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Brand Source Sees Challenges Ahead


– Despite outperforming the CE and majap
industries, Brand Source dealers slogged through
a July and August that CEO Bob Lawrence described
as “the toughest” 60 days he’d ever seen.

Lawrence said the group’s CE business is up
double-digits year-to-date in unit volume, and its
appliance sales are exceeding the industry in every
product category. But the near-term outlook, he told
attendees at the group’s national convention, held
here last month at the Paris and Bally’s hotels, remains

Keynote speaker Jim Campbell, president/CEO of
GE Appliances and Lighting, similarly described a long,
slow economic recovery in which consumers are reluctant
to trade up.

John White, Brand Source’s executive VP for appliances,
said rampant discounting by big-box chains
designed to counter soft demand and drive traffic and
market share has added to retailers’ woes by shaving
about 5 points off margins. “We’ve never had a period
of industry weakness coupled with such competitive
retail pricing,” he told TWICE.

The discounting will be even more aggressive on the
CE side due to a glut of inventory and resulting price
cuts by vendors, putting even greater pressure on margins,
observed Jim Ristow, executive VP of Home Entertainment
Source (HES), the group’s specialty electronics

But the excess inventory also presents an opportunity
for the group to participate in deeply discounted
large-quantity buys, thanks to its Expert Warehouse fulfillment

Nevertheless, both Ristow and White are girding
for an exceptionally promotional holiday season, even
by CE standards, and expect that Black Friday sales
events will begin ramping up as early as Halloween.
“It’s going to be a Black November,” White said.

On the product front, Ristow said members are doing
well with 3D TV, which has met with greater consumer
resistance at big-box stores. Indeed, group sellthrough
is almost on par with forecasts, he said, due
largely to the fact that Brand Source dealers tend to
demonstrate the technology two to three times more
often than do chains.

The loser in the TV panoply will likely be step-up
LCD, he projected, which will get shunted aside amid
promotional plasma and fully featured LED.

In appliances, Brand Source is changing direction
and urging members to load up on opening-price-point
and midtier models, given the consumer mood and
competitive retail scene. “In the past we encouraged
our guys to focus on the premium segment, but now
we’re telling them they need to be in the mid- to low
end,” Lawrence told TWICE.

Presently, business remains choppy, with “good days
and bad days,” the Brand Source CEO said, but he
encouraged his members to hang tough.

“We will get through this,” he assured attendees.
“Like past recessions this too shall pass. So hang in
there and be tough. We’re not going anywhere, and we
will continue to win.”