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The PRO Group is taking the long view when it comes to growth by not just looking at the immediate future, and by urging its major suppliers to do the same thing.
That's what Dave Workman, executive director of the PRO Group, told TWICE during a briefing at the organization's 2009 annual spring meeting, which was held here here May 19-21 at the Ritz Carlton Resort.
The specialty A/V retail buying group, which had annual sales of $1.8 billion for 2008 (not counting new members Jetson and Paul's TV), has 18 members and will soon add another member specializing in autosound.
The group is urging its suppliers to look at the long term and not just jump into special deals with national chains and mass merchants to get rid of inventory.
“In the short term it is natural [for suppliers] to move towards the mass market” during an economic downturn, Workman said. But PRO and its specialty A/V retailers “need to communicate with the industry about the long term, that the recession is not a permanent shift in consumer tastes. When the economy stabilizes, consumers will gravitate to our type of retailers.”
“It could be the biggest mistake for suppliers to think Wal-Mart and others will solve their problems. It will hurt the industry down the road ... hurt its future. Our customers will return. There is pent-up demand ... and they will come back to technology products,” Workman added.
When asked how PRO members have faired so far this year, Workman said, “It's really not that complicated. Business pulled forward in January and February, given the expectations we had in the fall. Due to the Circuit City [going out of business sales], it created awareness and gave [CE products] visibility. March and April were down from there, but our total numbers are better than the industry as a whole, when we compare ourselves to NPD Group numbers.”
The issue of where Circuit City's market share is going, according to how consumers shop and how suppliers sell existing retail channels, is still out there.
“We think suppliers are still feeling their way. It really varies by vendor. Some might say Wal-Mart and Amazon are now [sales] volume relief points” for excess inventories. “Some say the mass market, others say the specialty channel. It really does depend upon the vendor,” Workman noted.
“It is natural with the economy the way it is that you'd think the mass market will pick up. But as time goes by, the first people who are out of a recession, with 4 percent unemployment vs. 3 percent a year or so ago, are consumers that shop with us. I would be more concerned if our consumers were in the 8 or 9 percent unemployment group,” he said.
In speaking about the first half, so far, Workman discussed the delay from February to June of the DTV conversion. He said the 30 million or so DTV converter boxes sold are “really placeholders for a new TV set down the road. It raises awareness of HDTV.”
When asked about fourth-quarter sales, he said, “It is too early. The answer is — I don't know. I don't know about July.” Workman explained, “In a normal year there is seasonality, strengths, and predictable good or bad business. Right now, when you talk to members, you can't put a finger on July or August. When you look at October and forward, from that there are easier comps to beat. But to look at long-term trends you have to compare this year with two years ago.”
And one of the issues all specialty A/V retailers have discussed this year is which brand will replace Pioneer in flat panel.
“It is not so much a brand that will replace Pioneer ... but a technology. One technology that is seen as a step-up is LED,” he said. “It is a picture-performance story as well as an energy story. That is not to say that high-end plasma isn't important for movie fans. And it isn't that the price point should be the same as Pioneer's was. Maybe it isn't $2,000 more for a 'premium position.' We will see.”
With some distributors and retailers raising concerns that manufacturer forecasts and production across many categories will cause product shortages because of decisions made due to the fall economic downturn.
Workman said, “The data shows everyone, manufacturers and retailers, are carrying less inventories. Retailers want tighter lead times, just like manufacturers and national chains. This is a forecast business.”
He noted, “The danger will be a lag effect if business starts to turn up quickly. We watch it as a group. You don't want to have six-week delays in getting product.”
Product shortages, and possible support and promotional cutbacks on the part of manufacturers, are due to the uniformly dismal fiscal year reports that came out of Japan in recent weeks that resulted in layoffs and budget cuts.
Vendor consumer promotional support was another topic making the rounds at the show.
Walt Stinson, owner of ListenUp and a PRO board member, said, “Members are more concerned about a cut back in overall levels of support. Cutting back on service to the channel is a concern. Dealers are worried they will not get the level of personnel support and marketing. Some feel that they have cut back too far to save money. You want to cut fat, but not muscle.”
Again, the issue Workman brought up was long-term planning and taking what he sees as a short-term mass-market approach by vendors. “There is a concern about a minimum of level of investment vendors will make on the specialty channel. When the economy recovers there will be great opportunities in the specialty channel and we want our suppliers to capitalize on that. They may have become more reliant on mass retailers and it will hurt their brand position.”
Stinson added, “The best companies are going to take advantage of the coming recovery, not the recession. To do the latter is not a long-term solution for your business.”
Concerning the group's relationship with Brand Source's Home Entertainment Source, Workman said, “We want to further maximize the warehouse for our retailers and offer an opportunity for our members and try to get further down as a resource to complement as PRO Group.” He added that both groups met on this during the HES show in March and will begin cooperating on educational programs and will announce an agenda for this soon.
About PRO's own supply-chain management program, Denon has now joined Panasonic and Toshiba as part of the plan whose goal is to “be a virtual distribution play.” He said the system could work with HES, since the software developer for PRO also did a similar HES program, with the goal being: “We want to be considered one pool of retailers, act like a national retailer and receive the same consideration when ordering goods.”
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.