DALLAS — BrandSource, the $14 billion electronics, appliance and home-furnishings buying group, will continue to provide solutions to some of the most vexing industry challenges facing its 4,500 members.
Speaking before record crowds at the group’s 2010 Spring Summit here at the Hilton Anatole last month, BrandSource CEO Bob Lawrence cited instant rebates, inventory management and brand recognition among the biggest obstacles for independent dealers.
Instant rebates, which are hard to track, costly to administer and a drain on cash flow, are nevertheless here to stay, he said, as consumers, big-box chains and vendors embrace the concept. However, the promotions also represent “the only way to keep you price competitive without sacrificing margins,” Lawrence stressed, and pointed to the group’s new instantrebate portal, an online tool that went live in January, as a way to consolidate claims and reduce payment time to 15 days.
The portal will also begin processing instant rebates from major appliance manufacturers, who began offering the promotions in February. According to Brand- Source appliance VP John White, the rebates have given white goods a better than 20 percent lift and “help us be competitive with big-box stores,” which continue to pummel the category with aggressive 15 percent to 30 percent-off promotions.
On the inventory front, Lawrence reminded dealers that the group’s Expert Warehouse distribution program, which is rapidly approaching $1 billion in sales, allows members to lower their overhead and increase their turns by ordering truckloads of mixed merchandise as needed. BrandSource has also begun adding 900 major appliance SKUs from Whirlpool, Electrolux and GE to its Expert Warehouse distribution centers serving the Northeast quadrant of the country, and will expand the rollout to all states east of the Mississippi by year’s end.
Ultimately, said Lawrence, the program will also include furniture, making it the ultimate one-stop logistical solution.
The group will also continue to aggressively market the BrandSource brand name and will press the 50 percent of dealers that haven’t yet adopted the tagline in their signage and advertising to do so.
“It’s the only way I know to gain top-of mind awareness,” Lawrence said. “You can’t name a hotel, a real estate office, a gas station, a fast-food restaurant, a weight-loss center or a health club without a national tie-in. Why hasn’t our industry done it?”
BrandSource remains the fourth mostrecognized retail name in appliances and ranks fifth in consumer electronics, he noted, and plans to improve that standing include extensive advertising on the Scripps’ home-oriented TV networks and a return to dealers of $1 toward local advertising for every $2 they pay in branding fees. The placement of Brand- Source logos in each of the group’s 8,000 storefronts and ads in all members’ markets would help compensate for the multibillion- dollar advertising budgets of national big-box chains, Lawrence said.
The branding effort is also expanding online under former communications director Bob Donaldson, who has been named general manager of digital marketing. BrandSource will soon add a Twitter account to its Facebook presence, he said, and dealers will be provided with how-to guides for social-media and email marketing. BrandSource.com will also feature contests and giveaways, including a Ford Fiesta, refrigerators, flatpanel TVs and BrandSource gift cards, and site improvements now allow dealers to show below-MAP prices within the shopping cart.
In other BrandSource news, CE has surpassed majaps as the group’s No. 1 category in dollar volume due to growth and partnerships such as the alliance with PRO Group, Lawrence told TWICE. CE now represents about 40 percent of total sales, white goods 35 percent, and furniture 10 percent, followed by flooring and other categories.
CE dollar sales were up 4 percent last year, appliances rose 2 percent and furniture slipped 2 percent, he said, with each exceeding its respective industry and yielding market share gains for the group.
In electronics, Jim Ristow, executive VP of the Home Entertainment Source (HES) division, urged A/V dealers to evolve into system integrators as “the TV wall is going away”. In the meantime, he expects that half of the LED TVs sold by independents this year will be 3D, and has secured nationally offered product bundles by Samsung, and Brand- Source-specific bundles from Toshiba that include a 46-inch or 55-inch LCD, Blu-ray Disc player and free BD movie.
On the appliance side, White said the good news is that average selling prices for the industry were up $673 in 2009, the product mix improved in the fourth quarter, and sales are expected to grow 4 percent to 5 percent this year as 70 percent of consumers look to remodel their homes.
The bad news is that manufacturers cut production last year in response to weak demand, and the recent spike in sales from Black Friday promotions, federal appliance rebates and the improving economy has strained supplies.
Also troubling are the aggressive price promotions by big-box chains that are eating away at majap margins in a traffic driving tactic more familiar to CE. White warned dealers to expect “Black Fridaytype promotions” around major holidays like Memorial Day, Independence Day, Labor Day, Christmas week and, more immediately, the week before Earth Day as 31 states begin offering the remaining $187 million in federal appliance rebates.
BrandSource is countering with stacked promotions including delivery rebates, financing offers and movie club offers that can be a “tie-breaker” for dealers, White said.
BrandSource will next convene in August at the Paris Las Vegas Hotel, and will hold next year’s Spring Summit one month earlier, in February, at the World Marriott Center in Orlando, Fla.