Dealers Diversifying Through Industry Downturn

By Alan Wolf -- TWICE, 4/9/2012

NEW YORK — When the going got tough in CE and appliances, the toughest dealers got going by broadening their assortments into new and varied product categories.

Recalling their entrepreneurial spirit — and leveraging the web and their buying groups — retailers have ventured beyond their comfort zones to mine fresh profits from the prosaic (mattresses), the trendy (designer sunglasses), and just about everything in between.

Indeed, some CE and majap dealers have strayed far afield in search of new margin-rich categories to mine. Abt Electronics, for one, last year added electric generators, sump pumps, fitness equipment and HVAC systems to a diversified mix that also includes fashion sunglasses and luggage. The moves followed successful forays into luxury wristwatches and gourmet cooking products — both of which are backed by dedicated in-store boutiques — and even a stab at audio importing and product marketing with the MK Speaker brand. "We're always looking for new ways to drive traffic and create new business," co-president Billy Abt recently told TWICE.

George Manlove, president/ CEO of Montana-based Vann's, similarly hedged his CE and appliance bets with last year's launch of BigSkyCountry.com, a specialty ecommerce site for outdoor apparel, climbing and hiking equipment, and related electronics, including digital imaging, GPS devices and headphones. Leveraging his home state's outdoor heritage and an e-tail skill set gleaned from 15-year-old Vanns.com, Manlove created an online store that goes "beyond the routine e-commerce experience by offering an engaging, educational customer experience," the company said.

On the brick-and-mortar side, Manlove moved beyond Vann's five-store footprint and put his Apple authorization to good use by opening his own version of an Apple store in Missoula, Mont.'s Southgate Mall. The twoyear- old On Store, self-described as "the Missoula Apple store," offers "anything Apple," as well as a tightly edited offering of non-Apple A/V and PC products and connected services including streaming media and home networking.

The 4,500-square-foot shop is also an authorized Verizon wireless retailer and, taking another cue from Apple Stores, offers a litany of in-store PC services, including computer repairs and tune-ups, data transfer and backup, tablet setup and private IT tutoring sessions.

Custom installers are also finding alternative channels to help them ride the housing downturn. Despite mixed results from a recent certification program in photovoltaic (PV) solar-energy system design, integration and installation, the Home Technology Specialists of America (HTSA) is still finding fresh opportunities in energy management. Bob Hana, managing director of the buying group for installers, integrators and A/V specialty dealers, noted that many members are also "balancing their portfolios" by turning to the light commercial market, where "a large percentage of businesses is being done."

Vance Pflanz, principal of Home Entertainment Source (HES) member Pflanz Electronics, concurred. "We do quite a bit of commercial work," which helps smooth any bumps in his core premium A/V business. "It's been pretty steady," he said.

Besides commercial automation, HES executive VP Jim Ristow advises his group's specialty A/V and custom install members to tap into potential profits from LED lighting; headphones, wireless powered speakers and ultra-premium soundbars; Elite's receiver, TV, and client eco-system; Zvox's single-cabinet home-theater systems; and the emerging mainstream control and integration market.

More traditional CE and majap dealers should also consider lighting control, which, argued Jeannette Howe, executive director of Specialty Electronics Nationwide (SEN), a division of the Nationwide Marketing Group, is no longer exclusive to integrators and custom installers. "The lighting category can be highly profitable and is not challenging to implement," she noted.

Housewares, long a shelf presence at Best Buy, are also serving as a high-margin adjunct for independent CE and appliance dealers. Leveraging its Kathy Ireland licensing agreement, the BrandSource buying group has developed branded cutlery, food storage and countertop cooking products that are exclusive to its members. CEO Bob Lawrence also pointed to PureWash, a $399 water-treatment laundry attachment shown at the group's recent spring show, as an easy "no-brainer" that helps improve both the wash and dealer margins with it 45-point markup.

Also expanding into housewares is New York-based Data- Vision, the Fifth Avenue CE and IT emporium. It's new home line, which includes cookers, toasters, blenders and other countertop appliances by such brands as Sunbeam, Crock- Pot, Krupp's and Hamilton Beach/Proctor Silex, represents a fresh vein of online revenue, president Albert Liniado noted. In particular, Keurig's coffee brewing systems and Dyson's premium floor-care products are generating "tremendous numbers," Liniado said.

More recently, DataVision broadened its virtual boundaries further still by introducing 250,000 SKUs of hand tools to its main Datavis.com e-commerce site under such top brands as Black & Decker, DeWalt and Stanley, and may soon add toys to its burgeoning online mix.

Playthings are already a growing business for fellow Manhattanite J&R Music & Computer World, which recently announced its own new arrival: J&R Jr., a new 15,000-square-foot "super boutique" boasting a tightly edited assortment of parenting essentials including cribs, car seats, strollers, furniture, musical instruments, crafts and books. The new shop, located in the retailer's former computer software section, also features dedicated walls and displays for electronic toys, gaming consoles, kids' media players, tablets, A/V baby monitors and other small electronics and housewares.

J&R Jr. was conceived and merchandised by executive VP Jason Friedman and his wife Danielle based on their experiences as parents and the company's recent forays into educational toys by VTech and Leapfrog. Indeed, the latter's LeapPad Explorer learning tablet was "our hottest seller at Christmastime," he told TWICE at the shop's grand opening.

CE dealers looking for less esoteric adjuncts have also found succor in major appliances, a mainstay of many a merchandise mix. Despite a mushrooming furniture business Conn's said majaps will remain its core category, and Rick Bellows, group president and chief appliance merchant of the Mega Group USA buying organization, argued that white goods' quick turns, greater sales-per-square-foot and high-traffic draw make for a productive investment on the sales floor. To that end, Mega has worked with Whirlpool to develop a turnkey "Appliance Gallery" in-store shop that provides members an easy entrée to the category with training, signage, delivery and pre-arranged terms for a tightly merchandised assortment. — Additional reporting by John Laposky

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