With a rapidly shifting contemporary marketplace – from product and share to the ascendancy of so many fresh Asian factories – it’s interesting to recall the face of retail prior to big box and Internet.
In the ‘80s and ‘90s independents dominated the appliance and electronics business to the extent that they were not even grouped into a category as they are today.
Rather, in appliances there stood Sears with its 40 percent market share. Nearly all other major appliances were sold by independents, having chased department stores out of the category.
Electronics had RadioShack and Lafayette, although they were not so dominant as Sears, itself not a contender. Aside from some catalog or general merchandise dealers audio and video items were sold largely by individual retailers.
But changes unfolded:
- Nationwide member Best Buy morphed into “big box” status;
- Computers supplanted hi-fi as the main squeeze for tech lovers; and
- Wal-Mart learned how to sell televisions.
Vendors began to change their approach. For example, the majestic appliance industry once had stringent requirements for sales, service and advertising quality. Whirlpool required 50+ models on display to qualify for a franchise. Negative shopping reports could disqualify a retailer from even being allowed to purchase GE, Frigidaire, Amana or Maytag.
Suddenly these same brands were tripping over themselves to place as few as five SKUs into a Home Depot or Costco. Remember the overnight change in dealer attitude toward the brand a decade ago when Fisher & Paykel entered Lowes?
In the ‘90s Sanyo became the nation’s first brand to sell a 32-inch TV at $599, advertised by Wal-Mart naturally. No major brands sold this chain so they felt the need to be flashy. Sanyo then became the first 32-inch to be sold there at $499, later $399, and shortly afterward was dumped unceremoniously when RCA elected to sell the giant from Arkansas.
Ten years ago the model selection constituted a mere handful of items compared to the extensive display seen today.
Advocates argue, perhaps rightly, that dwindling margins and hyper competition has resulted in great value for consumers. Maybe. But from my perspective the side effect has been product mediocrity.
General Motors faltered badly when Chevy, Pontiac, Buick, and Oldsmobile shared parts and design. Now refrigerators and washers tend to be highly similar as identical platforms from the same factory (or OEM) simply get different brand badges.
Once prestigious products from companies like Sony have become regarded by some consumers as only marginally better than third-tier labels, which flash by as low cost providers.
The root cause may link to lack of channel management, failure to embrace market discipline, and how both relate to independent dealers and the retail selling process.
It’s axiomatic that consumers do not step themselves up. Back when NATM was called the “Forty Thieves”, comprised of dealers now defunct [see note below], a common approach was to advertise something at a low price to drive traffic, then try to step the customer up to something better with more profit.
Though typically derided as “bait and switch,” advantages grew from this tactic. Dealers earned enough money to provide bigger selection and better service; manufacturers sold a broader array of merchandise with more innovation; and consumers frequently ended up with better quality goods.[Note: None of the original NATM dealers from the 1960s remain in business, although The Big Screen Store in Baltimore is close since its run by the Luskin brothers. Highland, Silo, Audio/Video Associates and Circuit City all left NATM the same day in 1986 and all have closed their doors. Brick Church, Steinberg’s, Newmark & Lewis, Sun TV, etc. are all gone. The longest tenured NATM member today joined in the ‘80s, ABC Warehouse, a crafty survivor headquartered outside the tortured city of Detroit.]
Clearly today’s shopper has easier access to information via the Internet and mobile devices. Most arrive better prepared to compare and understand features and benefits. Of course, with minimum waged “clerked” floors there’s little option.
Even Sears, whose sales force was once the gold standard of appliance retail, exhibits a fraction of the talent that once guided consumers through the complexities of capacity, performance, space restrictions, installation and other mysteries. The age of commoditization arrived in earnest over the past decade, forcing both retailers and manufacturers to live on fiscal prison rations.
Surprisingly – well, maybe not to some – the higher priced, harder to obtain, still unique somewhat complex brands seem to have performed the best. Bose, Apple, Sub-Zero: all difficult to find in warehouse clubs and flea markets, all standing apart from the dog-eat-dog “let’s make a deal” brands, all retaining some of the cache once far more common at retail.
It may be nicer when the pendulum swings a bit further the other direction. Dealers could find shelter from customers who “showroom” and buy on line. Suppliers might restore pride in segments of their offerings. And “available at fine retailers” actually means some things will not be offered on eBay. Too much of the “Forty Thieves” brutality may have been a bad thing, but every day low price has its own downside that appears to have worsened lately.
I have a few suggestions. Vendors unhappy with declining market share, sales stagnancy, or a feeble bottom line, might try limiting their dealer network. Maybe not only to independents, and maybe not even the complete line, but consider carving out some product segment to be sold only by select dealers.
Find retailers who can explain attributes and advantages to consumers. This earns them a shot at making more money through influencing their clientele. Suppliers with this approach breed stronger relationships plus find it’s easier for one partner to improve profitability if the other does so.
Dealers, give more support to suppliers willing to keep product out of mass merchant, Internet, and/or self-service retailers. Dave Shepard from American TV used to cajole NATM’s electronics committee with the mantra of “rewarding good behavior”, i.e., making market decisions favorable to independent dealers.
Buyers should be instructed to respect manufacturers that try market segmentation, sheltered models or preclude Internet access. It never means making a bad buy, but in an era of parity products such protection (and its corollary of improved profitability) these vendor attributes constitutes important tie-breakers.
Brands should be encouraged to make their distribution plans public. Selling the latest Lee Child book or a popular candy bar as widely as possible makes sense. However, limiting high tech or premium products to stores capable of showcasing and differentiating seems equally sensible.
Giving publications like TWICE the details on which companies embrace this concept seems newsworthy to me. It makes one wonder what could have happened to 3D had Sam’s Club and Kmart been deemed unacceptable outlets. –
Warren Mann, a longtime CE vendor and buying group executive, is an independent industry consultant.