Changing Retail Landscape, Again
By Steve Smith -- TWICE, 8/18/2008
In the continuing saga of trying to maintain competitiveness in consumer electronics retailing, two of the industry's more notable players — Brand Source's Home Entertainment Source (HES) and the Progressive Retailers Organization (PRO) Group — signed an alliance to remain price competitive with national chains.
It is not surprising that these two groups would partner, since both historically embrace new ideas. HES is part of the innovative Brand Source buying group that has successfully helped brand independent electronics/appliance dealers. PRO's roots in A/V specialty retailing are legendary, with many founding and existing members who have made critical contributions to such organizations as PARA and the Consumer Electronics Association, as well as coming up with innovating merchandising ideas.
Both sides deny this is a merger, or an initial move in that direction. And the alliance will enable both groups to work with suppliers they both sell to develop channel strategies that will work for manufacturers and the specialty A/V retailers HES and PRO represent. (See the story that appears on pg. 1.)
But the key part of the deal is the main reason buying groups in the CE industry were created 40 years ago: get the best price from manufacturers. This is especially true when it comes down to "special buy opportunities." Those "opportunities" happen more now than ever before with suppliers offering them with more frequency to national retailers because of their market share and the ease of writing one bill and getting rid of a ton (or three) of inventory.
The Expert Warehouse program of HES is a key feature of this alliance. As Jim Ristow, executive director of HES, put it, "We can buy in large quantities and disperse them to appropriate members of both organizations."
Combined, HES and PRO have more than 500 members, 17 of which are PRO's regional players. The two organizations have combined annual sales of $4 billion. That's a lot of sales power nationwide, coupled with their members' ability to explain and service new technology.
This alliance gives HES and PRO members the opportunity to match in many cases the growing clout of Best Buy and Wal-Mart, both of which continue to go on the march and gobble up more CE sales and market share by the month.
Where this leaves Circuit City, whose fortunes continue to sag, is anyone's guess. Circuit City wasn't doing well when the economy was healthy, but this year — with the Blockbuster/Icahn debacle, a bleak economy and sagging profitability and sales — a refreshed alliance of independent A/V retailers is one of the last things it needs.
While Circuit City talked up new features on its e-commerce site (see story on p. 6), the closing of a distribution facility in Pennsylvania and the subsequent gloomy story by the Wall Street Journal has got to give many of its investors, employees and suppliers reasons for concern as the fall selling season approaches.
