Whether it is eroding profit margins on flat-panel TVs or a soft first quarter in major appliances, the NATM Buying Corp. is holding its own, according to president/executive director Bill Trawick.
NATM, which has a dozen regional electronics/appliance retailers as members and has annual sales of $4 billion, traditionally held its annual meeting in the spring with its key suppliers. Starting this year, NATM is holding its meeting in September, so TWICE visited with Trawick and operations director Michael Maund to get an update on the group and current market conditions. (For a full report on buying groups see p. 14.)
NATM's core CE vendors remain the same, Trawick reported, with Samsung, Toshiba and Sharp doing most of the business and "working relationships" with manufacturers like LG, Mitsubishi and Hitachi. In major appliances he remarked, "We do business with just about everyone — Whirlpool, Maytag, GE and Electrolux. In some way all of our members do some business with LG, and we had a good year with them in 2006."
Trawick said that while NATM's total TV sales were up during 2006 and in the first quarter, lower prices have been, "a struggle for us too."
He noted, "The real battle has been on the margin side" in TV because "the price moves impact margin. For these manufacturers to continue to lower prices it gets to the point they can't maintain the same kind of margin. Now [vendors] may give you the same percentage, but if you were making 35 points on a $3,000 TV vs. 35 points on a $2,000, that's a big difference."
The real change in TV has been in formats and it has been tough to compare last year to this year due to that change. "It is a struggle to get good numbers, but I can say overall business has been great ... double-digit growth in units and dollars."
But Trawick added, "Projection TV was down greatly, but LCD and plasma sets are flying, both up over 100 percent. But the decline in DLP and in the tube business it is tough to say what type of growth we really had."
Another problem that eroding prices cause is that "We have to sell an awful lot more TVs to get the same dollars [as the previous year]. My concern on the margin side is that [the industry has] given away a year's worth of growth."
On the positive side there will be "strong growth in units for the second half" and NATM members are "stepping up sales that used to be a 30- or 32-inch to a 42 inch and getting higher ticket prices. A lot more people are getting into the marketplace more quickly."
For the balance of this year Trawick said the group and its members are "checking out spot shortages in larger LCD product" so this won't impact plans for the second half.
NATM has been making up margin by selling more wall-mounts and furniture with HDTVs and "more of our members offer installation and service," Trawick noted.
Concerning major appliances, he noted that "it has been a tough year," with NATM down 5 percent and the industry down 10 percent in units. "Housing has had an impact, but it differs from region to region."
In previous years "consumers were buying new [major appliance] technology just to upgrade a kitchen before the old unit dies. Now consumers still love new technology, but are waiting longer to buy it."
Trawick is philosophical about the appliance market for 2007 in saying, "We've had a good 10-year run in appliances and you had to expect an adjustment. This is not a disaster and there may be some second-half improvements." Still, he noted that major appliances should be down more than expected for the industry and that "we could see some negative numbers for the entire year" depending upon the product category.
NATM is competing successfully during a sluggish year in electronics/appliance retailing, where such national chains as Circuit City, CompUSA, RadioShack, Sears/Kmart and Tweeter have had their difficulties.
When asked his view of the current retail landscape, Trawick noted, "In the individual markets our members serve they are the dominant independent retailer in those markets. Over the past nine years we have had a great run and gained share in just about all those markets, competing effectively vs. national accounts. If anything were to happen with some national accounts there would be opportunities [for our members] and would provide additional growth."
But Trawick added, "This is a big industry. I find it hard to believe that some of these chains wouldn't be able to go through tough times and just disappear."
And as for the oft-asked question of adding members, Trawick said, "We have nothing in the pipeline. In the past year or two [retailers] have shown interest in us, but we don't need to add a member unless it is good for both of us. We can attain growth through [members'] store openings each year."