For most of the summer, the country’s unseasonably temperate climes left retailers laden with stockpiles of unsold room air conditioners.
But just when dealers were ready to write off this year’s AC business, the dog days of August arrived in a blast of heat and humidity that helped salvage the room air season.
“We finally got the heat and sold off 85 to 90 percent of our air conditioners,” said Ed Kelly, director of Nationwide TV & Appliance, the nation’s No. 1 buying group. “It was a big, big help, and took the pressure off. Our Northeastern people were really sitting on a lot of inventory.”
Recalled Bob Lawrence, executive director of the Brand Source/AVB buying group, “We had 50 percent sell-through in June and July. Then all of a sudden, all that hot weather hit from the Midwest to the East, and sell-through was up to 65 to 70 percent.
“It turned out to be a good year,” he continued, “but it was a scary one because it came real late. The heat also helped refrigeration.”
Members of the MARTA buying co-op were also deluged by late season demand. “By the time the August heat came, we sold everything we could get our hands on,” recounted Warren Mann, the group’s executive director. “We cleared out the barn and got rid of pretty much everything.
“Thankfully, a lot of guys aren’t carrying any inventory and are poised for opportunity buys,” Mann said. Noting that Target began selling ACs last February for customer pick-up in June, he added: “We probably have members out there that would be happy to take product right now if the terms were agreeable.”
But despite the last minute feeding frenzy, Mann said the sharp promotional activity that preceded it had robbed dealers of much of their profits. “When retailers didn’t sell out by June, they panicked and dropped their prices. Wal-Mart was selling 5,000-btu units for $114. We were matching their price and tried to step customers up to better-featured models. But it took a lot of profit potential out, and it ended up being kind of a bland year.”
Another problem, said Nationwide’s Kelly, was that lenders responded to the bloated AC inventories by cutting off lines of credit, which dealers counted on to finance new purchases. “They couldn’t bring new stuff in because lenders didn’t consider the air conditioners seasonal items,” he said. “They used to have separate lines of credit for seasonal things like air conditioners and lawn mowers. Now, it forced some of our bigger dealers to go to big banks. If the Lord didn’t send that heat wave, some good dealers would have had big problems.”
Brand Source’s Lawrence agreed. “The wholesale financing folks need to set up a separate allotment for the rack business versus the regular business,” he said.
Still, individual dealers were happy for the heat. “It started out real scary,” said Yogi Baer of Sellers TV & Appliance in Chambersburg, Pa. “I thought I’d be sitting with everything.
“Still,” he added, “I was hoping for one more week of heat to completely sell out.”