Buying groups, those organizations that enable small independents and regional powerhouses to compete with national electronics/appliance chains, are having a pretty good year so far, considering war, unemployment and a generally mediocre economy.
The repositioning of buying groups to make them more valuable in the eyes of CE and major appliance manufacturers to sell higher-margined, higher-end products is working.
Buying groups still believe in commissioned salespeople, a strategy that most recently Circuit City has turned away from. Independent retailers think that knowledgeable commissioned salespeople can explain the product features better to consumers, sell products with higher margins more effectively, as well as make service and installation go smoothly.
But just because their sales performances are going well, doesn't mean that it has been an uneventful year. Group members seemed to jump from one organization to another, while some larger members decided to go off on their own.
For instance two buying groups with the largest electronics and/or CE/appliance retailers as members, the Progressive Buying Group (PRO Group) and NATM Buying Group, both lost, then gained members.
The PRO Group had, what executive director/COO Roger Heuberger called at CES "a trying year" during 2002. In addition, by the end of last year founding member Ultimate Electronics and its $700 million in buying clout left the group.
But Heuberger and PRO went recruiting and added Definitive Audio, ListenUp and the group's first international affiliate, Audio Centre, which is based in Montreal. And PRO, which traditionally only had members that were high-end A/V retailers, signed Abt Electronics, the Chicago-area giant that sells both brown and white goods.
Heuberger said last month that Abt's well-trained sales force, customer service and shared upscale CE lines made sense for both sides.
As for 2003, comp sales for the group in the first quarter are up. The good news is that video sales continue to grow, but the bad news is that audio is still having problems.
"Audio is a shrinking portion of member's sales," Heuberger said. But the custom install part of PRO's mix, which for some members is 60 percent of their total sales, continues to be "a big and profitable part of our business."
PRO's gaining a member was a loss for NATM. Abt left NATM right before the group's March convention because the retailer could not support a switch in a core program from Mitsubishi to Hitachi. NATM executive director/president Bill Trawick explained at the time that the group "is not here to dictate to members on how to run their businesses. But when you join a group like NATM there are responsibilities." He added that while NATM was, at that point, a smaller organization it was now more unified in backing core programs.
Unity is now a watchword with NATM, but during the past year Trawick and his group have endured plenty of changes. Last year H.H. Gregg, whose president Jerry Throgmartin was president of the group for several years, decided to drop out of NATM because his chain was going to expand into markets of other NATM members. Sight 'n Sound, which was acquired by Aaron Rents last September, dropped out of the group too. And in January American TV opted out of NATM to form a "strategic alliance" with H.H. Gregg.
Like Heuberger, Trawick replenished his membership, in his case with Queen City TV & Appliance, which rejoined NATM in November. During February another former member returned to the fold, Video Only. On the heels of Abt's departure Boscov's, the Pennsylvania-based department store with 38 stores, joined NATM.
In terms of sales, NATM has experienced double-digit gains in major appliances during the early part of the year, and Trawick is bullish on the future of electronics. "We're just on the surface of a digital explosion," he said at the group's March convention.
So too is Brand Source/Associated Volume Buyers, with about 1,800 members coast-to-coast, representing 2,500 storefronts and annual sales of about $4.5 billion. With its national brand on the front doors of its independent members, its www.brandsource.com Web site and its ongoing presence on TV game shows "Hollywood Squares" and "Wheel Of Fortune," Brand Source continues to compete effectively against national retailers, according to executive director Bob Lawrence.
Concerning business this year, Lawrence summed it up: "CE has been tough, but white goods sales have been good. CE is tough because of, in my opinion, the economy and the war. But when a washer breaks, you have to have a replacement." In appliances he noted, "Refinancing is still helping sell full kitchens in the mid- to high-end."
Lawrence noted that with CE products "business does depend upon the general economy, but there are some exceptional products in CE, led by LCD and plasma TVs. There will be pent-up consumer demand" pretty soon.
What is working for this group is the Brand Source name, which is getting far more visible, thanks to its TV exposure. "If you go to our Web site, we are running a 'Hollywood Squares' sweepstakes. In the first two weeks we have garnered 200,000 responses."
The country's largest electronics/appliance buying group, Nationwide TV & Appliance, got a little bit bigger during the past year, picking up 80 more members, giving it 2280 along with $5 billion in annual sales. Except for a two-week period when the war in Iraq started and "sales stalled," the year has been a good one for Nationwide and its members, according to executive director Ed Kelly.
Saying that Nationwide's members are "big-box sellers," Kelly stated that "high-end appliance sales have been good, and in consumer electronics, plasma, LCD, flat-screen TVs, big screens of all kinds, have sold very well. We are scrambling for inventory [in TVs]." And Kelly added that higher TV sales have driven sales of home theater audio packages.
MARTA Cooperative of America, like other buying groups, hired some former Circuit City salespeople and is pleased with its market strategy and positioning. "Good salespeople are hard to find, so this is wonderful for us," said Mann at MARTA's winter meeting in March.
The group knows its strategy is working because it continues to get courted by major suppliers who want to sell them their upscale products. And, in various categories, MARTA has had better percentage sales gains that the industry.
Executive director Warren Mann noted that even though MARTA membership is down 2 percent versus last year, "Our sales and buying power are up" with "well over $2 billion" in annual sales.
About current sales trends, Mann said that sales have been up for the group through March, but slower in April. He added, "I'm optimistic for the year because our basics are OK. We are well-positioned in CE and in appliances." He agrees that there should be more demand down the road soon.
The news from the Home Theater Specialists of America (HTSA) is that it just signed its 47th member, Audio Visions South of Tampa, Fla. according to executive director Richard Glikes. "George is a current board member of PARA and we are very happy to have him as a member," he noted. The organization, which is seven years old and has members generating $450 million in annual sales, Glikes said.
Glikes added that so far this year HTSA members are reporting its "retail walk-in business being off, but our custom business has been very strong." While LCD and plasma TV sales continue to sell well, he sees "a struggle until the second half. But there are a lot of new toys out there. Sales will improve."
Mega Group USA/Best Brands Plus celebrated its 20th anniversary this weekend at its annual meeting in Orlando. The anniversary is actually a celebration of the current organization and units of the old Key America buying group. The current organization consists of 725 dealers doing $2 billion in electronics, appliances and furniture, according to Rick Bellows, appliance merchandise manager.
The year started out slowly with January sales being "tough," but with slight improvement in February and even more improvement during March and April. Mega Group's appliance sales benefited from its "builder-channel sales, which have continued to grow." Bellows added, "All in all, our first quarter sales were slightly up versus last year, which is an accomplishment given the economy." — Additional reporting by Alan Wolf