New York — At the very least, 2004 was better for CE dealers than 2003.
Most retailers managed to rebound from last year’s losses and, after weathering war, hurricanes, the election and a historically bad AC season, posted new sales highs and opened new stores.
Some, like Best Buy with its Customer Centricity program, Tweeter with its new consultative selling business plan, and RadioShack with its new B to B services, tried to keep the momentum going by pushing forward new agendas and unveiling new retail formats. Sears and Kmart, on the other hand, hope to find strength in unity, having announced a merger that they say will revitalize both companies. Still others, like Office Depot, resorted to layoffs as new efficiencies were put in place to boost the bottom line.
Looking ahead, the prognosis appears positive for 2005. The current holiday season got off to a solid start, way better than last year’s, as consumers continue to show an insatiable thirst for flat panel displays and digital cameras. With any luck, the trend will continue through the season and pave the way for a successful 2005.
CES Attendance Sets Record
The International Consumer Electronics Show (CES), held in Las Vegas from Jan. 8-11, hosts 129,328 attendees, surpassing the previous year by more than 11,000 attendees. The 1.38 million net square feet of exhibit space housed 2,491 companies, compared to last year’s 2,230 companies in 1.25 million net square feet of exhibit space. Technologies such as thin displays, imaging, mobile electronics, wireless, home networking and gaming, among others, were the main draw. Also featured were keynote speeches and panel participation from FCC commissioner Michael Powel, Microsoft’s Bill Gates, and Rob Glaser of RealNetworks.
Weller Leaves Good Guys
Ken Weller steps down as chairman/CEO of Good Guys at the eve of CES, as part of a reorganization following the company’s purchase in December 2003 by CompUSA. Tom Herman, president/chief operating officer, and David Carter, chief financial officer, also step down. The West Coast specialty CE chain’s new management team is comprised of executive VP Cathy Stauffer, who is promoted to president of Good Guys Retail, and Rick Fountain, a CompUSA veteran, who is named chief operating officer.
RadioShack Refines Mix, Ends Thomson Deal
RadioShack announces it will deploy “disproportionate amounts of resources” to six core product categories this year, as it continues to refine and rethink its merchandise mix. The core categories are mobile phones, digital imaging, power products, broadband/connectivity, gifts/toys and health-related products. As part of the process, RadioShack does not renew its 5-year-old A/V alliance with Thomson, although it continues to carry RCA-branded home entertainment products.
Amazon.com’s CE Sales Grow 50%
Jeff Bezos, Amazon.com’s founder/CEO, reveals that the company grew its CE business by 50 percent in unit sales in 2003, thanks to a larger assortment, a robust holiday selling season and a free shipping offer. The company shipped 2.1 million units in total during the holiday season, pushing the e-tailer’s electronics and general merchandise unit over the $1 billion sales mark last year for the first time.
Best Buy Debuts Connectivity Demo Areas
Best Buy has retrofit seven stores in two markets to date, as the company begins to shift emphasis from selling individual SKUs to building personal networks with products and services that will allow consumers to manage content at home and on the road. The new “experience areas” are comprised of four wirelessly connected, interactive vignettes, including a “media room” and a “family room.” Shoppers can download and play music, view transmitted images on a TV screen, and use other various digital devices.
Circuit City Shutters 19 Stores
Circuit City shuts down 19 under-performing stores in 12 states because the affected trade areas “can no longer support” the stores, which have “no reasonable expectation of positive cash flow in the near future,” says Alan McCollough, chairman/CEO. The 19 stores’ average annual revenue was $7.9 million each, about half the corporate average of $15.7 million per store. Circuit City also plans to relocate seven stores this month, as part of its plan to move 18 units in fiscal 2004.
RadioShack Inks Alliance With EchoStar And Sirius
RadioShack is turned into a one-stop-shop for satellite entertainment with the announced alliance between the national chain and satellite TV provider EchoStar and satellite radio provider Sirius. The three-way alliance makes EchoStar and Sirius the exclusive satellite entertainment services sold through RadioShack, which will have access to all of the after-market brands that currently carry Sirius services. As part of the deal, Sirius music programming would also become available to the majority of EchoStar’s customers.
Nationwide Holds Its Largest Convention Ever
Described as a tribute to late co-founder Lee Guttman, the Nationwide Marketing Group roars into the Superdome in New Orleans to mount the largest convention in the buying organization’s history. Three thousand attendees and 140 appliance, electronics and furniture vendors fill the 175,000 square feet of exhibit space. “This is the most exciting time I’ve seen in 40 years,” Ed Kelly, president/director says. “We’ve got so many new products that are forcing price points higher, and so many ways to sell them, that you don’t need to open more stores to grow.”
