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Beating Goliath

How Mike Abt keeps Abt Electronics ahead of the big-box competition

By Amanda Wurzinger
Smart Business Chicago | August 2006

For Mike Abt, the success of his business hinges on one pivotal point: besting the competition.
And as the president of Abt Electronics, the largest single-store electronics and appliance dealer in the United States, besting the competition is his passion. From beating the big-box retailers on price to having an exceptional Web presence and creating an engaging in-store experience, Abt has used traditional and not-so-traditional techniques to draw customers in and keep them coming back.

Those efforts have paid off. In its 70 years of business, Abt Electronics has served more than a million customers, and last year, it posted $300 million in sales.

Price matters
In retail, the easiest way to attract customers away from your competition is by offering the best price. That is achieved by purchasing in bulk, something that often challenges smaller operators.

Although Abt Electronics is only a single store, the company's showroom covers 350,000 square feet, making it large enough to move inventory en masse and allowing it to buy in bulk and negotiate deals with vendors.

And while Abt can negotiate competitive deals as skillfully as his competition, he keeps prices below those of his peers' by saving on operating and marketing costs.

"We have very little overhead compared to other people," says Abt. "We spend under 1 percent advertising, and the average person in our industry is spending 7 percent advertising. So by us not having to advertise, just having good word of mouth, that's (the) biggest savings we have. And we're very efficient just having one store ? people drive to us, we don't build stores where they are. That keeps our price down, too."

In addition, the company has a DIY attitude toward maintenance and upkeep. Abt Electronics doesn't outsource the care and maintenance of its delivery trucks, repair services on the products it sells or its own building maintenance. By doing it all on its own, the company saves money and passes those savings on to customers.

Internet outreach
Besides keeping prices down, the company's single-store format has proved beneficial in other areas ? namely, flexibility. By being relatively small, it is able to adapt to industry changes more quickly than its competitors can, and it's also more willing to take risks.

"You've got to be aware, and spend on information and computers, go to shows and see what the new products are and be open to trying new things," Abt says.

This openness to change and trying is what led Abt Electronics to venture onto the Internet and into the world of online sales. In 1996, it launched its first Web page featuring product information and the store's address.

"We're really into information and sharing, and we knew that in the old days, appliance people would go to books and look up specs," says Abt. "We did it first just to get information to the salesmen so they could give it out to the customer. Then [outside] people came to it. We were one of the few appliance guides."

Recognizing the site's draw, in 1997 the company expanded from an online product information guide to a complete online appliances and electronics store.

One criticism of many consumer sites is that the shipping charges often cancel out any savings achieved by buying online. Abt has overcome that with a simple policy.

For customers purchasing appliances and electronics online, delivery to anywhere else ? California to Connecticut ? is the same flat fee.

"We just charge one rate," Abt says. "We definitely lose money on some products, but it's real simple ? $78 to buy one appliance and ship it. It just makes it easier for the customer. We're [usually] making enough on the product that we can pay for the shipping. That's not always the case, but it's a simple way to shop. And we just don't charge for things under $50."

Today, the online store provides three distinct benefits to Abt Electronics. First, it allows it to reach consumers nationwide.

"By being one store, we want to do more online than we can than in-store," says Abt. "That's the only way we can grow ? we're not building two stores. That's one way to grow externally ? keeping one store and still doing business out-of-state."

Second, the online store allows the company to sell more than it can display in-store. While the showroom is huge, there simply isn't enough room to stock every available color or model of every product.

"A key part of being online is trying to integrate it into the store; whenever we can, we try to make things similar," he says. "But there is product that we'll only show online. In our store, there's (thousands of) square feet of showroom, but you still can't show everything, especially like little accessories and different colors ? small differentiations that you don't want to show in the store you can put online, so you can see what a gray handle looks like if you're only stocking the stainless steel."

And third, the online store helps streamline shopping for customers. According to Abt, approximately 80 percent of Abt Electronics' in-store shoppers visit the Web site before coming in to make a purchase.

But the online store's success was never a given. While there was demand from customers to purchase online, Abt Electronics' vendors weren't so eager to have their products peddled over the Internet. And while many vendors have come around to the idea of Internet sales, some still have concerns.

"Everyone's worried about bad information being out there online," says Abt. "There (are) a lot of unauthorized dealers online ? you might not get a warranty if you buy from them and ... they don't have a lot of good information on their Web site and their Web site's slow. (Vendors) are just really hung up that people might get a negative experience of the product by it being on those Web sites."

That concern, says Abt, can be assuaged by taking time with the vendors, explaining how the sales process works with Abt and showing them how the online store works, alleviating anxiety about quality control.

Another common worry is not so easy to relieve.

Vendors "were worried that, if something's online, in one minute you can click and find the price at 50 different stores," says Abt. "So they didn't want it to just become a commodity. Especially the higher-end brands ? you have to sell and explain to customers why a Sub-Zero refrigerator is better. So even today, you cannot buy a Sub-Zero online, because they're still nervous about the different markets and protecting the different dealers locally."

In that case, says Abt, the only thing to do is to keep working with the vendors, let them see for themselves the quality of Abt Electronics' online store and hope that they'll change their mind.

The Abt experience
One of the most vital ways that Abt Electronics distinguishes itself from the competition is in the experience it provides customers.

Abt Electronics operates around the motto "The answer is yes to any reasonable request." That means, says Abt, that if the customer wants something reasonable ? for example, if a stove is dented during delivery and the customer asks for a new one ? the company does it, no questions asked.

And to ensure that all reasonable requests are honored, Abt authorizes employees to make the decision themselves about whether to honor a request.

"We let all our new employees know that, ‘Hey, you don't need to go ask a manager to see if you can help this customer make sure they get this TV out right away so they can have it for a birthday party," says Abt. "Just go put it in a car and get it done. It's hard to instill, because people aren't used to making their own decisions, and you really need all your employees to have that attitude, not just the managers.

"A new employee may say, ‘Maybe we're giving too much away. We're going to lose money on this sale.' We accept that on a short-term basis because we need to make people happy. We're just one store, and they need to come back to us. So we never penalize anyone for doing too much. They get it, but it does take months to really understand it and believe it."

In addition to the customer service experience, Abt has worked hard to ensure that customers have a positive shopping experience in the store. For example, he installed fun, interactive displays that have nothing to do with electronics or appliances, the showroom features a large courtyard with a fountain and kids can play with a large bubble machine or watch tropical fish in a 20-foot-long saltwater tank. It's simple things like these, says Abt, that really help the company stand out.

"We've got a single store, so we enjoy the products, we enjoy all our exhibits ourselves," says Abt. "It's kind of like collecting art ? we just collect it in our business. It's really priceless, because it makes us unique."

And being unique is what it's all about when it comes to Abt's retail success. By taking steps to stand out from the crowd ? from setting the right price to creating a stellar experience ? the company has not only weathered the growth of big-box electronics chains but thrived alongside them.

"We want to enjoy our work, our business, and I think our customers benefit a lot from that, too," says Abt. "We're a serious customer, but we're all about having a good experience for ourselves and our customers. We are one store, and people usually do have to drive from far away to get to us. But we've been successful for 70 years."

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