Lowe's to the left of them, Home Depot to the right of them, and Best Buy breathing down their necks with smaller market stores. What's an independent dealer to do?
According to Bob Lawrence, executive director of the Associated Volume Buyers/Brand Source buying consortium, the only way for members to match the clout of national personas is to create one of their own. Thus was Brand Source born.
In the four years since it was conceived, Brand Source has become the fourth best-known name in appliance retailing and the fifth in consumer electronics, Lawrence reported, thanks to a proliferation of network commercials, TV game show sponsorships and tabloid/insert programs.
The next leg of the branding campaign, exterior signage, will require even greater cooperation and understanding from dealers whose store names would share billing with the Brand Source moniker. But the alternative, said Lawrence, is to roll over before the big box retailers.
Lawrence outlined his strategy and assessed the competitive playing field during a recent interview with TWICE. Excerpts follow.
Sales were off this summer for the big chains. How is business holding up for your guys?
Business has been good. We're seeing some spiking up and down, but overall sales are still up.
What's been selling?
In major appliances, refrigeration and laundry have been good, and room air helped our dealers in the Northeast, North Central and Pacific Northwest regions. In electronics, projection TV and DVD has been good. We're also doing a lot of promoting, including no-interest promotions.
What are your projections for the third and fourth quarters?
I expect that we're going to have more of the same for the third quarter, but that the fourth quarter will be better. We have no indication at this point that it won't be better than last year. Yes, the economy is rough, but consumers still have to replace a broken washer, and they're going to go to a place they trust.
What's the biggest challenge facing your members?
Footprints in the store. How do we get customers to walk in? And the answer for us is Brand Source.
How willing have your dealers been to add a second, national identity to their locally recognized name?
Ninety-two percent have signed up as Brand Source members, but only 50 percent have exterior Brand Source signage. So that's the challenge for us. We're trying to encourage them to use the Brand Source identity through a co-op program that contributes 50 percent toward the cost of a new sign, up to $2,500.
What's the group's breakout by product category?
We're 50 percent white goods, 25 percent brown goods and 25 percent furniture.
You've developed a turnkey CE program to make it easy for members to enter or improve their electronics business. Why is it necessary for white goods or furniture dealers to also carry CE?
It's necessary to this extent: We don't want to send customers somewhere else. It also gives our dealers another opportunity to sell an appliance product.
Are you still interested in e-commerce?
It's a huge growth area. We're selling $3 million a year in appliances online, second only to Sears.com, which does $5 million annually.
Several pure-plays have come and gone trying to sell appliances online.
The answer is in the click-and-mortar model. After the order comes in over our Web site, we flip the sale to our closest dealer for delivery. It's a no-overhead fulfillment model, and the dealer gets the sale.
What are you doing with True Value?
In addition to developing turnkey solutions for outdoor grills — what we're calling The Grill Zone — we're capitalizing on their regional distribution centers and trucks: 4,000 tractors and 14,000 trailers. Logistics is a big problem for our channel. With 1,800 dealers, distribution is the biggest expense for manufacturers that do business with our group.
How does the retail landscape look? More consolidation, more market share shifts?
On the appliance side, a couple of big players are losing share, partly to the independents, and they're not going to put up with it very long. We'll see what happens when Sears gets aggressive.
Otherwise, I think we basically have what we're going to have — those retailers that are here today are the survivors. For independents, the issue isn't so much going out of business as it is retirement. Where there's no succession, we're going to start assuming some Brand Source stores until we can find someone to take over the businesses.