidate or close during this period, while vendors cut production or restructure.

His first piece of advice to HES members is: “Don’t panic. We’ve been through this before and can move quickly if we have to.”

Dealers should prepare for a possible 10 percent to 15 percent downturn in their businesses by cutting costs, liquidating inventory, reducing the number of brands they carry and moving to a just-in-time model. Ristow also urged members to participate in vendors’ instant-rebate programs, despite the sophisticated tracking systems required, and to take advantage of consumer finance programs offered by manufacturers and Brand Source/HES.

Dealers who survive the downturn will emerge stronger and more profitable, he said, and can pick up market share from businesses that failed. Members will also benefit from a second expected government stimulus package, and the advent of the “staycation” as consumers forgo travel for home entertainment.

Another positive — the rising dollar and falling London Interbank Offered Rate Index (LIBOR) — suggests that the United States economy may already be in the early stages of a recovery and that actions by governments worldwide are starting to take effect.

Ristow also presented members with HES’s lineup of Black Friday specials, which will help them compete against some exceptionally aggressive Thanksgiving promotions planned by competitors. These are believed to include a $99 Blu-ray Disc player, he said, and a $299 32-inch LCD TV that was contract-manufactured for a national chain.

Ristow said he is so far unaware of any major, disruptive holiday deals outside of planned promotions, although vendors and retailers are “looking to see who will blink first.”