Like the resilient New Yorkers many of them are, members of the NECO Alliance — the Northeast buying group, which held its annual convention and buying show at the Foxwoods resort here earlier this month — say they have weathered tough times but are coming out stronger.
Despite a soft first quarter, sales for the group are up year to date, and NECO members hope to close 2003 with a 10- to 12-percent gain. The group expects to hit $1.2 billion to $1.3 billion in retail sales this year, and although only five years old, NECO considers itself the No. 2 player in the Northeast TV and major appliance market, just behind Sears.
NECO, however, has felt its share of challenges, including the recent and sudden passing of Lee Guttman, president and co-founder of the Nationwide Marketing Group, of which NECO is a member. "It's certainly had an impact. Lee was a powerful figure in the industry, but plans are being worked through," to appoint a new executive, said Mel Hunger, NECO executive director.
Forays by The Home Depot, Lowe's and Wal-Mart into major appliances have been another hurdle, although some agree with Rich Woolfson, operations manager for NECO sub-group Intercounty Appliance, Commack, N.Y. "The worst is behind us," he said. "We've had the influx of the lumberyards, but the market is stable now. And even with their entry, we increased our sales in both brown and white goods."
Merchandise manager John Farley of Nationwide of Connecticut in Hartford, says NECO's builder business has actually increased in the past three years, despite the new competition. "We've advertised a $799 kitchen, no different than Home Depot or Wal-Mart. And Wal-Mart doesn't offer a featured product," he said, claiming NECO's strength is that it focuses on step-up products but can compete on price.
In a knee-jerk reaction, however, some of NECO's 450 retailers have begun carrying high-end white goods such as Sub-Zero that they order direct. While NECO is taking action to work with Sub-Zero, NECO co-founder and coordinator Jay Lebowitz of Intercounty warns of rushing into upscale goods in response to the big-box chains. "I don't want some small dealers to think it's a panacea, because they may only sell one kitchen a month when they should be giving more space to the rank-and-file washer/dryers," he cautioned. "They feel they can't compete, but we've shown them they can. We can give them a $299 washing machine with a 24- to 30-percent mark-up."
As with other TV appliance groups, NECO is pushing flat-screen TVs. For the fourth quarter, best sellers are expected to include a Sharp 15-inch LCD TV at $599. In appliances the hot sellers will be "anything stainless steel," said Jerry Grasso, merchandising director of NECO sub-group ADC in Monroe, N.J., as well as $1,000 washing machines as suppliers race to compete with Maytag's Neptune. In big-screen TV, he expects the hot price point to be $3,399.
Members expect a competitive fourth quarter where every sale is hard won, but solid sales are forecasted nonetheless. "If this show is any indication, I would say it's going to be positive," said Lebowitz. "We wrote more orders this show than we have at any other show this time of year. What I'm hearing from the major vendors, they are saying the same thing, that this was the best writing show they ever had."
Hunger agreed that the convention was NECO's largest to date in both vendor space and member attendance.
NECO continues to expand its warehousing facilities to over a million square feet in five locations. Most members sell a mix of 70 percent white goods and 30 percent brown, although the latter is picking up share, Lebowitz said.
Another key strategy is increasing group promotions, from rebates to extended warranty offerings on products. The Alliance is planning to hold its first World Series promotion for big-screen TVs this fall, Hunger added.