What does the kitchen have to do with state-of-the-art consumer tech trends? Let’s just say there’s plenty on the table.
Top buying group industry leaders shared with us their insights for the coming year, including the growing trend for aspirational buying and more connectivity.
“From the tech standpoint there were some lean years before 4K when it was difficult to sustain margins for our partners in the independent channels and brick-and-mortar,” said Tom Hickman, president, Nationwide Marketing Group. “But now we’re seeing a nice transition coming on the heels of 4K, into 8K, bringing more opportunities.”
A welcome trend, he added, is in the connectedness of everything moving into the consumer’s kitchen, such as voice through Google Home Hub or through devices from Whirlpool and others. “This is going to be a large part of our business going forward as we are focused on the connected home. I used to swear that the connectedness and sharing came through the living room, but not anymore. It’s probably going to be through the kitchen.”
With 200-plus vendor partners, Nationwide covers several categories with unique opportunities for all partners, Hickman said. “We represent suppliers in various stages of embracing new technology and we’re building on those relationships. We already have long term relationships with Nest and Google on the digital side and we continue to leverage those partnerships.”
Forecasting for 2019 will prove to be difficult, though, as there are numerous short-term obstacles that cloud the ability to clearly judge what outcomes and trends are extant, said Richard Glikes, president/CCO, Azione Unlimited.
“Issues like tariffs, stock market gyrations, international tensions, and presidential vicissitudes make this task challenging,” he noted. “My best guess is it will probably be considerably slower than the last three years. Consumer electronics are a luxury and not a necessity. This faucet is easy to turn off. Although the underlying economy is strong, the trust in stability is waning.”
Although tariffs to date have had a modest impact with a few vendors raising prices a slight degree, everyone is terrified of 25 percent tariffs, which would affect prices dramatically, Glikes said. “This brings in the problem that clients have quotes for jobs based on pricing that was lower at the time they signed the contract. Dealers would be absorbing this differential, which would severely affect their bottom line.”
Dealers buy "just in time" while vendors have to look into their crystal ball and predict future appetite for products, he explained. “The vendors have a much more difficult job. It won’t take much for this economy to flip in either direction. This makes life very hard when forecasting. Coin flips?”
On an interesting note, Glikes added, the industry is looking at more industry consolidation this year. “You have big players like Snap, Control4, Nortek, Legrand, and Samsung to some degree, each absorbing smaller companies to round out their portfolios. Big fish love to eat smaller fish.”
Ask The Pro
At ProSource, president/CEO Dave Workman noted that the slight softening with the higher demographic consumer is believed to be temporary given all of the uncertainties that have been in the market currently, including those stock market gyrations, Fed increases, trade wars and implications, along with the rancor coming out of Washington.
"The general consumer appears to be healthy in their spending habits,” he said. “However, we saw a marked slowdown in spending on the more premium priced products through the holidays. The outlook for now is a cautious one. While not expecting anything dramatic, we see a continuation of this trend into 2019 until such a time as things appear to settle down and there is more consistency to bring back the confidence necessary for consumers to luxury spend again. I think the outlook is similar for both dealers and vendors as we are mutually dependent on each other to our results.”
“Our members do a great job closing a consumer once they are in one of our stores," noted Jim Ristow, AVB/BrandSource CEO. "The independent has traditionally struggled with consumer awareness to get the consumer in the store, and successful BrandSource members have reversed that trend by leveraging our industry-leading digital marketing solutions. ... 2019 will see more innovation and tools to drive even more business into our members business."
The Appliance Game
“From an appliance standpoint, we’ve been used to looking at these humdrum, white boxes,” said Patrick Maloney, senior VP, Nationwide Marketing Group. “At CES, we saw more and more products with interconnectivity from both domestic and foreign manufacturers. There’s significant investment and effort to ensure that connectivity comes through the kitchen.”
“The average consumer does not necessarily understand how ‘connected’ works,” noted Maloney. “That’s why we believe these appliances will be sold through independent retailers, where consumers can benefit from educated sales associates to help them through the process. We’re spending a lot of time educating our members about what this will mean in the future and how they should prepare for this consumer.”
Historically, regardless of the category, new product innovation has thrived when launched through independent retailers, so it’s natural, as tech goes forward, that independent retailers remain the backbone of growth in the pipeline, he noted.
“The Sears consumers fit into the same demographic of independent retailer structure. We’re solution-oriented, focusing on solving problems for consumers. Sixty percent of consumers buy appliances under duress, when something is broken. Our challenge is how to make sure we present top-line awareness for our members and deliver the right model to fit the home. That leads to an upsell. If a consumer’s refrigerator goes out, there’s an opportunity to add a new range and dishwasher to the sale. We’re bullish on these chances to push premium and luxury goods, especially with the tech boom that’s coming.”
Even with the popularity of door-in-door refrigerators, the Family Hub, and connected appliances there are opportunities to extend this technology to new price points and categories, Maloney said. “We love to see consumers buy not under duress but because they want the latest and greatest and have a fear of missing out. That’s the excitement in the appliance market. We still have that 60 percent buying under duress, but now we have a good shot at going after the other 40 percent who want in vs. need in.”
The Bottom Line
Despite the challenges, industry leaders remain cautiously optimistic.
“Several years of innovation and hard work by our members and BrandSource has allowed us to grow same-store share the last two years in a row," said Ristow. "Although predictions for the overall industry are for moderate growth, we believe our members will fare much better. We are looking forward to continuing our momentum with another strong year."
It’s been a good ride, Glikes concluded. “How much longer can this go on? Believe it or not, the glass is half full. We’re on a roll. Azione Unlimited has new vision and mission statements to guide us through any morass with 200-plus smart dealers and 50 committed vendors delighted to help one another.”
“If you told me, several years ago, that 2019 would be a great year in A/V, that there’s plenty of demand, with predatory pricing at lower levels abated, I would have been surprised,” Hickman said. “We feel good about A/V; housing is still strong, there’s low unemployment, and lots of reasons to upgrade to include voice integration. Anytime there’s evolution or revolution, that’s great for A/V."