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Beyond CE: Alternative Categories Gain Steam

4/21/2013 08:00:00 PM Eastern

NEW YORK — As the CE retail channel reacts to the ever- changing pressures of competition, many independents and regional chains are increasingly looking beyond core CE categories to make up for razor-thin margins and showrooming shoppers.

Store managers are carving out floor and shelf space for a diverse array of home-oriented product categories that traditionally were left to specialty retailers outside the typical realm of the average A/V outlet.

It’s not just major appliances, electric housewares and furniture, which many CE retailers have relied on for years, but emerging categories such as mattresses, fitness equipment, musical instruments, and outdoor living products like deck furniture and grills. Taking a cue from the home-improvement channel and home emporiums like Conn’s — and the extreme weather events of late — some regional retailers are even experimenting with seasonal sales of lawn mowers, snow blowers and portable generators.

As evidenced by BrandSource’s recent decision to offer its buying group members outdoor furniture and appliances through a new division, OutdoorSource, these nontraditional category excursions are probably not one-off tests, but rather a growing retail trend. As BrandSource executive VP John White said, “We’re always looking for ways to help our existing members drive additional foot traffic and increase profits.”

Fellow buying group Mega Group launched an exclusive Serta mattress collection and a new upholstery/motion furniture program at its annual spring conference last month. The two introductions “offer great value, margin and sales opportunities for our members and will drive traffic to the stores,” said Mega furniture director Jerry Honea.

On the chain level, Conn’s recently reported a 54.2 percent quarterly increase in furniture and mattress sales year over year, with an 11.1 percent jump in margin on those sales, making them the dealer’s fastest-growing categories. Meanwhile, hhgregg CEO Dennis May said the company was pleased with its rollout last year of furniture and fitness equipment, which fit the bill as bulky, highmargin products that require a consultative sales force, a distribution infrastructure, next-day home delivery and a credit offering.

“hhgregg was a CE store that also sells appliances, and we’re becoming a home products store that also sells CE,” he said.

Furniture surprised hhgregg’s management by bringing in more new traffic than expected, he noted, and the chain is looking to expand its living room assortment and add bedroom fare to complement its mattress business. Meanwhile, it will continue to tweak the mattress and exercise equipment categories, where it plans to be more price competitive.

In some cases, CE mixes are shrinking at the expense of other categories, such as at American TV, which announced last month that it was exiting the car audio, digital imaging and PC categories in order to open up more floor space for furniture, among other categories.

The big guys are getting into the act too. For example, Best Buy has upped its online and in-store efforts in the musical instrument and large fitness equipment categories over the past year. It’s not much of stretch to see why, as more and more technology, like a fitness app or a guitar tuner on a smartphone, can enhance the user experience and blur the line of what’s a CE product and what’s not.

Looking ahead, retailers are beginning to look even more beyond. Home Entertainment Source executive VP Jim Ristow cited home energy management and solarpanel systems as possible directions for his organization’s dealers.

In the end, as long as margins and competition remain tight for traditional CE categories, dealers will look for other opportunities to boost the bottom line. In a way, by moving forward beyond CE, retail may be moving back, to a time past when department stores ruled the scene, and one-stop shopping for every room in the house was the ultimate luxury for a shopper. – Additional reporting by Alan Wolf and Steve Smith