BrandsMart Midwest To Close
BrandsMart Midwest, the A/V specialty chain which operates six stores in Kansas and Missouri, informs vendors of its decision to shutter its doors and begins liquidation sales. The privately held CE chain had initially considered a reorganization plan that included closing its two oldest locations, but market conditions, presumably exacerbated by the last year’s openings of a 712,000-square-foot Nebraska Furniture Mart and three of four planned Ultimate Electronics stores within the Kansas City area, compelled the company to opt for closure.
HTSA To Add Members
The Home Theater Specialists of American (HTSA) announces during its semi-annual meeting that it plans to expand its membership base, step up its consumer marketing activities, and trim the number of vendor partners to leverage its influence. The buying group’s plans include the possibility of radio or television advertisements, as well as an increase in print ads. It also intends to expand its dealer network to all 50 states, while shrinking its vendor base from 45, enabling HTSA “to become more important to vendors,” according to executive director Richard Glikes.
MARTA Celebrates 40 Years, Adds 12 Members
MARTA celebrates its 40th anniversary while adding 12 new members, the most it has ever signed on at one time. During its annual winter meeting and convention, the importance of independent retailing is hailed, reflecting the newest members who are either converts from other buying groups, or are relatively new companies who have never belonged to a buying group before. During the meeting, MARTA reported sales of $2.1 billion and presented vendor and member awards.
HES Adds 8 Brands
Holding its first buying fair, Home Entertainment Source (HES), the A/V arm of the BrandSource buying group, adds eight premium brands to its national warehouse distribution program, bringing the total of new brands added in the past six months to 40. The HES Summit and 30-vendor Buy Fair runs concurrently with AVB/Brand Source’s 125-exhibitor general buying convention. The new HES line additions include Bose, Hitachi Director’s Series, JVC, Optoma, Pioneer and Pioneer Elite, Sharp’s Sharpvision and Yamaha Concert Series.
Good Guys Opens Convergence Prototype
Good Guys opens its debut “convergence” store, reflecting its post-merger plan to play off CompUSA’s PC strengths by re-assorting its stores with computers and connectivity-type products. The store opened with gala promotions, and was retrofitted to accommodate more than 1,000 computer and computer-related products including monitors, printers, software, PDAs, digital cameras and accessories, along with its core A/V assortment.
Gateway Shutters Its Stores
Ending its seven-year run as a retail chain owner, Gateway announces it will shutter all 188 of its stores and lay off 2,500 workers. The move comes shortly after Gateway has completed two projects: a costly refurbishing of the chain’s locations to better sell the company’s new line of CE products, and the finalization of its $290 million acquisition of entry-level PC maker eMachines. Gateway offers no specific reason for the move, but company founder and chairman Ted Waitt and CEO &N>Wayne Inouye, former CEO of eMachines, had said during the merger process that Gateway’s plan was to use eMachines’ established retail relationships to place Gateway CE products in third-party retailers.
NATM Rebounds With Help
The NATM Buying Corp. has rebounded to the top of its game, thanks to the addition of three new members and aggressive expansion and store redesign plans from 11 of its 12 dealers. The white- and brown goods buying group announces that it hit the $3 billion mark in cumulative annual sales last year, which is up from its $2 billion tally in 2002. The new member trifecta included Boscov’s, Electronic Express and Grant’s Appliance & Electronics.
Sony May Expand ‘Style’ Stores
Sony announces plans to expand its smaller upscale Sony Style store chain into the top 10 U.S. markets. According to a company spokesman, the new locations will be more sales-oriented, and will feature Sony products in “lifestyle vignettes.” The 4,000-square-foot stores will be located in upscale fashion malls where they are expected to attract a high percentage of female shoppers. Customers will be helped by a concierge service that will assign “counselors and coaches” to demonstrate how various products interact.
PARA Celebrates 25th, Joins CEA
The Professional Audio Video Retailers Association (PARA) celebrates its 25th anniversary by becoming a fully sanctioned division of the Consumer Electronics Association (CEA). PARA will retain an independent board elected by PARA retail members and will also acquire a seat on the CEA board. John Flanner, PARA’s president, says the change will produce “a greater voice for the specialty community in CEA” and enable members to “work more closely on issues with manufacturers.”
