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PRO's Workman Talks CE Changes At Summit

2/22/2011 09:01:46 AM Eastern

Orlando, Fla. -
Dave Workman, executive director/COO of the Progressive Retailers Organization
(PRO Group), now part of BrandSource's ProSource with Home Entertainment
Source, is attending the parent group's Summit here this week and discussed
with TWICE the changing nature of the upscale CE market in 2011.

With all the
changes in the marketplace, when asked how the industry will evolve in the next
several years, Workman said, "The traditional model of stocking levels have to
be reviewed along with logistics. New categories are not going to have 40
points. They will have 15 points [in some cases], and we have to provide
dealers with business models so they can be profitable."

The industry
veteran said that HDTV "and other legacy categories will provide much lower
margins. We have to have more ‘just in time' and quick replenishment
logistics."

The usual choices
when it comes to retailer relationships with suppliers in CE has always been
direct or distributed, but PRO, under the ProSource umbrella, "is working on
hybrid model with Sony, a mix of direct and logistics," which is in beta
testing now and will begin April 1.

"We think that
model will win the day," as retailers have to deal with both tablet PCs and
"lower-margin legacy categories," Workman noted.

"Inventory used to
be an asset for traditional retailers -- now it is a liability," he explained.

The hybrid model
would enable upscale CE independents to work closely with suppliers to make
sure that when there are supply problems on upscale goods, they don't go
automatically to big-box retailers, Workman said.

"That is crushing
for our type of retailers. We need to develop systems to partner with
[suppliers] on such issues directly."

When asked if the
other part of the big-box business model -- the big box -- is outmoded, Workman
said, "It is a liability ... but it is a moving target. Best Buy is looking to
narrow SKUs. How many $69 DVD players do you display? The bigger issue is
inventory. The big box used to be about selection. Now the Internet is
selection. Brick-and-mortar should be where you go to find experience. Big box
has to change to focus on experience [rather] than create a big box to show
everything."

He said, "The
shift that is going to take place may not be a 3,000-square-foot store, but you
won't need a 48,000-square-foot store. How about 20,000 square feet?"

As for the
everyday low pricing message, Workman said, "The problem is that becomes the
central message. The problem is, can the entire operation do that? If you can't,
consumers won't buy. And how frequently will consumers come to your store? How
many unique, new shoppers will come to your store?"

Another problem he
sees in the current CE marketplace is that manufacturers has long operated as
if "one size fits all," and that model is now outmoded.

The reaction
suppliers have had to the creation of ProSource shows that manufacturers "want
more diversity and more channels to deal with. The overall reaction to
ProSource has been very, very good. They want this channel to survive and
thrive."

While the
specialty channel has "plenty of challenges in front of it," Workman noted that
"segments of the market are coming back to us. The luxury segment is filling up
in orders. Audio has helped our type of dealer."

So far the first
half "is definitely better" than last year, even with all the challenges of bad
weather in 2011," Workman said.

He said that by
later in the year, "all of our guys will be in tablet PCs," new business models
will be developed, and "for us, we are telling our members to go after headphones,
headphones, headphones. It is a fashion item and no longer just a low-end
category. Our members have to put in listening stations and treat it like a
high-end category."

And with all the
changes in the CE industry, specialty retailers must "fully embrace it as an
asset not a liability. Then we can do great things."