By Lisa Johnston
New products on display at the American International Toy Fair, held in N
All things considered, 2003 will likely go down in CE retailing annals as a year that's best forgotten.
Between SARS, Iraq, Orange Alerts, Wal-Mart, blackouts, unemployment and deflation, dealers largely took it on the chin — and the pocketbook — as jittery shoppers stayed away in droves.
Even as the year finally entered its waning weeks, it managed to deliver a parting shot in the guise of a record-breaking blizzard that crippled much of the Northeast during the critical third weekend before Christmas.
Compounding the pain, the industry lost a number of retail luminaries during the course of 2003, including Nationwide buying group co-founder Lee Guttman, Abt Electronics co-founder Jewel Abt, and Buddy Dixson, founder of independent distributor and supplier Crosley Group.
The good news about the year, apart from the fact that it's nearly over, is that 2003's holiday selling season got off to a roaring, if somewhat promotional start, and, snowstorms notwithstanding, promises to end with a bang. Here's hoping the good cheer continues through 2004.
Massive Crowds Jam CES: Ignoring lackluster holiday sales and a sluggish economy, 116,687 attendees flock to International CES, topping 2002's attendance of 99,438. The show features more exhibitors and floor space than ever before, according to its producer the Consumer Electronics Association (CEA). The event features more than 2,283 exhibitors, in 1.25 million net square feet of space, and attracted international visitors from 128 countries, making CES "the World Cup of Technology," according to CEA president/CEO Gary Shapiro.
Kmart To Close 326 More Stores: Kmart plans to shutter 326 stores, close a Texas distribution center and lay off upwards of 35,000 more workers, as it prepares to emerge from bankruptcy by its new target date of April 30, 2003. The ailing discount chain, which filed for Chapter 11 protection one year ago, says its board of directors has approved a reorganization plan, which it will file with the United States Bankruptcy Court.
RadioShack In Cost-Cutting Mode: RadioShack plans to rigorously curtail costs in order to meet its goal of 13 percent to 15 percent annual earnings-per-share growth over the next three years despite sales gains in the low- to mid-single digits. To help it hit its earnings targets, the company is planning a series of vendor and price initiatives, including rationalizing its vendor base, extending payment terms and centralizing product procurement to lower distribution and logistics costs.
Amazon Targets Early Adopters: Taking advantage of its inherently tech-savvy customer base, Amazon.com will begin emphasizing early-adopter products within its CE offering this year. CEO Jeff Bezos said during CES that the company plans to make a "big push" in 2003 to offer cutting-edge products that represent a huge leap in technology or are "qualitatively or quantitatively different by a factor of 10." Bezos notes that his company's emphasis at the show was to seek out new electronic exotica and to work with manufacturers on launch dates in order to allow online aficionados to pre-order the products.
Circuit City Ends Commissions, Cuts Jobs: In a dramatic effort to reduce costs, Circuit City moves its sales force from a commissioned to an hourly pay structure, will pink-slip about 4,100 employees including 3,900 commissioned salespeople, or nearly 10 percent of its workforce, and will shut 10 more product repair centers. Dropping the split-pay system, which chairman/president/CEO Alan McCollough describes as divisive, cumbersome and expensive to administer, is expected to save the company some $130 million in payroll costs this year. Although Circuit City had long held its commissioned sales force as a key point of differentiation between it and chief rival Best Buy, McCollough says the impact on service will be minimal, thanks to greater grab-and-go merchandising, increased online research by consumers, and an effective Internet-based training and accreditation program for its sales associates.
January Sales Remain Soft: Dealers' December doldrums carry over into the new year as economic uncertainty and the threat of war conspire to suppress January sales for publicly held retailers. Among those reporting, Circuit City says January comp sales slipped 2 percent, and Ultimate Electronics and Sears both say comps declined 8 percent last month, with the latter citing weakness in consumer electronics. By contrast, Wal-Mart reports a 2.6 percent rise in January same-store sales.
Video Only No Longer Lonely: Former NATM Buying Corp. member Video Only rejoins the dealer group. The 14-store Northwest specialty chain had left NATM in March 2000, along with Queen City TV & Appliance, Vann's and Handy TV, reportedly after key vendors balked at servicing the group's four smallest members. In a statement, NATM notes that it is "pleased to have them rejoin the group, as their current business is strong and their future plans include additional store locations."
Cablevision Puts The Wiz On The Block: After five years and close to $500 million in red ink, Cablevision Systems Corp. finally pulls the plug on its ailing New York metro-area CE chain, The Wiz. Unable to stanch the losses after multiple management shake ups, store closings and redesigns, the entertainment and cable provider announces that it will exit the consumer electronics retail business by the end of June. The company, which has been under pressure to curb its debt and boost its bottom line, says it is "exploring options" for the remaining 17 Wiz locations, including selling the chain or shutting its doors.
