Let's say you told someone unfamiliar with the industry that a guy you know was famous for forming and running an organization euphemistically known as "The Forty Thieves." Then you told this person that the guy was going to get a distinguished achievement award. Wouldn't the uninitiated think that an organization represented in "The Sopranos" was honoring this guy?
Those of us who know the electronics/appliance business realize that the person in question is Saul Gold -- a man who has spent almost 40 years in electronics and appliance retailing, with almost 30 of them toiling as executive director of the NATM Buying Corporation (aka The Forty Thieves), one of the largest buying groups in the industry.
During CES, Saul received the TWICE Distinguished Achievement award for a career in electronics/appliance retailing, and his considerable charity work with the Anti-Defamation League and the UJA/Federation.
In his remarks while presenting Gold his award, Bob Gerson, TWICE's founding editor and editor-at-large, said, "If they awarded medals to businessmen, Saul would have a chestful commemorating the battles he has fought with manufacturers on behalf of his retailing members. And [for battles] with his members on behalf of the group as a whole. Members come and go at NATM. Saul can be proud of his role in helping launch such alumni as Best Buy, Circuit City and REX into superstore status."
Gold, who retired as executive director of NATM last fall, has negotiated with them all, fought with them all, and seen it all during his retailing career. And he may have more work to do.
Gold may become the executive director of a new buying group possibly being formed, called ASTAR. Three of the four potential members are former NATM retailers that were recently dropped by the group. Time will tell where that leads.
When he first started with Allied Stores in 1961, then helped form NATM in 1970, the electronics/appliance landscape was a far different one than it is today. Manufacturers controlled the retail landscape, and the retailers ruling the roost were department stores and a new breed of mass merchandisers. Through the work of Gold at NATM, family-owned independents became regional powerhouses, and some -- such as Best Buy and Circuit City -- became national giants and changed the industry.
A couple of weeks ago I sat down with Saul to discuss his career, how the industry has changed during his time in it, and what the future will bring. Here is an edited transcript of our discussion:
TWICE: What were some of the most significant product introductions in electronics and appliances that helped shape the retail business during your career?
GOLD: The most significant was the VCR. It changed the whole [electronics/appliance] retail economy, for what it did for retailers. It had regional retailers thinking they could become very wealthy individuals [by going public].
Of course, color TV was the most important, but it didn't create a situation where you had independents going bonanza with it. That happened in the '70s, and department stores were where the action was. Color TV was the first killer of our industry. The second killer was the VCR.
TWICE: What do you mean by "killer of our industry"?
GOLD: These products created a bonanza of sales for retailers. It made some very, very wealthy men of some retailers, starting in the early '80s, when these emerging regional chains went public. The problem is that going public forces retailers to cut prices prematurely. DVD video has gone from $500 to $165 at retail! How can you take technology down in price like that?
You can't keep prices high in an industry that is controlled by Wall Street. That is where the problem inherently lies. For the regional guys, if they want to grow with Wall Street they have to expand beyond their capacity. And we now have the big boxes going absolutely crazy. For instance, two building chains going head to head, Lowe's and Home Depot. And they are getting involved in appliances. It is a way for them to increase comp sales. Wall Street judges these guys by comp sales.
TWICE: When NATM began in 1970, what was the retail marketplace like for electronics and appliances?
GOLD: There were no big-box stores. Department stores, mass merchants, all got the advertising dollars from manufacturers. When NATM was formed you had 18 or 19 members that didn't do a total of $125 million or $200 million as a group. These were the smaller stores of today, family-owned stores. Except those stores were owned and led by visionaries. They had the nerve or moxie to take on risks others wouldn't take. They weren't brighter than other people, but had moxie.
TWICE: Pricing was far more stable for both product categories in those days. Why?
GOLD: The appliance industry was the harder of the two to deal with because it was truly, truly run by the manufacturers. It was almost a price-fix situation. On the CE side you had a strong Zenith and strong RCA. Small guys, like NATM members were back then, had to go to Admirals of the world or other secondary and tertiary brands.
When foreign [electronics] manufacturers entered the U.S. market, what they were really doing were selling below cost or selling at price others couldn't match.
In electronics they were able to bring in color and sell it cheaper.
Zenith, its president John Nevin, spent all these resources and energy suing foreign TV suppliers and lost. RCA was able to maintain itself. Magnavox battled too. Those were the [companies] who said, "You want my product? This is what you'll pay, and this is what you'll sell it for." Independent retailers had to buy something they could add value to. And they weren't getting anything from these brands. So they turned to foreign suppliers.
TWICE: What is the current condition of the appliance business? How do manufacturers approach the marketplace?
Gold: What we have today is a lot of people in the appliance business that are not from the appliance business. We have Lloyd Ward, who joined the industry from Pepsico, bringing in those business philosophies. Up until recently you had nobody from the appliance business running GE. They brought back Larry Johnston, who is the last of the GE people who was trained to run the business.
I don't think the manufacturers' approach to the business is changing. I think it is the same. There are new people running the companies and look for big boxes to give them orders, and the orders are great. But when you compare them to NATM, the group is really the second largest dealer of appliances in the U.S., they rival Circuit City and Sears in certain markets.
TWICE: How about the consumer electronics business? How has it changed, and how does it compare with the appliance side?
Gold: Foreign companies run the brown-goods business, and it is a fast-and-furious industry. They have a different outlook as to how to run a business, and many did well at it until 1994 or 1995. Interchange of personnel from overseas to the U.S. did result in very few adjustments. Now executive changes are very difficult. Many don't know, or want to know, anything about U.S. retailing.
