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Notes From BrandSource

BrandSource executives commented about industry issues and other future plans for the buying group at their annual convention here last week. Here are a few:

  • Private Label Plans: While emphasizing its high-end value strategy, BrandSource is not opposed to dealing in commodity products with private label efforts in major appliances to protect its flank. Executive director Bob Lawrence confirmed, “We still have to offer low-end product,” and said that the group is talking to Asian manufacturers to supply the group with such product built to its specifications, probably under the “Expert” brand with product probably arriving here no earlier than the first quarter of 2006. When asked if the Home Entertainment Source (HES) division is looking into its own private label brand, general manager Jim Ristow said, “We have no immediate plans, but it is something we are constantly reviewing.”
  • Whirlpool/Maytag Merger: Lawrence expects the merger to go through, thanks to the success the LG and Samsung brands have had in the United States recently. “Whirlpool’s lawyers will argue that they are in a very competitive market that they can’t dominate.” The real issue for the new company will be “the brand lineup, really, which ones will be positioned as high-end, which ones low-end? Will they cut some brands?”
  • Affect of the Ultimate/Tweeter affair on HES: Lawrence complimented Ultimate Electronics’ CEO Mark Wattles’ “very savvy coup in getting back [the chain’s] better stores in an auction.” About his unstated but seemingly obvious attempt to take over Tweeter, and its effect on Lawrence’s HES group, he commented, “That’s great for HES. The more uncertainty over there, the better it is for our dealers.” HES’ Ristow noted, “We are in a unique, positive position. If some kind of Ultimate/Tweeter chain is formed and if you compare us to Best Buy’s Magnolia Home Theater, we do things at the local level that a national really can’t do. Will they affect us? Yes. The landscape of how suppliers will react will change soon, but we are in the best position we’ve been in for 15 years.”
  • Effect of higher gasoline prices: Lawrence said that so far his retailers have not felt that consumers have curbed buying electronics or appliances due to higher gasoline pricing. The real effect has been “the cost of doing business. Deliveries are more expensive, service is more expensive. Eventually costs will be paid by the consumer.” Concerning higher costs for major appliances this year due to higher steel pricing, and whether or not it has hurt sales, Lawrence smiled and said, “There hasn’t been any effect as yet. Consumers haven’t noticed it.”