Best Buy, Circuit City Battle Tough Quarter: A weak economy, war worries, and an exceptionally promotional holiday period take their toll on the industry's two largest retail chains, Best Buy and Circuit City, which report soft same-store sales for their just-ended fiscal fourth quarters. At Best Buy, company-wide comps slipped 0.2 percent for the three months ended March 1, while total revenue rose 9 percent to $7.6 billion. For Circuit City, comps fell 6 percent for the quarter ended Feb. 28, against a 5 percent decline in net revenue to $3.2 billion.
Crosley Founder Dixson Dies: Carl Eugene "Buddy" Dixson, founder of the Crosley Group of independent appliance distributors, dies at the age 83. Dixson, a co-owner of the Brown-Rogers-Dixson Co., a regional distributor, founded Crosley in 1976 in response to the loss by independent dealers of channel-restricted product lines to national discount chains. Its private-label Crosley brand, created specifically for independents, today encompasses a full range of kitchen and laundry products that it distributes — along with the Maytag and Zenith lines — to some 8,000 dealers in all 50 states through a network of 75 distribution centers.
Abt Leaves NATM: Abt Electronics and the NATM Buying Group part ways over a shift in a core group program from Mitsubishi to Hitachi. According to the retail organization's president/executive director Bill Trawick, NATM changed video vendors in response to margin declines on Mitsubishi products following the brand's placement with Best Buy. Abt president Mike Abt wishes his former colleagues well. "I love NATM, they're great guys, and the group is as strong as it's ever been. But sometimes you've got to act on your own and do what's best for your company. And in this case we did what's best for the company."
The Wiz Files Chapter 11: Beleaguered N.Y. metro-area CE chain The Wiz files for bankruptcy protection following its sale to a unit of Gordon Brothers Group, a leading retail liquidator. TW Inc., operating as The Wiz, files motions seeking approval of debtor-in-possession financing and for authorization to conduct going-out-of-business sales at its 17 stores.
Best Buy In Talks To Sell Musicland: Best Buy is in talks to sell its ailing, mall-based Musicland music and video software group, comprised of some 1,200 Sam Goody, Suncoast and Media Play stores. The company has hired an investment-banking firm to assist with the sale, as well as "additional professionals to assist in other areas of the plan," the retailer says. In anticipation of the divestiture, Best Buy is reclassifying Musicland as a discontinuing business and is taking a $441 million charge against the operation.
War Jitters Hurting Retail Sales? While no one knows for sure if the added anxiety and distracting around-the-clock coverage of the war in Iraq is suppressing sales, it certainly can't be helping the already anemic retail scene. The numbers would certainly support that hunch. According to the National Retail Sales Estimate (NRSE), published by Chicago research firm ShopperTrak, U.S. retail sales fell 9.9 percent during the first four days of the war (March 20-23), compared to the same period last year. The biggest decline came on March 20, the first full day of the conflict, when sales were off 13.9 percent nationwide and 19.1 percent in the Northeast.
Boscov's Joins NATM: Boscov's, the $1 billion regional department store chain, joins the NATM Buying Corp., becoming the group's 10th member. The full-line, 38-store retailer is the largest privately owned independent department store in the country and the first to join the white and brown goods buying group. The addition of Boscov's, plus the recent return of Queen City TV and Video Only, has helped restore the group's dealer ranks following the departures of four members since September, including Abt Electronics — which opted to join PRO Group this month — and H.H. Gregg, which has opened the first five of 11 planned stores in Atlanta.
Buy.com Expands CE Selection: Buy.com boosts its commitment to consumer electronics, expanding its selection to 2,500 new home and mobile electronics products, due to a new distribution agreement and expanded relationships with a number of the site's current vendors. The e-tailer says an unnamed distributor will provide the company with "a greatly expanded selection" of CE products from major brands including Sanyo, Harmon Kardon, Panasonic, JVC, Sharp, Samsung, JBL, Monster Cable and Audiovox.
CE's SARS Scare: Manufacturers and retailers are keeping a wary eye on Severe Acute Respiratory Syndrome (SARS), the deadly respiratory disease that has taken its biggest toll in China, the production heartland of consumer electronics. Although vendors and dealers have reported few problems to date with supplies, shipments or sales stemming from SARS, most are maintaining travel restrictions and other safeguards for employees, forcing a fundamental change in the way the industry conducts business.
Sony's Ron Boire Joining Best Buy: Ron Boire leaves his post as president of Sony Electronics Consumer Sales Co. to join Best Buy as executive VP/GMM of its flagship store group. Boire succeeds Mike London, who is tapped to lead Best Buy's new customer centricity initiative, the most critical of four core strategic areas around which the company has aligned itself. Bob Weissburg, strategic sales planning VP for Sony Electronics Consumer Sales and a 23-year company veteran, replaces Boire as president.
