Dana Point, Calif. - Progressive Retailers Organization (PRO Group) executives further detailed the 2012 strategies outlined in the "State of the Industry" presentation on Wednesday during a briefing with TWICE.
Dave Workman, president/COO of PRO Group, and George Manlove, Vann's president/CEO and chairman of PRO, were joined by PRO board member and president of ListenUp Walt Stinson in discussing its ProSource partnership, eBay plans, channel management and the current CE market for the group in the coming year.
How will the new ProSource organization help PRO and Home Entertainment Source members become more competitive?
Under ProSource we can come up with an aggregate buy. We are not a "one-size-fits-all" group, but we can optimize the size of our [retail] sales. [Editor's note: ProSource has $3.1 billion in annual sales.]
Second, the business is changing. Dealer classifications, how dealers want to be handled by vendors and vice-versa is changing. Inventory [as discussed in their formal presentations] is a liability now vs. an asset. And there are new business models. We are not a distributor but a fulfillment model. We approach our infrastructure as one to build business models.
We also have a critical mass in certain categories. In audio categories we may be No. 2 in the industry behind Best Buy. Other times we may be No. 1.
And with ProSource, our focus is still the mid- to upscale products. Not just the $3.1 billion. Vendors can make money on these types of products.
How are the new unilateral pricing policies working out so far? A work in progress?
I would say a work in progress. It is a challenge for everyone involved, including the consumer.
A policy can't just be channel management ... it could lead to overreaching. Sometimes unilateral pricing will [result in] selling the product to everyone for the same price ... and [the products] will then not be special to anyone.
We live in a multichannel world that is changing, and we must make [business] decisions around that multichannel world.
What is the current status of PRO's eBay initiative? How has it been accepted by vendors?
When you change the rules, sometimes you get resistance because it is change. eBay has been known as an auction site. They don't want to abandon what they have done, but in certain categories they want to be a full-fledged marketplace.
Amazon is very important [as a marketplace] but sometimes it isn't good to be in competition with your host. eBay provides Milo, Paypal and a suite of services that they can bring to the dealers. It just doesn't list products.
How are inventories? Do you expect some shortages?
I expect that output [in video] will go down. I see the market having bottomed out in supply. I don't see audio having the problems video had. I see a change with video vendors this year. It is about profitability now for them too. Hopefully it will be profitable for both them and us.
As a group, or individually, what CE categories are you adding this year?
In cameras we have some of the best retailers around. One area that we may pick up is the whole car audio electronics category, which is doing well.
The concept of digital audio and make it sound as good as possible ... and making it as easy as possible to work is growing. Walt has been on the forefront of educating the consumer in that area. And we were early in headphones, which continue to be popular.
Have Best Buy's problems given CE retailers like yours a black eye in the minds of your consumers?
There is no influence there. We hear more about Amazon's influence [on consumers] than anything else.
Part of Best Buy's challenge is all the [negative] headlines and the pundits. But the foundation elements of its problems are that big selection and lower price of big boxes have been taken away by the Internet. That will not change. But the people at Best Buy know that things run in cycles. They will reinvent themselves. They have also been caught up in the industry trends we're all facing.
Remember that this is a big-box [retail] trend and not just a problem for Best Buy or even only the CE industry.
What categories are doing well now?
The luxury segment is rebounding nicely. [The industry] was in overcapacity in 2008, and we have been adjusting ever since then. We downsized and right-sized [ListenUp]. Now we have to hire people and add inventory. We right-sized for 2010 but by 2011 we have begun to expand. My sense is that industry has bottomed out.
For manufactures, they are behind the curve. Maybe they are not as close to the street as we are. Maybe they are behind because the problem is global.
There is a bounce-back in custom and two-channel ... but not in video, not yet.
So what does all this mean for your type of retailers this year?
The Consumer Electronics Association estimates that the industry will grow this year, but the growth will focus on tablets and smartphones, and to a certain extent, readers. But legacy categories like audio and video will not.
Who is controlling tablets and smartphones?
To all this, you add the migration of retail sales to the web. That also points to the problems that the big-box retailers have will continue.
For retailers like ours you have to pick your targets well and become more focused, not less, leveraging all your experience and advantages.