George Granoff is down on the economy but up on Tweeter Opco’s prospects to ride out the storm.
Since assuming the CEO slot nine months ago he has been busy rebuilding the A/V specialty chain, which was acquired in a bankruptcy sale last year by Schultze Asset Management, an investment group.
Turnaround measures include overhauling the company’s infrastructure and re-building its supply chain, Granoff recently told TWICE. The latter included closing excess warehouses and moving to a just-in-time delivery model that has reduced inventories to an eight-week supply.
At the same time, Granoff revisited Tweeter’s marketing strategy, switching from broadcast media to a direct-mail program, which began July 1, that leverages the chain’s segmented, 1 million-customer database.
Granoff is also focused on boosting labor attachments through increased sales training and a mix of “bigger, heavier and more complicated products that lead to more installations,” he said.
The highest-profile change was the official opening last month of Tweeter’s newest store prototype in Dedham, Mass. (see below). The remodel features automated Disney-like demos, activated by pressing “Try Me” buttons, which allow customers to compare products and experience the benefits of whole-home integration.
The display concepts were inspired by vendors’ trade show exhibits and developed and installed by Tweeter’s in-house engineering team.
The new format supplants Tweeter’s previous prototype, the vignette-based Playground concept, which continues to outperform older stores but proved too costly to scale system-wide.
Granoff said the Dedham remodel will be evaluated for two more months on 20 different performance metrics to determine “what works best, what provides the most lift,” and which elements will be rolled out to Tweeter’s 93 other locations.
The results of the company-wide overhaul are encouraging, he said, as the chain rebuilds relationships with its customer and vendors. Its stocks are “very solid,” customer count and satisfaction levels are improving, and vendors are “all providing us with credit.”
Tweeter will need all the good will it can muster as the industry enters the back half of the year, given the weak macroeconomic environment. “There’s a serious convergence of negative issues out there — housing, gas prices, rising unemployment — and there’s no end in sight,” Granoff said. “Consumers’ net worth fell by $1.7 trillion in the first quarter, the biggest drop since 2002, and all but the wealthiest are feeling some kind of pain.”
Tweeter stores that are feeling the pinch the most are located in the Phoenix and Florida markets, where real estate has been hit hardest, he said.
Granoff expects it will be another one to two years before the economy fully recovers, and believes that in the interim Tweeter is better positioned than most to weather the storm. “We have a very unique niche in the marketplace,” he noted. “We’re the only national chain focused on the higher-end customer and have a highly skilled organization to serve them. The higher, more affluent population is more buoyant, and doesn’t need to rely on a home equity loan for a $100,000 installation.”
The company also has an advantage in its lean management structure and private ownership, which makes it more nimble in the marketplace compared to other national chains, Granoff said. This is especially critical in the CE industry, where the “continued downward pressure on price and constant devaluation of inventory puts a lot of pressure on retailers and manufacturers and makes it difficult to plan your business. But we will try to be more nimble for the fourth quarter.”