Tweeter Launches Strategic Plan: Tweeter Home Entertainment Group initiates what it describes as "a major strategic repositioning" designed to return the company to its growth track and restore profitability. The plan calls for operational improvements to institute best practices in several key functional areas and a long-term strategic repositioning that will ensure Tweeter's place as a leader in emerging technologies. The effort will begin with extensive consumer and industry research and a full strategic review this fall, which will encompass potential partnerships and alliances and an evaluation of additional products that will "bring more complete solutions to customers," the company says.
MARTA Mushrooms: The MARTA Cooperative of America adds four new members to its ranks, bringing its roster up to just over 100 dealers and distributors, and pushing its annual group-wide sales to more than $2 billion. The new additions are Grand Furniture in Norfolk, Va., See World in Indiana, Pa., New York-based Thunderball Marketing, and U.S. Supply Co. in Philadelphia. According to Warren Mann, executive director of the not-for-profit buying co-op, the addition of four new members at once was an "unusual coincidence," given the challenge of finding qualified candidates in differentiated markets.
RadioShack Lays Out Core Solutions Strategy: RadioShack details an overarching strategy of differentiation at its annual shareholders meeting that's founded on providing families with accessories, CE solutions and proprietary novelty products while improving back-end efficiencies. Chairman/CEO Len Roberts says the company's core solutions strategy differentiates the chain from low-cost, mass-market rivals and high-end specialty stores by offering ease, convenience, selection and quality at a reasonable cost, while providing answers to consumers' product or service-related needs and wants.
Circuit City Rebuffs Buyout Bid: Circuit City's board of directors rejects a takeover bid by Mexican billionaire Carlos Slim Helu. The Slim family, which owns CompUSA and a 9.2 percent stake in Circuit City, among other interests, offered to pay $8 a share for the balance of the retailer's stock, which had been trading at $6.75. An alternative proposal called for merging Circuit City with certain Slim-held businesses and issuing shareholders cash and stock in the combined company.
Sears Doubles Flat-Panel SKUs: Sears is doubling its assortment of flat-panel displays to 22 models to establish itself as the leading retail destination for plasma and LCD TVs. The rollout, which will be completed in August, is an expansion of the company's Thin-TV shop concept launched in 650 stores last September. The category has "resonated well with customers," a spokesman says, encouraging the mass merchant to pursue its strategy of becoming "the dominant player in plasma and LCD."
Nationwide's Lee Guttman, 65: Lee Guttman, the inspirational president and co-founder of the Nationwide TV and Appliance buying group, dies suddenly of a heart attack at age 65. An ordained rabbi with a background in CE and majaps merchandising, Guttman was one of seven original members of Nationwide, which was created in 1969. Since then, he helped the group grow to more than 2,280 members with $8 billion in annual sales. Indeed, much of Nationwide's success has been attributed to his merchandising acumen, his close relationships with vendors and his tireless support of member dealers. While a succession plan was reportedly in place for the long-time president, it remains unclear how his passing will ultimately impact the buying group.
Retailers See Limited Upside To Cable Contracts: CE retailers acknowledge that the advent of interoperability standards could eventually create a meaningful business model for the sale of cable subscriptions, hardware and other related services. But in the meantime, dealers tell TWICE, selling cable TV is almost more trouble than it's worth, due to the morass of systems, terms and offerings; operators' inexperience with retail; limited opportunities to sell high-margin hardware; and the slim profit in subscriptions.
A Mart Grows In Kansas: Nebraska Furniture Mart's long-awaited Kansas City superstore opens its doors on Aug. 15 to throngs of curious Kansans and kudos from the vendor community. Located 30 minutes west of town in a new development district that it shares with a NASCAR raceway, a minor league baseball stadium, a hotel and a popular sporting goods emporium, the Mart features 10 acres of selling space for high-end, mid-priced and promotional furniture, flooring, consumer electronics and appliances, and boasts such amenities as a leased café and a See's candy shop — which, like Nebraska Furniture, is held by billionaire investor Warren Buffet.
Blackout Biz: Like many of the estimated 50 million people affected by Aug. 14's power outage throughout much of the Northeast, area CE retailers remain calm and collected, if not necessarily cool. Indeed, many merchants wound up performing a public service for their communities by staying open long after the lights went out to sell desperately needed commodity items like flashlights, batteries, corded phones and portable TVs and radios. Still, the loss of regular business took a significant toll on some retailers' revenue, as seen in subsequent financial reports.
The Wiz, Revisted: P.C. Richard & Son says it will put its newly won rights to The Wiz name to work by opening several Wiz stores and launching a Wiz-branded online retail operation. The regional chain agreed to pay $1.8 million for the rights to the franchise as part of a U.S. Bankruptcy Court ruling that overturned an earlier auction won by former 6th Ave. Electronics CEO Leon Temiz and reopened the bidding. The cost breaks down to $1.6 million for the names and trademarks of The Wiz and $200,000 for customer lists.