Sears Exits Seven CE Categories
As part of a decision to overhaul its CE assortment and redesign its electronics departments, Sears reveals it will exit seven product categories: PCs, peripherals, component and mobile audio, film cameras, cell phones and PDAs. The products are to be replaced with “more relevant and productive” categories, according to a Sears spokesman. The new products will include deeper assortments of digital cameras, DTVs, gaming hardware and software, DVD movies, HTiBs and other digital products. A redesigned department with new layouts and fixtures will house the new products.
Tweeter Acquires NOW!, Outlines New Strategy
Tweeter announces that it is buying NOW! AudioVideo, an A/V chain and fellow member of the Progressive Retailers Organization (PRO Group). While providing an exit strategy for NOW!, the buyout will increase Tweeter’s retail and in-home installer base in North Carolina and Tennessee with NOW!’s six stores. Tweeter also unveils a new business plan that emphasizes sales of bundled home theater products and services, targets its most profitable customer segments, and calls for a new brand campaign that conveys its home theater expertise. The company also plans to double the size of its in-house installer team to over 800 technicians within the next few years.
Wal-Mart Gets Sirius
Via a Jensen plug-and-play radio, Sirius Satellite Radio service becomes available in the majority of Wal-Mart stores. Previously available in a few hundred Wal-Mart locations, the rollout of the majority of stores is expected to take a few months because Sirius is “putting live feed kits in every location,” says Joe Clayton, Sirius’ president/CEO.
Toshiba and Drexel Team Together
Toshiba and Drexel Heritage team up to create one-stop home theater shops in the furniture maker’s 35 stores. The goal is to offer a positive experience for women, who are thought to be involved in 89 percent of all CE purchase decisions. A Drexel spokesman says the two are working together to sell products in a place where “women feel at home – in a Drexel store.” A Toshiba spokesman added that the companies are planning to expand this to independent furniture retailers who carry Drexel Heritage products.
Best Buy Unveils ‘Customer Centricity’
Best Buy is taking the wraps off its Customer Centricity program, which is expected to reinvent the chain by focusing on the most profitable customer groups who shop at Best Buy, and training the employees to supply better service. Five initial customer segments are identified by Best Buy (affluent professional, young male, family man, suburban mom and small business customer). Each store in the plan will be adapted to serve at least one dominant customer segment shopping at the store, with employees trained to focus on specific customer groups rather than product categories.
Sears Selects CE VP
Former Wiz chief merchant Tasso Koken is selected as VP/general merchandise manager of home electronics at Sears. His areas of responsibility include business strategies, merchandising activities, new products and business growth opportunities, and the development of marketing and promotional strategies. Koken fills a hole in Sears’ CE lineup that has been vacant since former electronics VP Ray Brown left in 2003.
VOOM Signs BrandsMart
BrandsMart USA, the five-unit South Florida brown- and white-goods emporium, becomes the second retailer after Sears to carry VOOM, the HDTV-centric home satellite service. Under the pact, VOOM will work with BrandsMart to train the dealer’s sales and installation staffs, and to set up displays. The two also announce plans to collaborate on a co-op marketing campaign to promote the direct broadcast satellite system through TV and newspaper ads.
Best Buy Boosts Assortment
Best Buy reveals it will increase its plasma and flat-panel LCD display offering by 50 percent, double the number of notebook computers, and boost its mobile video selection over the next six months. To make room for these increases, analog TV, conventional audio and PCs will see their floor space and inventory levels reduced.
Futurehome Joins HTSA
Futurehome Systems & Design, a 13-year-old specialty store in Fresno, Calif., becomes the 50th dealer member in the Home Theater Specialists of America. Futurehome was founded by Jim Richards, a 20-year veteran of GE’s major appliance and CE businesses and a former retail chain merchandising VP.
Office Depot Unveils New Retail Format
Office Depot unveils a new retail format called Millennium2 (M2). The new format is designed to be less expensive to open, more efficient to operate and easier to shop. The prototype store is just one of the 80 to 100 stores that Office Depot plans to open this year. They are designed with the female demographic in mind, and an emphasis is placed on CE appeal.
Electronics Expo Adds Home Fashions
Electronics Expo adds home furnishings to its assortment. The New Jersey A/V specialty chain’s broadened product line is the result of a partnership between the dealer and Levitz, the multi-state furniture retailer. Levitz handles inventory and delivery, and pays Electronics Expo a commission on sales of its goods.
Ultimate Electronics Returns to PRO Group
Ultimate Electronics rejoins the Progressive Retailers Organization (PRO Group), the high-end dealer consortium it helped found 17 years ago. Ultimate left the buying organization in 2003 because of territorial conflicts with other PRO Group members. Although Dave Workman, Ultimate’s president/CEO, acknowledges that trading area overlaps will remain, he said he now believes the benefits of exchanging ideas with his retail peers outweigh any regional issues.
