Brand Source Sees Challenges Ahead

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– 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 challenging.

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 division.

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 program.

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.”


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