Movin' On: NARDA and PARA are losing their leaders. Elly Valas resigns as president/CEO of the North American Retail Dealers Association (NARDA) following 12 years of service with the trade group. She will remain in her post through January 2004 and the Consumer Electronics Show unless a successor can be found before then. Separately, Deborah Smith, executive director of PARA, will be leaving her organization after the 2004 conference next May to start her own business, the group announces. PARA president John Flanner says in a prepared statement, "Deborah Smith has done an outstanding job over the past 12 years in growing and directing the evolution of PARA."
Home Depot To Take Manhattan: The Home Depot says it will open its first two stores in Manhattan next summer. The nation's No. 3 major appliances retailer had been evaluating locations throughout the borough for several years, according to Eastern Division president Tom Taylor. It will join a short list of other national superstores with a Manhattan and CE presence, including Kmart, Circuit City and Best Buy. The company presently operates 15 locations throughout the city's four outer boroughs and 78 stores within the greater New York metro area.
Wanted: Good Guys: CompUSA announces it is buying out Good Guys in a cash-for-stock deal valued at $55 million. The definitive agreement is expected to close in February 2004, pending regulatory and Good Guys shareholder approval. At that time, Good Guys will become a wholly owned subsidiary of CompUSA and will continue to operate under the Good Guys name. The move advances CompUSA's strategic expansion beyond PCs into consumer electronics and home networking, while providing Good Guys with a capital infusion.
RFID Praised, Protested: The debate continues over radio frequency identification (RFID) technology. Wal-Mart brought RFID into the public awareness this summer when it mandated that its top 100 suppliers have RFID tags attached to all cases and pallets by Jan. 1, 2005. Despite privacy concerns raised by consumer groups wary of the tracking technology, a who's who of retailers and vendors are contributing toward its development including Best Buy, Canon, Eastman Kodak, The Home Depot, Lowe's, Target and, of course, Wal-Mart.
Jewel Shines No More: Jewel Fischman Abt, who founded Chicago retailer Abt Electronics 67 years ago with husband David Abt, dies at the age of 96. The Abts started out in 1936 selling radios in a storefront in Logan Square using her life savings of $800. "It was her idea and her money," said her son Robert Abt. The retail business grew, relocating to increasingly larger stores, culminating in the current megastore in Glenview, Ill., which opened in 2002. Mrs. Abt remained active in the business into her 70s.
Gateway Completes Pilot Store Rollout: With the re-opening of Gateway's sixth and final pilot store in New York City, the chain has completed its transition from its original PC-driven Country Store design to a format that better accommodates the company's fast-growing CE product line. The retrofit of the Manhattan unit reflects similar, though less extensive, redesigns that were performed on the balance of Gateway's 190 locations over a three-month period beginning last February.
Sears Rolls Out Exclusive CE Product Strategy: Sears is rolling out a collection of exclusive CE products to further reestablish itself as an electronics destination store for the holiday season and beyond. The items include a Fisher-branded miniature camcorder and digital still camera by Sanyo; a combination DVD recorder and VCR from Sansui; and a portable DVD player from Memorex's Disney Electronics line. The products are the latest in a series of moves designed to reinvigorate the company's CE business and reposition its departments as family entertainment centers.
Temiz Opens Electronics Expo Chain In N.J.: Leon Temiz, co-founder and former CEO of metro New York regional chain 6th Avenue Electronics, launches his latest retail venture with the opening of the first of 15 planned Electronics Expo stores. Temiz left family-owned 6th Avenue in August with plans to revive The Wiz, the onetime New York CE powerhouse that corporate parent Cablevision folded last spring. After P.C. Richard & Son ultimately acquired The Wiz rights for $1.6 million, Temiz instead alighted on the name Electronics Expo, ostensibly to reflect a "higher level of customer care and detail that you just don't find in traditional consumer electronics outlets," he said.
Black Friday Promos Herald Holiday Season: Hopes for a less promotional holiday selling season are seemingly dashed Black Friday weekend as consumers across the country cued up before dawn for $20 DVD players, $500 notebooks, two-year, zero-percent financing offers, and other door-busting CE specials.
Large-Screen TV Shortages May Hamper Holiday: Reported shortages in supplies of some large-screen TV types, particularly rear-projection LCD and DLP sets, may prove to be the fly-in-the-ointment for what's shaping up to be a solid holiday selling season. Retailers say overcautious projections earlier in the year by manufacturers led to the shortfalls. Stuart Rose, chairman/CEO of Rex Stores, said, "Our business would be through the roof if we could get all we want."
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.