Nationwide Group Expects A Strong 2002 - Twice

Nationwide Group Expects A Strong 2002

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Seeing a real opportunity for growth in consumer electronics, an expected $500 million more in annual sales from the addition of Retail Dealers of America (RDA) and the imminent debut of a new consumer Web site (see p. 14), the Nationwide TV & Appliance buying group was rather upbeat at its PrimeTime meeting.

And sales were strong in both major appliances and consumer electronics through the fall and into the New Year for Nationwide's members, so director Ed Kelly couldn't help but smile at his group's good fortune during the meeting at Disney's Coronado Springs Resort, here.

With the addition of RDA, which also brings about 310 dealers and about 400 more locations, Nationwide now has more than 5,600 storefronts, 2,200 members and "probably more than $8 billion in sales," Kelly said.

RDA, which joined Nationwide days before the meeting (TWICE, Feb. 11, p. 1), will now operate as the BrandDirect Southwest division. When asked how the new division was going to be brought into the Nationwide umbrella, Kelly said philosophically, "You can't change everyone, but you can show new concepts and benefits to new members. You can't be a dictator."

He clearly doesn't have to be, as Kelly happily reported, "Sales were still good in January, but February was softer. Our only problem is that in consumer electronics we can't get enough inventory." In fact sales have been so strong in recent months, "More and more of our members say they are planning to open new stores. Overall we see a stronger business."

New member and industry veteran Charles Palko, president of Appliance Depot Electronics, Sarasota, Fla., agreed with the positive view. "Independent dealers are getting stronger. People in business now weathered the storm. The expansion of nationals made independents stronger, not weaker. [Independents] have improved their operations to compete."

Elly Valas, executive director of North American Retail Dealers Association (NARDA), who also attended the show, noted, "So far it looks like we will have a strong first half. Consumers now must upgrade their [CE and appliance] purchases, and want to. Housing sales are still good. Interest rates are in line. So it looks like we will have a strong first half. The only unknown is unemployment and, God forbid, if there is another terrorist attack."

Clearly Kelly and Nationwide see consumer electronics as a growth opportunity for the first time in a long while. "In consumer electronics digital products are clearly driving the business. We don't know how big the business will be for us this year, but we have to prepare for it," Kelly said.

He is so bullish on the CE business that he noted, "We expect a stronger year in 2002 and even better year in 2003. Dollars and units will be up in both years. Consumers are going for higher technology. As more digital products are sold, prices will go down slightly, but still be profitable."

This is a change for Nationwide, whose mix is major appliance heavy. For instance, in the past Kelly said that appliance sales were from 74 percent to 77 percent of the mix, with CE ranging 18 percent to 20 percent and furniture making up the rest. Currently major appliances are now 66 percent to 69 percent of the mix, CE about 21 percent or 22 percent, and the rest is furniture.

Kelly hastened to point out, "While our appliance mix is smaller than it was, we've gained market share, so we have more dollars there than before."

He added, "Our guys who sell high-end appliances want to sell high-end, digital TVs. Many are planning to change their stores to do it. One of our dealers says 80 percent of his big-screen sales are now digital TVs."

"The scary thing for us is, are our members prepared to sell these products?" Kelly volunteered. As part of the effort to bring them up to speed the group's existing Nationwide Knowledge Surfing Learning System is being stressed, Kelly said. Over the last two years 6,200 salespeople at Nationwide member retailers have been trained in 30-hour programs. The backers of the training program include the following: DirecTV, Frigidaire, GE Appliances, Hitachi, JVC, Maytag, Pioneer, Thomson, Toshiba, Whirlpool, Fisher & Paykel, KitchenAid, NSI Protection Plus, Panasonic, Lifestyle Appliances, Philips, Samsung and W.C. Wood.

In appliances, Kelly said that a top manufacturer made a recent presentation to the group illustrating Nationwide's strength in the marketplace. "While the study showed how well Home Depot and Lowe's are doing, as a group Nationwide is right up there with Sears. Like Sears, we have selling floors and vendors would rather sell to those stores that have selling floors."

Still, Nationwide and other buying groups are warily watching Wal-Mart, which is testing major appliances in certain locations. While Kelly said, "It's too early to tell how they are doing," he admitted, "Wal-Mart could take a share of the market."

But he has heard that to curb the price wars that have gone on in major appliances during the last couple of years, Kelly said, "Some manufacturers are planning to differentiate their lines for specific types of retailers."

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