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NECO Weathers AC Slump

9/17/2004 01:06:00 PM Eastern

Mashantucket, Conn. — Coming out of one of the worst summers for room air conditioners in years, members of the NECO Alliance, gathered at the Foxwoods resort here for the buying group’s annual Fall Expo convention and buying show, said they are weathering the storm and will turn the tide to their advantage.

Jay Lebowitz, president of Intercounty, Commack, N.Y., one of a handful of chapters that comprise the consortium of independent northeast brown and white goods dealers, said “It was one of the worst years in air conditioning. A good year is 85- to 90 percent sell-through, a medium year is 70- to 75 percent, and this year, the sell through was 40- to 50 percent.”

Lebowitz said many members have arranged with suppliers for credit on unsold air conditioners or refinancing. “It’s the lost cash flow that hurts,” he explained, adding that one of the main challenges in room air conditioning this year was not only the cool weather and lower prices but distribution. “Five thousand Btu units were stacked up at A&Ps, in lumberyards and even in Pep Boys,” he noted. “Pep Boys is even trying to get into LCDs.”

Despite the poor AC season, members said the group’s comparable sales were up by single digits for the year overall. If not for room air conditioning, they said, sales would have been up by double digits.

NECO hopes to recoup lost profits by focusing heavily on television, a category they say they let slip under the radar, essentially giving that business up to “big box retailers.”

Explained Vinnie Capuano, president of the DMI group in Brooklyn, N.Y., the big box retailers were discounting 13-, 20- and 27-inch direct-view TVs so heavily that NECO focused its attention elsewhere. “It slipped away from us,.” Capuano said. Now, we’re coming back and I think we’ll do a fabulous job. It’s what we do best.”

Members plan to advertise and prominently display big-screen TV. NECO hopes the emphasis on high-end displays will reap additional benefits through adjunct sales of home theater furniture such as recliners and TV stands. Lebowitz said he expects shortages in LCD and DLP to again vex the industry as it did last year, but he says suppliers have promised that retailers will at least get their initial orders. At the same time, “We have to do a better job of forecasting,” he conceded.

At present, the Alliance has no plans to expand its majap matrix, although NECO is looking into adding new alternative white good lines, such as those by Samsung and LG. The Alliance is also considering direct sourcing NECO-branded major appliances and electronics in the future, members said.

Keeping dealers afloat this year was the continued rise in home remodeling and new housing starts, which drive the appliance market, members said. Some are also experimenting for the first time with merchandising snow blowers and bedding.

Overall, NECO said the six-year-old organization, itself a division of the $8 billion Nationwide Marketing Group, is stronger than ever, with double-digit growth expected in 2005. The Alliance, which has its own warehouses, says warehouse space is now over one million square feet, with individual member groups increasing space by up to 40 percent this year.

“We’re more cohesive than other groups. We have dealers making 30 to 40 percent mark ups where before they made 10 to 15 percent. So we have the ear of our members. We continue to prove to manufacturers that we can do for them what a big box retailer can do. We give them 500 dealers in the Northeast that are knowledgeable about the product and display it.”