Despite the brutal marketplace, which Brand Source CEO Bob Lawrence described as particularly tough in July, the buying group’s total revenue rose more than 16 percent year over year to $14 billion, buoyed by brisk sales of TVs and gains in such ancillary businesses as rent-to-own and floor coverings.
Lawrence provided the business update during Brand Source’s 40th anniversary convention and buying fair, held here last week at the Paris and Bally’s hotels.
Specifically, TV sales through the group’s Expert Warehouse distribution program were up 28 percent in units and 10 percent in dollars over the past 12 months, said Jim Ristow, executive VP of Home Entertainment Source (HES), the organization’s specialty A/V division.
On the appliance side, Lawrence said member dealers were enjoying a “pretty good” business in replacement sales, although consumers are trading down to mid-tier products across all majap and CE categories. Total white-goods sales are down for the group, although volume is still outpacing the industry average, which is down about 15 percent year to date.
Lawrence didn’t hold out much hope for an equivalent “cash for clunkers” federal program for appliances, which is underfunded, differs from state to state, fails to provide a removal and recycling strategy for old majaps, and could delay consumer purchases until it goes into effect in October.
The $300 million in allocated rebate funds only covers about three weeks worth of production, he noted, and Brand Source is initiating a letter-writing campaign to lawmakers in an attempt to revamp the program.
Looking ahead, the executives are anticipating a bruising fourth quarter, with promotions starting earlier and running deeper, and compounded by a possible price war between Best Buy and Wal-Mart.
For its part, Brand Source will re-arm its members with competitive Black Friday promotions as it did last year, but will also focus on margin opportunities in 55-inch and larger TVs — particularly LED-backlit and step-up plasma panels — that will be bundled with Blu-ray Disc players to help drive traffic. “We’re trying to merchandise not just profit opportunities but marketing opportunities,” Ristow said.
“It’s time to promote, and we’re promoting more than we ever have,” he added, as reflected in a recent 3 million-piece Samsung insert, to be followed by Toshiba and Mitsubishi tabloids.
Given the changing marketplace dynamics, vendors are looking to Brand Source and HES dealers even more to support their step-up and better goods, such as LED- and laser-lit TVs, Ristow said.
“They tell us our sales ratio of step to commodity products is four or five times better than that of the national chains. That’s where we need to go, that’s where we can make money, and we have to send our dealers there.”
Members are also finding renewed profit opportunities in service calls, particularly on out-of-warranty products, as many consumers choose to repair rather than replace their broken TVs and washers. “We have 12 to 15 vehicles on the road every day for service and installation, and we do very well against Home Depot and Lowe’s,” said Jeff Ahlden, operations VP at Home Appliance & Heating in Kankakee, Ill.
About 70 percent of Brand Source members are servicing dealers, Lawrence said, and the group is working to develop its own service brand around a network of some 400 retailers.
Despite the loss of some dealers to the weak economy, Brand Source has seen a net gain in membership this year, Lawrence noted. Attendance at the show was flat year over year, he said, although meetings and seminars saw an influx of dealers from the Association of Progressive Rental Organizations (APRO), which piggybacked its convention with Brand Source to make the event more cost effective for the groups and exhibitors.