Louisville, Ky. — Mobile Entertainment (ME) Source, a division of the Brand Source buying group, announced its member fees and began signing up retailers at the annual Mobile Enhancement Retailers Association (MERA) KnowledgeFest show.
ME Source offered dealers at MERA, just prior to its own Brand Source meeting in Dallas this week, monthly fees starting as low as $50 in an effort to create a group that would do for car stereo retailers what ACE Hardware did for hardware stores that banded together years ago to fight the big-box stores.
ME Source is a joint effort with MERA — the 12-volt trade association that is encouraging its 350 members, still smarting from one of the toughest periods in auto sound retailing, to join the buying group.
Show-goers were told that ME Source benefits would include free shipping on warehouse orders of $1,000 or more for mixed brands, and an extended-warranty program with six field trainers to help specialists get comfortable selling profitable three-year warranties.
Retailers will receive faster shipping from ME Source’s three warehouses that deliver to 75 percent of the country in one-to three days.
MERA leaders at KnowledgeFest called the buying group the simplest way for retailers to shift gears as the 12-volt industry changes from hobby shops specializing in creating “boom” cars, full of bass, for teens, to a newer, less certain model of adding low-margin portables and complex adapters to an existing factory radio.
“Some years ago this industry was booming … and specialists were selling as many boxes as they could buy,” said Bob Graham, MERA president, adding, “When I look at the future of our industry, I believe we must create in the minds of the consumers, our own national identity with a common local appeal to all our stores, similar to ACE Hardware. It is our plan to accomplish this through the buying group. Today’s consumer has changed. He shops for the experience.” He encouraged retailers to take a tour of their local Apple store as an example.
Buying group benefits will include a flexible consumer financing program including “90 days same as cash.” Since 12-volt retailers will be joining the Brand Source umbrella, they will benefit from the more favorable finance terms enjoyed by appliance stores, who have a less “risky” clientele.
Jim Ristow, executive VP of Brand Source's Home Entertainment Source (HES) division, noted that auto sound has a 9.3 percent default rate on financing while appliance dealers have a 1 percent rate. “We do a half billion dollars in financing, so it’s all under one umbrella now,” he said, adding, “Big-box stores get the traffic in the stores through 12 month financing.”
While traffic may come from extended financing, profits for the big-box stores comes from extended warranties, he said. “This is what is going to keep you in business,” Ristow told retailers. “At every box store you have a $6/hour employee asking, ‘Would you like a three-year warranty on that ma’am?’ At McDonald’s, they ask, ‘Do you want to super size that?’ We have six trainers to teach you how to run this. It could mean an extra two to three percent gross profits.” The retailer cost for a three-year warranty on a $1,000 system would be $32, underwritten by AIG. Big-box stores might charge $79 to $99 for that, he said.
“How often do your customers come back and want you to work on a system for free? Now you can say if you have any problems and come back under our Gold Service program we’ll fix it at no charge,” Ristow explained.
Many retailers try to sell the warranties and fizzle out after a week so; Brand Source calls in its trainers to teach dealers to give the warranty a regular place in the the sale, he said.
At KnowledgeFest, new ME Source brands were announced: JBL, Harman, Infinity, CompuStar and Metra Electronics. They join previously announced partners Alpine, Eclipse, JL Audio, Mitek and HushMat. Special programs are also planned for portable navigation devices from brands such as Garmin, TomTom and Magellan.
Other ME Source benefits include store redesign on a four-year financed “lease.”
“Fixing up your store should be part of your advertising and promotion budget. [It creates] instant credibility in the eyes of the customer because it shows you pay attention to detail and it helps the floor salesmen close the sale,” he said.
The specialist could shut his door on a Thursday, empty out the store and paint it, let the redesign team work over the weekend, and reopen on Monday, Ristow said.
Membership fees for the buying group are $500 for the rest of the year (in two payments of $250) if retailers sign up now, otherwise they are $100/month during 2008 and $150/month in 2009.
At a seminar introducing ME Source, dealers in the audience were asked how many are considering joining and approximately three-quarters of the attendees raised their hands.