Ultimate Electronics is resigning from the Progressive Retailers Organization (PRO Group), the high-end dealer consortium that it helped found 17 years ago.
The departure will become effective Dec. 31, although its affiliation will formally end March 31, 2003 with the conclusion of the group's fiscal year programs. The move will reduce PRO's total volume to about $1.4 billion, based on the loss of Ultimate's $581 million in CE revenue last year.
According to PRO Group executive director Roger Heuberger, the decision was prompted by Ultimate's long-term expansion plans, which will bring it into greater territorial conflict with fellow members, as well as its gradual shift away from group merchandising practices.
The A/V chain, which currently operates 57 stores in 13 states, already competes with other PRO dealers in two markets, including Kansas City, Mo.-based BrandsMart. But the company's aggressive growth strategy, which will result in 12 new store openings this year and eight to ten in 2003, would find it rubbing elbows with additional members in another two or three markets.
What's more, Ultimate's typical 33,000-square-foot megastore format and broad assortment, which has evolved over the past several years, differs from most PRO members' 10,000-square-foot stores and narrower, niche market assortments.
"Over the past 17 years we have enjoyed a mutually beneficial relationship with the PRO buying group," noted Ultimate president/COO Dave Workman. But as the chain's geography began to overlap with that of other members, the value of the idea exchange within the group diminished, he said.
Added Heuberger, "Rather than let the group dynamic deteriorate, [Dave's] feeling was to separate from the group in advance of any member/vendor issues created during Ultimate's market expansion."
Workman said the company has no plans to join another buying organization or form a new one, although he finds value in exchanging ideas with other retailers — CE or otherwise — and has learned to "never rule anything out."
Ultimate's resignation from PRO Group mirrors H.H. Gregg's departure from the NATM Buying Corp. in September, which was also attributed to territorial conflicts stemming from an aggressive, multi-market build-out. (TWICE, Sept. 16, p. 6.)
Heuberger acknowledged that Ultimate's departure would impact more than just the group's buying clout. "The loss of its participation in group activities will be felt," he said. "Ultimate has been a huge part of the PRO culture and an integral part of its growth."
But despite the loss of Ultimate's revenue, the group is still projected to top $1.4 billion in sales for its next fiscal year, due to expected store openings by upwards of five member dealers including Tweeter Home Entertainment Group, Heuberger said. He added that the group will maintain a close relationship with its current vendor base, and that despite the addition of two new members, Definitive Audio and Listen Up (see story, p. 4), recruitment is not a priority.
Ultimate is the last remaining founding member of PRO Group. Workman will be succeeded on the PRO board of directors by Myer-Emco president Jon Myer.