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Groups Mixed On Aftermath

Depending on the heft of their commitments with Zenith, buying groups reacted to the vendor’s decision to suddenly drop their programs with anger, indifference or despair.

While most lauded the struggling CE supplier for taking strong action amid a competitive vendor environment, group directors and member dealers took umbrage with Zenith’s 60-day notice, which sent them scrambling to find replacement product.

“We think Zenith’s direction is good,” said Bob Lawrence, executive director of Associated Volume Buyers (AVB), which counts Zenith among its top five TV brands “But the way they treated a whole lot of very loyal, longtime dealers-some going back two or three generations-was completely unfair. They pulled the rug out, and I’m sure those dealers will remember this for a long, long time.”

For Nationwide TV & Appliances, the sting of Zenith’s move has prompted retribution. While president Lee Guttman continues to hold talks with Zenith in an effort to reverse its decision, the $7 billion buying group decided during its annual meeting in New Orleans last week to boycott all products, both brown and white goods, from Zenith parent LG Electronics.

“We had an outstanding response from the members on our decision,” said Nationwide executive director Robert Weisner, “and we expect a hundred percent cooperation in sending the message back to LG management. There are a number of other support companies like RCA, Hitachi, Toshiba, Samsung and others that will be happy to take up the sales within our group.”

Weisner noted that Nationwide had “supported Zenith for years, and we feel that they have turned their back on the very independents who supported them through the hard times.”

Mel Hunger, executive director of Nationwide sub-group NECO, agreed that while “we liked Zenith, and had an opportunity to make a profit with Zenith, we can shift our sales. It would have been worse at Christmas, but we can make the shift pretty seamlessly now.”

Rick Bellows, merchandise manager of brown and white goods for Best Brands Plus, said his group was also disappointed by Zenith’s announcement. “We knew they were struggling, had cut their sales force, that they’d been in dire straits and needed a major shakeup,” he said. “But we thought if anything they would be working closer to the buying groups.

“It’s sad that a major company that has partnered with independents for so many years is walking away from us,” Bellows continued. “The independents helped make Zenith, and they made a mistake by not trying to work it out using organizations like ours.”

MARTA executive director Warren Mann, who was leading his group through its buying convention in Orlando, Fla., earlier this month, was diplomatic about the subject.

“We have been a good supporter of Zenith,” he said. “We are not happy when a supplier loses money. If some of what they propose can make the brand ‘future proof’ and make it a strong brand name, that’s good for them and good for MARTA’s members. Any manufacturer that improves profitability in the market with their brand is good for us.”

Rumors abounded at the MARTA show that Zenith was going to drop Circuit City and Sears with its new strategy and sell its mostly low-end product under the GoldStar name. But Mann said, “There is no guarantee that it could sell them with the GoldStar brand. Those chains want the Zenith brand.”

Circuit City would not comment on its relationship with Zenith, and Sears’ CE VP Ray Brown was unavailable at press time.

While Zenith executives at the MARTA convention referred press inquiries to its corporate headquarters, retailers attending the show had plenty to say about the subject.

Mel Heller, principal of Jer-Mel Appliance of Syracuse, N.Y., was not a fan of the new plan and said, “We are getting out of Zenith [merchandise]. It’s a low-end line. Why should I carry their HDTVs? When people come in for HDTV today they ask for Toshiba, Panasonic, Pioneer, Mitsubishi and others, not Zenith.”

Mike Koon, principal of Schewel Furniture, and its electronics and appliance buyer, is one of the retailers who will be carrying the new, streamlined Zenith line. “They’ve taken their best 25-inch and 27-inch [analog] TVs and will offer them along with their HDTV line,” he explained. “Their HD products are good, [and] the emphasis on digital should help them in the marketplace.”

While NATM “did have a handful of members that supported Zenith, we weren’t doing a lot of business with them as a group,” said executive director Bill Trawick, who wasn’t surprised by the move. “The same change is happening at other companies. Others have come to us and said they want to play a less active role in the commodity business.”

Trawick questioned whether Zenith can compete in the high-end arena, where “just a handful of vendors own 75 percent to 80 percent of the mix.” He also questioned whether Zenith could be competitive serving dealers on an individual basis as the buying groups throw their massive support behind competitive brands, because “the volume is much more substantial when working with groups as a whole.”-Additional reporting by Steve Smith and Tedra Meyer