PRO Group, HES Give Details On Alliance

By Steve Smith -- TWICE, 8/7/2008 1:56:00 PM

New York — The alliance between the Progressive Retailers Organization (PRO) Group and Home Entertainment Source (HES) buying groups has received support from suppliers and is not a first step to the merger of both groups.

Dave Workman, executive director/COO of PRO Group, and Jim Ristow, executive director of HES, said in a conference call with TWICE that each group will continue to work independently and have no plans to merge. The membership types in each group are different. PRO consists of 17 regional members with $2 billion in annual CE retail sales which are major players in their markets. HES, the A/V specialty division of Brand Source, has 500 members, around half-dozen the size of PRO’s, and annual sales of $1.8 billion.

And both men said the alliance between PRO and HES, the specialty A/V division of Brand Source, will allow both entities the ability to collaborate with their mutual vendor partners on special buy opportunities and specific channel strategies.

Dave Workman. PRO	Jim Ristow,  HES

Manufacturers that sell both groups that were briefed before today’s announcement were supportive. “The reaction was very positive,” Ristow said. “Suppliers, retailers and wholesalers are all trying to find a way to effectively sell step-up goods. Many [suppliers] said [the alliance] is for the good of the industry and found the channel strategy exciting.”

Workman said that after suppliers were briefed the next reaction was, “‘How do I take advantage of that?’ The goal is to develop channel strategies with vendors and also to take advantage of opportunity buys when they come along.”

Some of the suppliers both PRO and HES have in common are Sony, Panasonic, Sharp, Pioneer Elite, LG Electronics, Klipsch, Toshiba, Mitsubishi and Yamaha, among others. Both executives said the alliance starts immediately.

Workman commented that this alliance is a “long-term commitment” to sell “step-up goods for vendors in a growing [retail channel].” The groups said their members have over $4 billion in retail volume.

Ristow said logistically the alliance is operational right now. The HES Expert Warehouse program “will be the catalyst for the opportunity buys,” Ristow said. “We can buy in large quantities and disperse them to appropriate members of both organizations.”

HES and PRO have discussed an alliance of some type since last year to work together. Workman said, “In the past year or so when manufacturers have an overage they can write one order and clear out inventory immediately. Expert Warehouse can provide PRO with a clean, quick solution when available. This gives everyone at PRO more opportunities.”

In joint prepared statement, both Workman and Ristow each detailed the changes in the industry as reasons for the alliance. Workman commented, “The consumer electronics industry is changing and buying groups need to provide new business solutions to their members that can help them compete against the rapid commoditization and new competition in this business.”

Ristow noted, “The CE industry is entering a state of contraction, consolidation and commoditization which, left unchecked, will drive a level of downward pressure into the market. Over time this will greatly constrain dollar growth for both retailers and manufacturers. This alliance represents the most viable growth opportunity for the manufacturer in upscale, value-added merchandise and allows them to develop a cohesive national strategy giving everyone — vendors, dealers, industry — the best chance to survive and prosper.”