Buying Groups Change Strategies, Broaden Benefits - Twice

Buying Groups Change Strategies, Broaden Benefits

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NEW YORK —

It’s been a busy year for the nation’s buying groups.

The retail confederations, which provide merchandising, marketing and business support services for independent CE, majap and furniture dealers, have been scrambling to stay ahead of the structural changes sweeping the industry.

Some of those changes, such as consumers’ rapid shift to online and mobile shopping, present a clear challenge to the groups’ brick-and-mortar membership. Others, including recent setbacks for No. 1 CE and majap competitors Best Buy and Sears, may offer new market share opportunities for local dealers.

Either way, buying group executives and directors have been busy developing new product categories, e-commerce services and strategic alliances to better position their members for a brave new world of CE and majap retailing.

BrandSource

, one of the industry’s two largest buying organizations, recently announced a raft of initiatives to drive traffic, lower costs and meet the competition. Perhaps the most innovative is a five-dealer test of in-store appliance kiosks at Costco locations in the Northeast, which could generate substantial sales leads thanks to the warehouse club’s extreme traffic volume.

Continuing its majap focus, BrandSource will also make appliances available to members throughout the country this fall through its in-house logistics program, Expert Warehouse II, and will offer targeted credit card promotions under a new private-label program with Citi to help win customers and market share from Sears, CEO Bob Lawrence told dealers at its recent spring meeting.

The group will also hold its first bedding symposium this summer to help dealers enter and build the high-margin category, while online efforts include new features for BrandSource’s mobile app including thousands of additional SKUs, store-specific pricing, and location-based messages to nearby customers.

Meanwhile,

Home Entertainment Source (HES)

, BrandSource’s specialty A/V division, is guiding its rank-and-file into the burgeoning mainstream control and integration market, and is urging sales of wholehome systems over one-off items. Both offer rich margin and profit opportunities and shielding from “showrooming” by mobile shopping apps.

Other categories that provide profits and protection from online and big-box competition include commercial automation, LED lighting, and premium audio, executive VP Jim Ristow told HES members at the BrandSource spring meeting.

HES now represents BrandSource’s largest division, and a doubling of Expert Warehouse’s A/V inventory over the past year has helped CE supplant majaps as the parent group’s largest category with 40 percent of sales volume.

Elsewhere, HES has forged even closer ties with the

Progressive Retailers Organization (PRO Group)

, the 16-member A/V and custom installation group with which it formed the ProSource alliance last year and is holding its annual meeting in Dana Point, Calif., this week, May 8-10.

For its part, PRO Group is focusing on online competition by forging a separate partnership with one of the world’s largest e-commerce platforms. A joint effort with eBay, first announced in January, is providing PRO members with higher profiles, enhanced storefronts and an opportunity to tap into the site’s dizzying traffic, executive director/COO Dave Workman said. In return, PRO offers eBay a collection of reputable, authorized sellers that can lend it added gravitas with consumers and vendors as it revamps its CE department with MAP treatments and a new brand-focused design.

On the member front, the addition of J&R Music & Computer World earlier this year as its 16th dealer more than offset the loss of Sixth Avenue Electronics, which folded in October.

The industry’s other 600-pound buying group gorilla, the

Nationwide Market Group (NMG)

, reached sales volume parity with BrandSource last month with the acquisition of a $2 billion Canadian buying group from Sears Canada.

At its recent member meeting and convention, Nationwide CEO Robert Weisner and his top merchants exhorted CE dealers to tap into new opportunities in tablets, computers, connected technologies, gaming and digital imaging, made possible in part through an expanded program with D&H Distributing, and to focus on 50-inch and larger panels that can still provide margin within the TV category.

Even more esoteric but high-profit categories like lighting control are accessible to mainstream dealers, said Jeannette Howe, executive director of the group’s

Specialty Electronics Nationwide (SEN)

division, while more mundane but equally margin-rich categories like bedding and furniture can help tide CE and majap dealers through lean times.

To help members level the playing field with etailers, Nationwide has also begun providing eBay’s Milo Local Shopping at no charge. The store locator and shopping service allows consumers to search and shop for local products online, and provides additional attachment opportunities during the in-store pick-up.

In appliances, Nationwide is providing members with exclusive, higher margin models and has developed a program called “Draw, Escape, Sell” to help merchandise and assort them. Based on the “80-20 rule” that 20 percent of SKUs do 80 percent of the business, the tightly edited offering features three SKUs per category from each participating brand, and allows dealers to select from dozens of popular and profitable products, rather than pick through thousands.

Appliances also remain a bright spot for the $5 billion

NATM Buying Corp.

, comprised of a dozen of the nation’s largest regional CE and white-goods dealers. President/executive director Bill Trawick told TWICE that the category is performing quite well for member dealers, some of whom are picking up market share from Sears and Lowe’s.

To help supplant sinking TV margins, NATM dealers are taking a cue from Boscov’s, Conn’s, R.C. Willey and other home-furnishings members and are entering the mattress business, as ABC Warehouse did last year, Trawick said. Other members including P.C. Richard, BrandsMart USA and Nebraska Furniture Mart are finding higher profits in private-label step-up products, and NATM is looking into direct-importing goods that other members can merchandise under their respective house brands.

NATM also recently welcomed its 12th member, Southern California’s La Curacao to the fold, which filled a void in the group’s geography.

Appliances and bedding are also the focus for

MEGA Group USA

, the $3.5 billion home-furnishings group, which recently created a turn-key Whirlpool appliance store-within-a-store concept to help furniture dealers enter the majap business. Assortment, signage, terms, delivery and training are pre-arranged, and the 800- to 1,000-square-foot shops allow nonwhite- goods dealers to tap into that category’s high traffic, turns and sales per square foot, president Rick Bellows explained.

MEGA is also offering members a new social-networking service called Social Extend, which updates dealers’ Facebook pages with news, videos, photos and other vendor content, and continues to enhance its five-year-old website development program for dealers.

Online marketing is also at the forefront of

Home Theater Technologists of America (HTSA)

, the 63-member buying group for integrators, custom installers and A/V specialty dealers. In his first HTSA meeting as managing director, Bob Hana last month stressed the need for lead generation through strong marketing and social-networking efforts in order to drive traffic and sales. To that end, HTSA is revamping its internet and intranet sites and is developing a group database to increase lead-generation efficiency online and improve return-on-investment (ROI) for customer acquisition.

The group also plans special e-mail, direct mail and online ad campaigns; negotiated specials from vendors; increased search engine optimization (SEO) and paid search efforts; enhanced content for its

HDLiving.com

consumer site; and greater use of print and other traditional media.

In addition, HTSA will create an outreach program, developed by a member committee, that will tap into other trades such as architects, designers and construction companies to find additional sales leads, Hana said.

Beginning this year, integrators and custom retailers also have another option in

Azione Unlimited

, the nascent buying organization founded by industry veteran Richard Glikes. So far volume has surpassed the $100 million mark, he reported, and the group is on track to finish its first year with 150 vendor and dealer members.

Glikes noted that nearly three-quarters of Azione’s dealer members were previously unaffiliated, suggesting that “a huge hole in the market” exists for the organization’s model. He said the group is unique in its regional and national conferences and low dues of $750 per quarter, and by the inclusion of vendors as members and board directors.

“This formula is win-win for everyone involved,” Glikes said in recent statement. “Azione Unlimited is poised to deliver the best results to both dealers and vendors.”

— Additional reporting by Steve Smith.

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