Circuit City Offers Value-Added Warranty Kits
In an effort to boost attachment rates, Circuit City offers buyers of extended PC warranties a host of free software, technical support and discounted and trial offers that are bundled together in a binder. Valued at over $200, the “Comprehensive Resource Kits” are provided at no extra charge with the purchase of a warranty plan. CompUSA carries a similar program.
Following the news that Gateway will expand its computer retail presence with the addition of Best Buy, the company says it will also gut its budding CE business; the company cites product assortment simplification as the reason. Through stores, it will sell off its remaining CE assortment and then concentrate on its high volume computer product lines. Gateway also adds CompUSA to its retailer list and expanded its existing partnership with Office Depot.
6th Ave. To Open New Location
6th Ave. Electronics, a New York metro area A/V specialty chain and PRO Group member, will open a new concept flagship store in Paramus, N.J. The 25,000-foot prototype, replete with granite floors and central glass cases, will more resemble a jewelry showroom than a traditional CE store, and will use lifestyle vignettes and multiple theaters, as well as product comparison rooms to demonstrate audio, advanced video and gaming, and home networking and automation systems. It will also serve as the prototype for future stores and remodels.
Nationwide Draws Record Crowds
Attendance tops 3,000 dealers at the Nationwide Marketing Group’s summer PrimeTime! Buying convention, held at The Mirage hotel in Las Vegas. The CE, majaps and furniture buying and marketing organization fills the 100,000-square-foot exhibit space with new products and services from more than 120 exhibitors. At the show, dealers are encouraged to take advantage of “aggressive pricing programs,” and were given incentives in the guise of “cash back now” rebates.
CompUSA, Good Guys Consolidate
CompUSA announces it will consolidate the buying, marketing and advertising functions of its Good Guy subsidiary, and it will move those operations to CompUSA headquarters in Dallas. Under the plan, Good Guys’ buying team will also assume responsibility for certain elements of CompUSA’s expanded home entertainment offering. Tony Weiss, CompUSA’s chief operating officer, says that Good Guys will continue to maintain its own merchandising and marketing functions.
BrandSource Turns 35
Now the fourth most-recognized CE retailer in the United States, BrandSource celebrates its 35th anniversary during its National Convention and Buy Fair at the Paris Hotel in Las Vegas. Previously the Associated Volume Buyers (AVB) buying group, BrandSource now consists of 2,500 storefronts with 1,645 members and annual volume of around $4 billion.
Sears Tests LCoS Brand
Sears introduces its first Liquid Crystal on Silicon (LCoS) rear-projection TV, marketed under a new private label Veos brand. The 65-inch set, supplied by chip and microdisplay products manufacturer Brillian Corp., retails for $8,000, after an introductory $7,600 price. The set is sold briefly at Sears’ Web site and at a limited number of Sears stores, but the test is soon ended and the product dropped.
RadioShack says it will embark on a three-year strategic growth plan beginning in 2005 that’s designed to boost sales and earnings by revitalizing its stores, expanding its international presence, getting an early lead on new technologies, and selling products and services to its retailers and distributors. It plans to accelerate the rollout of its Concept 3 retail store format, which features wider aisles, more open space and a central checkout counter.
Huppin’s/OneCall Joins PRO
Huppin’s/OneCall, the click-and-mortar CE dealers, announces it will join the Progressive Retailers Organization (PRO Group) on Oct. 1. The addition of Huppin’s — which was founded in 1907 and came to national prominence in the 1990s with the launch of one of the CE industry’s first fully authorized e-tail sites — will raise the specialty A/V buying group’s member roster to 18 dealers.
Samsung Bows New Showcase, Sony Bows Store
Samsung opens a multimillion-dollar interactive showcase in New York for its products and technologies. The 10,000-square-foot demo-only space is located in the Time Warner Center building in midtown Manhattan. It is open to public but will also be used for trade presentations. No products are sold at the site but retail referrals are provided. Meanwhile, Sony opens its Qualia boutique store, also in Manhattan, which seeks to provide “unparalleled service for an emotional experience,” according to Mike Fasulo, president, Sony Electronics eSolutions and the executive responsible for the expansion of the Sony Style stores. The store provides appointment-only, one-on-one product demos of Sony’s higher-end models.
