I'd like to remind dealers and others of a truism that has been around since the beginning of the appliance and consumer electronics industries:
You can't sell substantial quantities of any national brand item without first meeting the lowest price in the market for that product, plus the value of services provided to the consumer.
If we can agree on that, it's easy to see why so many independents, as well as the suppliers counting on them to move merchandise, are concerned by the entry of Wal-Mart, the world's largest retailer, into the appliance business. (Not to mention other big fellows, such as The Home Depot, which are taking a more aggressive position in the marketplace.)
That potential retail volume can more than compensate for operating on smaller gross margins by providing high net profits despite lower retail selling prices.
Does all this add up to the end of the less-capitalized owner/managed dealerships as a factor in the marketplace?
The answer, I believe, is a resounding no! Who but the family-run neighborhood store can know which of the hundreds of new products produced each year will capture the attention of local shoppers? Who will take the time to become expert in the operation of those products and pass that information along to the consumer? And who can better offer the personalized services that go far in making the shopping experience a pleasant one?
When it comes to lowering the cost of goods sold, and using inventory turns to maintain profitable competitive prices, independent retailers have several options. They can pool their purchases through cooperative buying groups to qualify for quantity discounts, or they can work with suppliers who maximize dealers' turns by taking the inventory-carrying burden off their shoulders.
There is absolutely no reason for the entrepreneur to roll over and die because the giants are invading their turf.
Furthermore, manufacturers have a responsibility to their shareholders to help find a way out of this mass channel mess. If the problem continues in its current direction, those merchants with a huge public following will be in a position to dictate the size of the profit the manufacturers will make and the distribution policies they will follow.
It strikes me that what's needed is an industry council consisting of representatives of manufacturers, wholesalers and retailers. This group would maintain a survey of the entire distribution process, as well as conduct a study of what each link in the chain needs for its survival and growth.
By recognizing that no one link is more important than the rest, and that it benefits each if the others survive, this council can help assure the growth of all -- even if it means changing present methods of doing business.
This evidence of true leadership must originate with the CEOs of all the companies in the picture, who by holding sales vice presidents and managers responsible for something more than this quarter's volume, can demonstrate the foresight that has made this industry as great as it is. n
Jules Steinberg, a former NARDA executive VP, is president of Jules Steinberg & Associates, 425 Sunset Road, Winnetka, IL 60093. Phone (847) 446-7312; e-mail JSteinb611@@aol.com.