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Brand Source Foresees Cutthroat Q4

8/30/2007 11:30:00 AM Eastern

Las Vegas — Brand Source is bracing for a bitter fourth quarter.

A slowdown in consumer spending, plus sharp flat-panel promotions planned by key vendors and retailers, will make for rough going come November, executives told TWICE during the group’s National Convention here this week.

“We’re not anywhere close to seeing the end of [predatory] pricing,” said Brand Source CEO Bob Lawrence, who predicted a replay of Black Friday 2006.

Setting the stage is a soft retail environment impacted by the housing credit crunch, falling flat-panel prices and the high cost of gas. “White-goods sales are flat,” Lawrence said, “and while CE unit volume is fine, dollar volume is in the tank.”

“The consumer will come back,” he continued, “the only question is when. I was hoping it would be the fourth quarter. Now we’re looking to the first quarter of 2008.”

Jim Ristow, general manager of the group’s Home Entertainment Source (HES) specialty A/V division concurred. “The fourth quarter will be very volatile, and we’re telling our members that it will be another wild ride. The good news,” he said, “is that stability is in sight on flat-panel pricing. We’re starting to see that in the 32-inch category.”

HES will help its dealers compete by providing the right inventory at the right price. “We have a very close relationship with our suppliers and are intimately involved in the forecast cycle, which enables us to anticipate the market,” Ristow said.

Lawrence said the group’s brand building efforts have also helped Brand Source gain market share in a tough retail environment by driving traffic, a challenge for many national chains. According to group statistics, Brand Source dealers are up 2.4 percent in majap dollar volume across the board this year, compared to a 6 percent decline in overall industry sales. Similarly, the group is outpacing CE industry sales 2-to-1, with Brand Source brown goods volume up 16 percent in dollars vs. 8 percent at retail overall.

“All independents are picking up share from the big boxes,” he told TWICE, “but we’re outperforming the other independents. We seem to be getting more footprints in the stores. We must be doing something right.”

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