Florida Storms Sting Retailers
Florida’s major CE chains survive four hurricanes in 44 days with their infrastructures largely intact, but top and bottom lines are expected to be bruised from sales lost to the storms. Many of Tweeter Home Entertainment Group’s stores suffer roof and water damage, lose exterior store signage and sign pylons, and go without water and power. The company loses over 191 store days to weather-related closings. BrandSmart USA loses only tiles, awnings, and plastic coverings, missing the wrath of the storms. Circuit City reports many of its stores suffer a minor amount of damage; the worst-hit location (Vero Beach, Fla.) suffers some water damage and roof problems. Office Depot’s Delray Beach, Fla., headquarters close for at least four days, and the company projects the weather-related impact on earnings at negative $0.01 to $0.02 per share.
Apple, Dell Unveil Retail Formats
Apple Computer and Dell Computer separately reveal new formats for their respective stores and kiosks. Apple announces a new 750-square-foot shop concept whose lower overhead and smaller size will allow it entrée into venues with limited real estate. Six mini stores open in three states. Dell announces a new home vignette design for its Dell Direct retail kiosks that incorporates the company’s latest home entertainment products. The first of the retrofits are scheduled to open in four cities.
BrandsMart, Fry’s Enter Atlanta
After years of planning, BrandsMart USA, the Southeast Florida CE, majaps and housewares discounter, opens its first mega-store outside the Sunshine State, setting the stage for what could become a bruising battle for market share in Atlanta as H.H. Gregg backfills locations and Fry’s opens its first in the city. BrandsMart’s 130,000-square-foot emporium is the first of at least three planned units that will encircle the city, all to be supported by a 200,000-square-foot regional warehouse that is expandable to 1 million square feet.
Stern Get Serious About Satellite
Sirius Satellite Radio gets a major boost when controversial radio personality Howard Stern signs a five-year deal to bring his top-rated comedy show to the No. 2 satellite radio service beginning Jan. 1, 2006. Stern says the move is prompted by a climate of broadcast censorship that’s being fostered by the Bush Administration and the F.C.C., while analysts say the deal could create enough buzz and new subscribers to boost Sirius subs by one million and offset the expenses of the $500 million partnership.
Office Depot To Lay Off 500
Office Depot says that it will begin outsourcing its inbound call center and outbound account management functions, resulting in the layoffs of 900 employees and the shutting of three of its eight telemarketing facilities. The move, which is expected to be completed by September 2005, will cost the company about $12.9 million in severance and facility exit costs, but is expected to save some $15 million a year in overhead. The layoffs will affect call centers and offices in California, Connecticut, Georgia, Kansas, Ohio and Texas. A portion of the call center and account management activities will also be consolidated into two existing facilities in Boca Raton, Fla., and Norcross, Ga.
Sears And Kmart To Merge
Kmart announces it will buy Sears Roebuck & Co. in an $11 million deal. The combined entity, to be based at Sears’ headquarters in Hoffman Estates, Ill., would become the third-largest retailer with $55 billion in annual revenues and 3,400 stores. The merger would realize some $500 million in cost savings and “revenue synergies” from store conversions and shared brand portfolios, according to Sears’ chairman Alan Lacy. Lacy cites consumer electronics as one of several key product categories that stand to benefit from the proposed merger; however, the merchandising synergies will not extend to major appliances.
Tweeter Launches New Business Plan
Tweeter Home Entertainment Group rolls out the first elements of a radical new business plan. The strategy, which is two years in the making, employs a completely redesigned store model and a fresh marketing theme to emphasize the chain’s new focus on custom installation and complete home theater solution selling. The initiative is designed to further differentiate Tweeter in the marketplace by emphasizing bundled, media server-based home theater products and services over individual price-driven items, while targeting its most lucrative customer segments. The company announces it will consolidate its five different operating names under the Tweeter brand, and a new logo has been designed.
Karmazin Follows Stern To Sirius
Just weeks after Howard Stern announces his blockbuster defection from broadcast radio, his longtime boss, Viacom president/CEO Mel Karmazin, follows in his footsteps by joining Sirius Satellite Radio as CEO, succeeding Joe Clayton who will continue as chairman.
CE Gets Black Friday Boost
Retail got off to a less than stellar start this holiday season, as high fuel prices and low consumer confidence muted the impact of Black Friday sales on November revenue. Sales swelled on Black Friday before retreating the rest of the weekend, as customers lined up in predawn hours for $17.99 DVD players, $499 notebook computers, $199 desktop computers and $49.99 3-megapixel digital cameras. Thanks to a newfound focus of earnings over sales volume, Wal-Mart’s same-store sales came in below its already lowered expectations.