Sony has always acted like an American company. Our friends at Panasonic do it differently than anybody. They sell everyone, and their philosophy is, "Let the best dealer win." What they mean is, "Let the best dealer with the best volume win." They were not allowed to give as much margin as others do. However, Panasonic has become more aggressive lately in providing more margins.
TWICE: How did your job, and the role of the buying group, change over the years?
Gold: I don't think it ever changed. The role of the buying group became more sophisticated due to the players involved. The players saw that by acting together there was more to gain than by acting separately with suppliers. [Buying groups] changed when awareness changed. What one does together is a hell of a lot better than what one does independently.
What we learned at NATM during the last three years is, when a manufacturer is in trouble, you tell them, "The customer is always right." They should at least listen to us. Suppliers have to improve their quality, service and delivery. When retailers see that things are done properly, it helps things turn around on the sales floor. If there is a problem with a product, the retailer takes the blame from the consumer, not the manufacturer! Buying groups try to teach members and their suppliers.
TWICE: How has NATM differed from other buying groups?
Gold: All the NATM people over the years have been appliance retailers that also sell electronics. The exception was Circuit City, but at times that changed too. That was the philosophy, even today that is its strength. The NATM members know how to move big boxes.
What are the profit items today in consumer electronics? Big, big boxes. You make money with 32-inch, 36-inch and projection TVs. You have to able to service it, you have to deliver it on time. Instant gratification. That's what people want.
That's still the problem with Sears. They can't deliver the same day. Sometimes they can't deliver the next day. How do they get consumers to accept that philosophy? The tremendous success of its credit card, that's how.
The strength of a buying group is giving one face to a supplier and most, even today, can't do that. The problem is the mind-set of one guy, one retailer, who feels he can do better alone than in a group. So, we are back to the same two philosophies of what hurts our industry, whether you are a retailer or supplier: paranoia or greed.
Newmark & Lewis was very strong in New York in the late '80s. All the chain had to do was what it said it was going to do in 1985: to maintain the business. Newmark & Lewis chose to become self important and turned to Wall Street to expand. Family-owned, private retailers at some point need to get some money out of the corporation for record keeping and estate planning. You have to make the transfer orderly. But once you believe are bigger or better than your peers, you're faced with a problem.
TWICE: Was that one of the undercurrents behind the creation of Group Four, when Circuit City, Best Buy, Highland and REX Stores left NATM in 1985?
Gold: Group Four wanted to move into the areas of their NATM partners, and they feared a lawsuit at that time. For instance, Highland wanted to spread from Minneapolis northeast to Maine and go south to Texas. When they got to the Northeast they knew they'd have to go after [NATM member] Lechmere in New England. Highland, Best Buy and Circuit City took REX Stores with them.
Alan Wurtzel of Circuit City asked me if I would join them as executive director of their group. I said no, because I just signed a NATM contract and wouldn't go with them anyway. Sun TV's Macy Block accused me of knowing all about it. I thought it might happen but not on that day. This left NATM with nine members.
I took nine guys to Chicago right after the split and asked them what their concerns were. They said that one of our key executives left with Group Four, and I said, "What do you think I am, chopped liver? I've been to every one of those meetings. I know every one of those guys. I know what they want. I will be your intermediary." Since then some of the retailers that were part of NATM failed, some left to go their own way, but the organization is still strong.
TWICE: Who were some of the more memorable executives you have met in your career?
Gold: David Mondry of Highland was able to instantaneously understand a situation and be able to take advantage of that knowledge. If you compare Alan Wurtzel [of Circuit City] to someone similar, you have to say GE's Jack Welch. Alan's uniqueness is that he could take an organization's best practice and execute it far better, far more successfully than the person who had the original idea. Just like Jack Welch.
TWICE: What effects will e-commerce have on electronics/appliance retailing?
Gold: Brick & mortar is becoming click & mortar. Retailers will have to be able to understand instant gratification on the part of consumers. Some suppliers would rather shop click & mortar retailers because the e-tail-only sites can't deliver the volume they need. That's not their business! As for the manufacturer sites, they show what products are available.
Consumers can buy portable products and have it the next day. But how are e-tailers going to deliver a big-screen TV? If you can't set it up you lose right away. And you have to be able to deliver. Still, consumers will vary their shopping between a site and a store, depending upon price.
And as for sales tax for e-commerce transactions, that's a political situation that will be settled down the road.
TWICE: What about this new group you may head, ASTAR? What is the latest, and why are you involved?
Gold: Three members who left NATM saw no opportunities or benefits in the other buying groups available. They want to attract retailers with similar attributes. The mind-set is not volume.
There are few local retailers out there in the $20 million to $100 million area. We will see who will accept the package.
If retailers are willing to sit back, think and act as one, it can work. As long as they are strong independents in their own markets then they can do it.
The growth of the independent retailers must be the one thing a buying group has to believe in. I maintained that position for the 29 years with the public, suppliers, trade press and group members. If we can get members who believe in this philosophy we can start ASTAR. The winners in this business are those retailers that have strong relationships with suppliers and can deliver what they promise to manufacturers and consumers alike.
TWICE: What would you say to a person who is just starting out and wants to get involved in electronics/retailing today? Would you recommend the industry?
Gold: It is still a very strong business. But you must be willing to dedicate a great deal of time to the business to be a success. You won't be able to be there all the time for your kids. You're going to have a strong spouse. People ask me today, "Why get involved with ASTAR? Why not relax?" Well, I say, it's fun. This is still a fun business.