As the holiday season nears, the usual concerns about product supplies in certain categories, especially video, are taking residence in the minds of many industry insiders. TWICE reached out to a number of distribution execs recently to discuss these issues and more.
TWICE:What do you think will be your biggest challenge as the holiday season approaches? How will you address the problem?
Warren Chaiken, president and COO, Almo: With the continued price reductions in flat-panel televisions and the propensity toward gift giving with smaller screen sizes, the biggest challenge we'll be seeing this holiday season is stocking issues. Manufacturers are already warning of shortages with flat panels below 32 inches — availability of Blu-ray DVD players may also be an issue this year. To compensate, our product team is working in advance with our manufacturers to increase our stock levels well in advance of the buying season.
Bob Gartland, president, AVAD: I believe flat-panel product availability and continued price erosion will strike again this season. We are working diligently with our vendors to ensure we will have adequate supplies. If and when price erosion or predatory pricing in the market occurs, we plan to stay ahead of it and be very communicative with our customers.
Joel Blank, purchasing executive VP, BDI-Laguna: One of the biggest challenges for this holiday season is the new innovations in the CE products and declining pricing for those products. This combination is opening new consumer markets, and has placed distributors, like BDI-Laguna, in an essential role, bridging the dealer, installer, reseller and retail worlds. Our goal is to ensure that our customers can respond to the consumer demand for these and all other products that BDI-Laguna offers. The BDI-Laguna team understands that flexibility and value are essential to meeting the demands of this dynamic marketplace and, as a result, continues to add value to our premier distribution, fulfillment, marketing and logistics services. In addition, we have invested in state-of-the-art systems designed to allow BDI-Laguna's customers to scale their businesses seamlessly, giving them a real competitive advantage throughout the holiday season.
Henry Chiarelli, president, DBL Distributing: Warehouse space will be our greatest challenge this year. We are forecasting extreme growth this quarter. To ensure a seamless holiday season, DBL has focused on process improvements and adopting best practices in our warehouse operations. We have improved our pick, pack and ship capabilities which has resulted in significant additional shipping capacity. With the addition of our turbo line, DBL is equipped to ship over 20,000 packages per day. All orders placed by 5 p.m. MST are shipped the same day. DBL prides itself on fulfilling orders on time and having products arrive free from damage.
Rob Eby, purchasing director, D&H Distributing: Forecasting is becoming a more critical strategy in our business. It's not always an easy thing to achieve in a volatile market, but D&H has been very diligent in its forecasting efforts in order to stay on top of stock and accurately meet market demands. We plan to analyze order histories from past years, compare them with the current sales trends and the expressed needs of our partners, and use that as a guide to anticipate for this year. Preparation is key: We want to start the forecasting process early with our larger manufacturers in order to get the best results.
Mike Hench, president, The EDGE Distributors Group: We see continued confusion about high-definition video as a problem for our dealers. Inexpensive, low-end flat-panel sets will be plentiful and potentially take sales from our dealers. Our challenge is to educate the dealer to be able to deliver a convincing value proposition to the customer for better products. It's not just all about 1080p. Other features like discrete codes, high contrast, the ability to integrate with other components and a real warranty are also important. They can make the difference between an easy-to-use A/V system and one that the customer cannot understand.
The second challenge is dealing with the reality that our market is not growing at the same rate as over the last two years. There are fewer dealers out there and less new ones entering the business. We need to be more efficient in everything we do. We've always delivered excellent customer service, and now it is more important than ever.
Sam Taylor, president, Electrograph: Our greatest holiday challenge is always the same — stocking the right level of inventory in each of our distribution centers. So many factors affect holiday inventory so we try to stock extra volume of product that could be constrained in the channel. Each one of our distribution centers across the U.S. is operating in high gear, including our new factory authorized service center in the Los Angeles area, to ensure that we are able to meet the expectations of our resellers this holiday season.
Bill Stewart, president, Petra: We know we just can't wait to be reactive to challenges that arise in the fourth quarter so we really do a lot of pre-planning to avoid challenges that are within our control. Months ahead of time, our team sits down to evaluate exactly what we need to do to provide the high level of service our dealers and vendors expect from us.
We began forecasting our fourth-quarter product sales months ago so we won't be caught without inventory. We have worked diligently with our partners to ensure we will receive our order allocations because we know how important it is for our dealers to have all of the hot products consumers are looking for during fourth quarter.
As always, we will begin our holiday hours soon because we know that the fourth-quarter demands make it necessary for our dealers to reach us. Our sales, merchandising and distribution team are already staffed to handle the enormous volume of orders that get processed in our facility. Plus, we expanded our warehouse space by another 50,000 square feet to increase our ability to ship orders quickly and accurately.
TWICE:Are you expecting any supply chain disruptions in any categories? Why or why not?
Blank: We work very hard to accurately forecast demand with our customers. Of course, anything can happen to interrupt the flow of products, but we have improved our systems to ensure that if we have the products, their customers will have the products in time. This year, we expect very high demand for LCDs, GPS and digital cameras for the holiday season.
Chiarelli: The only potential disruption could be availability of some LCD products — certain brands of portable DVD, some sizes of picture frames and select sizes of LCD TV. Dealers may want to consider ordering slightly more than normal to avoid possible availability issues.
Eby: Supply on LCD televisions of various screen sizes will be tight due to the explosive growth we're seeing in the market. Issues with LCDs may therefore stimulate demand for devices with smaller screen sizes, such as phones, GPS systems and portable media players.
Hench: Manufacturers are concerned about [softer sales] and are adjusting their inventories accordingly. Accurate forecasting can mean the difference between having something to sell and being out of stock. We see shortages in key categories such as A/V receivers and select flat-panel displays.
Taylor: Due to supply issues, we are preparing for shortages in the 26-inch and 32-inch LCD categories. On the other hand, our large-format LCD and plasma display inventory is abundant and we are ready to meet demand for these products.
Stewart: We know that the screen shortages will cause some inventory problems for LCD TVs and digital picture frames — both of which will be big sellers for fourth quarter. We also tend to see the remote car starter business increase heavily during the fourth quarter.