Contradictions At Retail

Anyone who is unlucky enough to have a job where projecting trends in electronics/appliance retailing is part of his or her responsibilities always has their hands full. Doing it in times like these is almost impossible. Hopefully our retail coverage in this issue of TWICE will at the very least provide some sense of what industry leaders are thinking.

Since our last issue New York metro area cable provider Cablevision finally pulled the plug on its CE retail chain, The Wiz. The Nationwide buying group held its winter meeting in Dallas. On top of that this issue of TWICE includes our annual Retail Roundtable, which was held during CES in last month and drew top executives from leading retail chains. In it they share what happened during 2002 and what they think may occur this year. Read the retail coverage in this issue. Go back to our February 10 edition and take a look at our January retail sales report for publicly held retailers and dramatic changes at Circuit City. If you analyze all of the trends and factors discussed and say to yourself, "What's going on?" you're not alone.

For instance, Cablevision's decision to part ways with The Wiz seemed to come right after the cable and CE industries signed a peace pact on HDTV. Chuck Dolan was right about the future of HDTV via cable meeting at retail. But The Wiz lost too much money for too long to hang around and be part of the changing marketplace. Reacting to The Wiz's demise, the industry wasn't surprised. But executives were surprised that it took so long for Cablevision to make the move.

At our Retail Roundtable, which was ably moderated by TWICE senior editor Alan Wolf, the retailers assembled said that while the Christmas season was disappointing they were upbeat because 2002 was finally over. They were upbeat that the CE industry's transition to digital continues to march on. But they were concerned that mass merchants such as Wal-Mart, Target and others, along with drug and food chains, which have stepped into parts of the digital business with typical, lowball pricing. That's nothing new. What is new is the high-octane aggressiveness of these mass merchants to use these products as loss leaders, with the complicit cooperation of mostly new Far East suppliers, with the $35 DVD player becoming the poster boy of this phenomenon.

(Separately TWICE has received unconfirmed reports that some unnamed national chains are demanding terms from CE suppliers, such as a guaranteed sell-through price, which means if a chain has to discount the merchandise under the negotiated price the supplier has to pay the difference. That would be a tough deal for large manufacturers to meet, but for medium-sized suppliers it may be counter-productive to sell the big guys.)

Since digital technology is the CE industry's present and future, the industry has always thought (aside from Best Buy and Web sites like Amazon.com) that to sell these products effectively and profitably you need a knowledgeable, commissioned sales force. That belief made the industry collectively sit back and scratch their heads over Circuit City's move to cut its commissioned sales force.

And finally, a schizophrenic trend from last year continues. While publicly held CE and appliance retailers continue to cry the blues with some soft sales in December and January, the opposite is the case when you speak to members of buying groups. Nationwide's membership of relatively small, privately held local retailers report they had a good December and are satisfied with 2003 so far. As P.C. Richard & Son merchandising VP Gregg Richard told TWICE in discussing The Wiz, "January sales picked up nicely. February has been pretty good. If we can match the comp sales we did last year we should be OK."

Go figure.