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At a recent visit to DBL Distributing's 144,000-square-foot facility here, seeing its "Turbo Line" in action you get the impression that the distributor is really a manufacturer of cardboard boxes.
Actually, those boxes are filled with all types of CE products and are going to retailers nationwide that, more importantly, are packed with profits. That's a commodity that is always in short supply in this industry, especially during a year like this one.
The visit to DBL's headquarters came right after the company's bi-annual Vendor Expo early in May (see story at right) and the week that the distributor published its new 1,100 page Summer/Fall catalog that features 31 new manufacturers and more than 3,000 new products.
The numbers are significant and only someone like Henry Chiarelli, chief marketing officer of DBL who joined DBL last August and was a long-time Tandy and RadioShack executive, can put into perspective. "At RadioShack we had 3,300 SKUs and we thought that was a lot. Here we have more than 18,000 products from nearly 400 vendors."
He added, "Unless you've been a distributor you don't know the thin margins you're working on and the diversity of the product mix."
And David Lorsch, president/CEO, who founded the business in 1989 with a 1,500-square-foot facility here, pointed out another view of the business' scale: "We have 30,000 retail customers and handle 5,000 customer calls a day."
While the numbers are impressive, there is a method to the madness of carrying all those products and selling them to retailers. DBL's mission statement in a company backgrounder only has four items: "Deliver good products, offer good prices, provide good service and take care of the customer."
The company's motto is "The Accessories Specialists" and both DBL executives illustrated in a variety of ways how accessories provide margins for retailers across the board.
"We have more and more accessories in our line than ever before, such as Sony," Chiarelli said. "In MP3 we carry cases, docking stations, ear buds and all the ancillary products to enhance an MP3 player. But we don't carry iPod."
Lorsch noted, "Sony has been with us for years, covering all accessories and no hardware. We are the largest independent distributor of Sony Accessories."
And he explained how accessories are vital to retailers who sell iPods. "Apple gives retailers a small profit with each iPod that's sold. But if you sell an improved $50 headphone with the iPod half of that price is margin. If you miss that sale you miss the margin from carrying iPod. Retailers have to have speakers, earphones and a ton of other attachments. If you aren't selling those products you are not in that business."
To make his hardware point as we toured the warehouse facility Lorch passed some cellphone accessories and pointed out "there is a ton of accessories available and a ton of profit to be made with it. But we don't sell cellphones."
Chiarelli noted that DBL's photo and video business is "huge" because it carries cases, batteries and other accessories for the category "making it our second largest category." In this area DBL carries the hardware. For instance, it signed a deal in April to carry Panasonic's camcorder line. It has similar deals with JVC and Hitachi for their camcorder lines. Batteries, cases and memory for these camcorders are also "important" for DBL and its retail customers, he added.
To efficiently and profitably move all these products from a plethora of suppliers to a myriad of retailers with their margins intact, DBL constantly upgrades its order processing, especially in its mammoth warehouse. On the tour Lorsch said, "We need to be more efficient in this process. We have to get away from relying on the 'tribal knowledge' of experienced employees in locating products" and put in place a more systemized approach.
DBL's aforementioned "Turbo Line" debuted in November 2006 and the line can process 1,100 boxes an hour and around 15,000 per day at peak volume. Lorsch noted, "The advantage of all this is that the cost per box shipped goes down." And more improvements are on the way, he added.
While DBL's bread-and-butter is accessories it also carries flat panel TV and it sees the margin problems there. "The pricing situation has brought dealer profits down. There are half the profits in flat panel [than last year]. With energy prices going up the cost of shipping flat panels to retailers becomes more and more expensive. You are chasing flat panels for not a lot of profit."
When asked if that means that DBL will be phasing out or carrying fewer flat panel TVs this year, Lorsch answered this way: "We want to emphasize that we are the best accessories distributor in the country. We must sell more. We make more profit and so do our retailers, because accessories are profit."
Concerning price compression Lorsch pointed out that distributors have taken on a much higher profile in recent years because manufacturers have chosen to have "fewer points of contact directly with retailers." DBL has proven it can "serve retailers efficiently, more efficiently than manufacturers could do themselves."
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.