The high-profile departures of buying group CEOs Roger Heuberger and Dave Workman from, respectively, the Progressive Retailers Organization (PRO Group) and the MARTA Cooperative of America this month may be indicative of larger evolutionary changes that lie ahead for buying groups and the brown- and white-goods industries overall.
According to vendors, as well as some of the principals directly affected, the recent spate of realignments at PRO, MARTA, Brand Source and the Nationwide Marketing Group reflect a reevaluation of the buying groups' role in a consolidating marketplace and their efforts to remain relevant and viable in a world of falling prices, diminished vendor-direct distribution and big-box supremacy.
“The industry has undergone dynamic changes — the national accounts have changed their formats, but buying groups haven't changed much in a long time,” said Steve McNally, senior sales VP for Sharp's consumer electronics group. “For them, this is a time of opportunity, a time to redefine themselves. Manufacturers are faced with the transition from CRTs to flat panel and have seen price erosion of 35 to 40 percent over the past year. We have to rethink how we go to market. The groups that will be successful in the future are those
that partner with manufacturers to support their brands and take on new initiatives. Based on the economic climate, they can say, 'We are a buying group and this is what we do.'”
“Manufacturers are taking a much closer look at their buying group relationships,” agreed Bob Perry, LG Electronics' U.S. CE products sales VP. “As the landscape changes with increased commoditization manufacturers have to become more efficient in distributing product.”
Perry continued, “The business is changing and buying groups can't be all things to all people. Those that do not have a cohesive, common strategy are in jeopardy. LG Electronics is committed to a couple of groups that provide a focus to a brand and a lineup. Other groups that do not provide specialized, focused approach to the market do not provide a value to manufacturers.”
According to Keith Ido, buying groups VP for JVC, the organizations are not only facing increased competition from national discount chains and each other, but from distributors as well, as vendors increasingly turn to two-step distribution in order to cut costs.
Indeed, Brand Source's warehousing program, which allows smaller dealers to order partial truckloads online, was a major incentive for MARTA members to align themselves with the larger group, suggested Tim Cavanaugh, merchandising director for LG's major appliances division.
Workman himself sees the management departures as part of a larger reassessment of group viability amid a wave of industry change. “The memberships had to step back and look how things are done today and how it differs from the way things were done 10 years ago. It's not an unhealthy thing for the groups and the industry.”