twice connect

PRO Gives Details Plans, Opportunities

5/21/2012 12:01:00 AM Eastern

DANA POINT, CALIF. – Progressive Retailers Organization
(PRO Group) executives further detailed
the 2012 strategies outlined in the “State of the Industry”
presentation during briefing with TWICE.

Dave Workman, president/COO of PRO Group,
and George Manlove, Vann’s president/CEO and
chairman of PRO, were joined by PRO board member
and president of ListenUp Walt Stinson in discussing
its ProSource partnership, eBay plans,
channel management and the current CE market
for the group in the coming year.

How will the new ProSource organization
help PRO and Home Entertainment Source
members become more competitive?

Under ProSource we can come up
with an aggregate buy. We are not a “one-size-fits-all”
group, but we can optimize the size of our [retail] sales.

Second, the business is changing. Dealer classifications,
how dealers want to be handled by
vendors and vice-versa is changing. Inventory [as
discussed in their formal presentations] is a liability
now vs. an asset. And there are new business
models. We are not a distributor but a fulfillment
model. We approach our infrastructure as one to
build business models.

We also have a critical mass in certain categories.
In audio categories we may be No. 2 in the industry
behind Best Buy. Other times we may be No.
1. And with ProSource, our focus is still the mid- to
upscale products. Not just the $3.1 billion [in combined
annual sales]. Vendors can make money on
these types of products.

TWICE: Are the new unilateral pricing policies a
work in progress so far?

Manlove: I would say a work in progress. It is a
challenge for everyone involved, including the consumer.

Workman: A policy can’t just be channel management
… it could lead to overreaching. Sometimes
unilateral pricing will [result in] selling the product
to everyone for the same price … and [the products]
will then not be special to anyone. We live in
a multichannel world that is changing, and we must
make [business] decisions around that multichannel

TWICE: What is the current status of PRO’s eBay
initiative? How has it been accepted by vendors?

Workman: When you change the rules, sometimes
you get resistance because it is change. eBay
has been known as an auction site. They don’t want
to abandon what they have done, but in certain categories
they want to be a full-fledged marketplace.

Amazon is very important [as a marketplace] but
sometimes it isn’t good to be in competition with
your host. eBay provides Milo, Paypal and a suite
of services that they can bring to the dealers. It just
doesn’t list products.

TWICE: How are inventories? Do you expect
some shortages?

Stinson: I expect that output [in video] will go
down. I see the market having bottomed out in supply.
I don’t see audio having the problems video had.
I see a change with video vendors this year. It is
about profitability now for them too. Hopefully it will
be profitable for both them and us.

As a group, or individually, what CE categories
are you adding this year?

In cameras we have some of the best
retailers around. One area that we may pick up is
the whole car audio electronics category, which is
doing well. The concept of digital audio and make it
sound as good as possible … and making it as easy
as possible to work is growing. And we were early in
headphones, which continue to be popular.

TWICE: Have Best Buy’s problems given CE retailers
like yours a black eye in the minds of your

Workman: Part of Best Buy’s challenge is all the
[negative] headlines and the pundits. But the foundation
elements of its problems are that big selection
and lower price of big boxes have been taken
away by the Internet. That will not change. But the
people at Best Buy know that things run in cycles.
They will reinvent themselves. They have also been
caught up in the industry trends we’re all facing.

Remember that this is a big-box [retail]
trend and not just a problem for Best Buy or even
only the CE industry.

TWICE: What categories are doing well now?

Stinson: The luxury segment is rebounding nicely.
[The industry] was in overcapacity in 2008, and we
have been adjusting ever since then. We downsized
and right-sized [ListenUp]. Now we have to hire people
and add inventory. We right-sized for 2010 but
by 2011 we have begun to expand. My sense is that
industry has bottomed out.

For manufactures, they are behind the curve. Maybe
they are not as close to the street as we are.
There is a bounce-back in custom and two-channel
… but not in video, not yet.

TWICE: So what does all this mean for your type
of retailers this year?

Workman: The Consumer Electronics Association
estimates that the industry will grow this year,
but the growth will focus on tablets and smartphones,
and to a certain extent, readers. But legacy
categories like audio and video will not.

To all this, you add the migration of retail sales to
the web. That also points to the problems that the
big-box retailers have will continue.

For retailers like ours you have to pick your targets
well and become more focused, not less, leveraging
all your experience and advantages.