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NATM: Smaller, But More Unified In Core Strategy

Looking past this month’s sudden departure of Abt Electronics — its fourth dealer resignation since September — the NATM Buying Corp. extolled the solidarity of its nine remaining members and their commitment to core vendor programs during the group’s annual spring conference here last week.

Keeping those commitments, together with ambitious expansion plans by members, helped the buying group generate over $2 billion in sales last year, compared to $3 billion when its dealer count was nearly double, said president and executive director Bill Trawick. It also enabled NATM to outpace the white goods industry’s average 6 percent growth in 2002 by posting a 10 percent sales gain as it grabbed greater majap market share, he said.

“We’re smaller but more unified than ever before because everyone is supporting vendor programs,” Trawick said, citing the group’s 100 percent support of core programs with Toshiba and Whirlpool, and the willingness of three members to add a new video vendor following a switch in core suppliers.

The changeover, to Hitachi from Mitsubishi, prompted Abt’s departure after the Chicago retailer ultimately decided that “they didn’t think they could support it,” Trawick said. (See story, p. 4.)

“Mitsubishi had been the most profitable brand for us,” Trawick explained, but “Best Buy has been aggressive and we’ve seen margin erosion. We will support Hitachi, which isn’t in Best Buy and is not in the nationals.”

By contrast, Trawick applauded Maytag, which he said is pulling its flagship brand out of national chains and will be offering its lesser-featured Performa platform in its place, while GE, Electrolux and Whirlpool will continue with their derivative strategy.

[A Maytag spokesman declined to comment on “the specifics of our channel distribution,” but denied that the Maytag brand would be leaving Lowe’s.]

Trawick also anticipates further distribution shifts stemming from Circuit City’s controversial switch to an all non-commissioned sales force (see story, p. 1). “JVC is pulling TVs from Circuit,” he said, and “We’ve voiced our concerns to Sony” regarding continued distribution there of its super-premium XBR line.

Trawick said NATM’s selling floor approach is validated by the numbers, which show increased dollar volume despite lower unit counts. The group also enjoyed one of its most profitable years ever, and managed to “make all our programs despite the tough times.”

Specifically, CE sales were up between 2 percent and 3 percent on the strength of projection TVs (ahead 20 percent), plasma and LCD displays (“through the roof”), DVDs and combo units (up double digits), and home theater (up “substantially”).

Growth in those categories helped offset “substantial” declines in audio, camcorders and smaller analog TVs. “We can’t turn around camcorders and those other categories” given increased competition from Wal-Mart and the e-commerce channel, he said.

Also buoying business is white goods, where members enjoyed double digit gains in January and February despite “severe declines” for the industry overall. “Our appliance strength has kept our companies healthy,” he said, citing a strategy that focuses on mid- to upper-tier lines — including popular $2,000 laundry pairs like Whirlpool’s Duet and Maytag’s Neptune — while still maintaining an opening price point presence.

Fortunately, price erosion in white goods has “leveled off,” he said, and the industry is anticipating improvements in the second half. The pricing situation is different for CE, however, where 4:3 digital sets are retailing below $1,000 and 16:9 will soon follow, he noted.

Nevertheless, Trawick foresees “tremendous growth” in LCD, plasma, projection TV, DVD/combos and digital cameras — a new category for some members — and has high hopes for recordable DVD.

“We’re just on the surface of a digital explosion,” Trawick said. “The next two to seven years will be a tremendous opportunity. We’re well positioned.”