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MARTA, Brand Source Get To Know Each Other

MARTA Cooperative of America held its first meeting under the aegis of its alliance with the larger Brand Source buying group here at the end of February when chairman John Rice of DeSears Appliance & TV, Bradenton, Fla., outlined the background of the deal, why it was struck and how MARTA will operate in the future.

Initially Rice said that Bill Pleasants, merchandising VP of Brand Source, met with him when he became chairman of MARTA last August. “Bill said it might be worth an opportunity to do some things together,” Rice said during an interview with TWICE at the group’s recent convention at the Renaissance Sea World Resort, here.

Rice then took a look at the strengths of MARTA, which he said include “a group with solid, salt-of-the-earth members” and its membership’s “somewhat common size. We have also maintained good, close relationships with our vendors.” MARTA has 90 members, and sales for the group are $1.5 billion, with 40 percent being CE and the rest being major appliances and furniture.

But as the industry changed, Rice said that MARTA members knew “We needed help with logistics, marketing, health care — we needed member services. MARTA always provided us with the ‘best deal.’ But we needed more.”

He noted that in consumer electronics it had three top suppliers — Toshiba, JVC and Sharp — but didn’t have logistics. “Today with our alliance with Brand Source we have the opportunity to carry Pioneer, Samsung and a number of other brands.” And Rice added, “If a MARTA member wants to use the Brand Source signage, we can use it” while maintaining MARTA as its own entity apart from Brand Source. (See p. 16 for details.)

As a result, MARTA felt it had three choices: an alliance with another group, create all of these support services itself or do nothing. Rice and MARTA’s board did not think the latter two choices were an option so, “We decided to start discussions with Brand Source, and it was enticing enough to bring to the board.”

The final decision was made in December, Rice said, with the main reason being “creating value for our members. That was the issue. We work for our membership, and [MARTA] is all about creating value. MARTA has great value [on its own], but the affiliation with Brand Source does a lot. For instance, the Brand Source Expert Finance program is a great tool and helps develop retail members’ financial strength.”

MARTA members and its suppliers will also be able to save money, especially when it comes to the traditional late-winter, late-summer buying conventions. “We expect to have two shows a year starting in 2007 that will be held along with Brand Source. We are taking a good, hard look at our August 2006 MARTA show, but no decision has been reached on that as yet. If we had our druthers, we’d rather not hold it,” but as Brand Source’s Bob Lawrence also said, contracts on the show may not enable them to cancel it.

Rice said that comparing MARTA’s fiscal year of 2005, which ended July 31 of last year, with projected costs of fiscal year 2007, to end July 31 of next year, the group’s cost of operation will be reduced by $1 million.

There was some talk at the show that since MARTA’s 90 members are larger than the average Brand Source member, possibly MARTA would become the “big guy” group in the alliance. Rice noted, “There are around 100 Brand Source members who have over $20 million in sales, which is a small percentage of its membership. I’m not comfortable to say that is possible at this point. That hasn’t been addressed as yet during the transition.”

What Rice is comfortable in saying is that the alliance is “a very good deal for both groups. We can see the value in this, especially with major suppliers who haven’t done business with us [as a group] like Samsung. What major suppliers see with Expert Warehouse is one account number. We have seen a tremendous amount of support from suppliers because they see efficiencies.”

Bill Bursley, managing director of MARTA, commented that his members were so impressed by Brand Source’s presentation at the show that “forty of our members will be attending the Home Entertainment Source and Brand Source Spring Buying Fair in Dallas March 25-29.” (See Bursley’s guest column on MARTA’s role in the changing marketplace on p. 27.)

Another major topic of conversation was the hiring of industry veteran Dave Workman as executive director of MARTA in January and his quick departure a few weeks later to take the top spot at the PRO Group, a buying group he was intimately acquainted with given his long career at Ultimate Electronics, a founding member of that organization.

When asked about Workman’s sudden departure Rice said, “I was startled and amazed that he accepted the job” since Workman was impressed with the MARTA business model.

Speaking of business, Rice said that so far this year CE “has been strong and our business has been up with all manufacturers.” While that was true, MARTA “suffered with flat-panel TV sales around the Super Bowl due to supplies, but everyone had that problem.” He added that majaps “have been fine with strong sales. Our growth is from 3 percent to 7 percent across the board.”