Las Vegas – BrandSource celebrated its 35th anniversary during its National Convention and Buy Fair at the Paris Hotel last week by accentuating the positive, namely that BrandSource is now the fourth most-recognized major appliance retailer and fifth most-recognized CE retailer in the United States.
BrandSource, which was developed under its previous name, the Associated Volume Buyers (AVB) buying group four years ago, now consists of 2,500 storefronts with 1,645 members and annual volume of around $4 billion, with a product mix that consists of 47 percent major appliance sales, 30 percent consumer electronics (a growing category due to its Home Entertainment Source division) and 23 percent furniture.
In a wide-ranging talk that emphasized the group’s past, present and future, executive director Bob Lawrence delighted attendees with a video of him on a Harley-Davidson motorcycle backed by “Born To Be Wild,” a song popularized the year AVB was born, 1969, in the movie “Easy Rider.” Lawrence was seen visiting various BrandSource locations, and concluded by driving a Harley on stage live with keynote speaker and former Harley chairman Richard Teerlink riding alongside.
While not, in his words, “bashing manufacturers about sales practices to big-box stores,” Lawrence asked suppliers, “how can you ignore a chain like Lowe’s who today has 972 stores and in five years … will control 14 percent of the appliance business?”
Still, he made the point that when he entered the business in 1978 “there was much rhetoric about … the big-box stores of that day … Montgomery Ward, Federated, Silo, Highland, etc. They will come and go [but] we’re still here, and we’re still growing.”
Lawrence added, “Why focus on what we cannot change? Let’s focus on what we can do, what we have that will make us successful … as a 2,500-store chain to get the manufacturers’ attention.”
For instance, BrandSource, as an organization, continues to advertise on NBC, ABC and CBS, has added sponsorship of HDTV programming, and continued sponsorship of Wheel of Fortune, Jeopardy and Hollywood Squares in a $12 million, a $2 million increase over last year. Individual BrandSource dealers continue to spend $180 million in print advertising.
Lawrence, and Jim Ristow, general manager of the Home Entertainment Source (HES) division, are very upbeat about the organization’s position in consumer electronics and major appliances.
Lawrence said in his opening remarks that LCD, plasma and DLP display sales have grown 10 percent, “strongly outpacing the industry in this category.” In fact Lawrence said that HES has grown “55 percent this year alone.”
While a few years ago “many of our members were bailing out of the CE business because they could not compete.” But the implementation of the Expert Warehouse system has allowed the group to buy direct from manufacturers, get access to more products at “competitive prices … and fill orders when customers cannot get [product] anywhere else.”
Ristow noted in an interview with TWICE that HES has 362 members and counting, representing over $700 million in annual sales. The organization, created in 1999, features traditional BrandSource electronics/appliance/furniture dealers, but has over 162 CE specialists and custom-install companies.
And while HES sees challenges ahead from Best Buy and its Consumer Centricity, Geek Squad and Magnolia Hi-Fi efforts to move more upscale and provide more service, Ristow said, “Best Buy will impact the high-end audio/video market and low-end custom area, but our [HES] members are honestly so evolved and diverse, we should be able to compete effectively.”
Ristow does not see shortages in the display area like there were last year. In fact he his bullish on the fourth quarter, expecting some spot shortages on individually hot display products. In the audio business, which has picked up this year, “retailers have been able to sell more high-end components and high end HTiB.”
At CEDIA this week HES will be exhibiting and will probably show some IT-type media servers at its booth. “We always look ahead rather than react to certain market changes.” When asked about launching its own house-brand, or some type of overseas direct sourcing, Ristow said the group may “make some announcement in the near future.”
On the appliance side, Lawrence said that the business is up for the industry by 8.2 percent, which is inflated due to the builder business and lower interest rates. Still, “after doing a lot of research and talking to many people, I’m comfortable in telling you that if you carve out the builder business, the increase to retailers in the appliance business is up about 4 percent. This is about where our group is today.”
Lawrence also compared outlet share in major appliances from 1997 through June 2004. He said that Sears and the discount chains “went up and down” while Best Buy increased their business slightly. Yet the home-improvement channel, with Home Depot and Lowe’s, went from “a combined 2.7 percent in 1997 to 21 percent today.” What it did to independents is have its share drop from 47.4 percent in 1997 to 30.3 by the end of the first half of this year.
But in the second quarter of this year, independents gained share, according to Lawrence, getting 32.8 percent of the appliance business, and showed a gain through the first half, which he believes shows “that we are beginning to win back market share and have the ability to take even more as time passes.”
Still, in an interview with TWICE during the show, Lawrence said that one of his biggest concerns is “channel competition” with large chains and that “members are closing stores, not going bankrupt, just closing stores. We give away market share. The biggest challenge is succession, will young people, sons and daughters of these owners, get involved in the electronics/appliance business? It is hard work.”