NEW YORK –
In many ways 2010 was more of the
same for CE and appliance retailers.
Although the economy technically emerged from the
recession, joblessness, foreclosures and the threat of
both continued to suppress sales for much of the year.
Business was choppy at best, with value-minded
shoppers sporadically emerging for sales events or to
get their piece of the $300 million in majap stimulus
funds. That program provided a much-needed shot
in the arm for white-goods dealers and vendors, but
sales dissipated as soon the till ran dry.
Business hit a new low over the summer, when limited
disposable dollars were diverted to vacations, and
didn’t return in a meaningful way until November, when
pre-Black Friday promotions helped prime the holiday
pump.
Early returns suggest a solid holiday season, especially
for e-tailers and assisted floors, as near-cost
pricing on TVs and PCs drive traffic, and 3D begins to
fulfill some of its early promise.
So before we bid a final farewell to 2010 and the
dealers it took with it including Bernie’s, Flanner’s, Ken
Crane’s and MyerEmco, let’s take one last look back at
some of the highlights and low points of the first year
of the second decade of the century.
JANUARY
CE Boosts Holiday Sales
Chain stores started the New Year off on a roll
thanks to solid CE demand in December. Best Buy
reported strong sales of notebooks, mobile phones
and majaps and a surge in online orders that boosted
comp-store sales 9.3 percent; Target said net sales
rose 5 percent in December with an assist from CE;
Costco saw strength in PCs and audio, which drove
mid-single digit gains in its CE and majaps business;
and strong sales of CE and video games helped push
BJ’s Wholesale Club’s revenue up 9.4 percent.
Nevertheless, The NPD Group said CE sales
slipped 0.8 percent overall during the holiday period,
dragged down by double-digit dollar and unit declines
in TV.
Ominous Signs From Ken Crane’s
While the holidays were relatively happy for the industry
overall, store closings at Ken Crane’s suggested
that the retail consolidation of 2009 was not over
yet. The Los Angeles-area A/V specialty chain shut
four of its 10 stores and laid off industry veteran Steve
Caldero in an effort to control costs and boost profitability
amid dwindling dollar volume.
PRO, HES Exploring New Tech Categories
The Progressive Retailers Organization (PRO
Group) and its strategic partner Home Entertainment
Source (HES) plan to expand their product mix beyond
the buying groups’ core A/V specialty assortments.
New categories under consideration include gaming,
computers, mobility devices, control automation,
energy management and subscription-based content services, the buying groups said. The partners, known
collectively as The Alliance, will support the new avenues
with turnkey business solutions, including logistical
support through HES’ fulfillment centers, in order
to reduce risk, lower the barrier of entry, and deliver
profitable sales for members.
“The business models of old are just that – old,” said
Jim Ristow, executive VP of HES. “There are opportunities,
but it means doing things differently.”
Bernie’s Bids Adieu
New England A/V, majap and furniture chain Bernie’s
became the industry’s first retail casualty of 2010.
High costs, low margins and the weak local economy
forced the 15-store chain to file Chapter 11 bankruptcy
protection and begin liquidation sales. Losses
mushroomed from $234,000 in 2008 to $1.9 million
in 2009, and sales declines led to defaults on about
$12.7 million in loans. Bernie’s was founded as a gas
station in 1947 by Bernie Rosenberg, was bought by
Newmark & Lewis in 1985, and was re-acquired six
years later by Rosenberg’s son Milton, who re-built the
business from a two-store operation with plans to expand
into Boston and beyond.
MyerEmco Going Bust
MyerEmco Audio Video, which served the Washington
D.C. market for the past 55 years and helped set
the standard for the independent A/V specialty dealer,
is going out of business. Principal Jon Myer said the
company succumbed to the prolonged recession and
a credit squeeze that left it without sufficient working
capital, and began liquidation sales in mid-February.
“The economic downturn was like a light switch,” he
said as revenues plummeted by 35 percent.
Super Bowl Meant Super Sales For Retailers
Super Bowl XLIV added extra zest to TV sales, especially
for local dealers in the hometowns of the contending
New Orleans Saints and Indianapolis Colts.
“It’s been wild,” said Cowboy Maloney president Eddie
Maloney. “The Saints are a big story here.” Meanwhile,
Indianapolis-based hhgregg marked the big game by
extending its “Employee Family Discount” program to
virtually all product categories. “We’re excited for the
Colts and are cheering for them in Super Bowl,” the
company told TWICE.
Elsewhere around the country, big-box chains also
mounted aggressive TV price and financing promotions
in the days leading up to Super Bowl in a flashback to
Black Friday. “We’re making value and convenience our top priority for our guests,” said Mark Schindele, Target’s
senior merchandising VP.
February CE Sales Up 6% At Retail
Retail sales of consumer electronics rose 5.8 percent
in February following a tepid 0.4-percent gain
the month before, MasterCard’s Advisors consultancy
division reported. The increase represented the sixth
consecutive monthly gain in CE sales, and came despite
severe winter weather that crippled much of the
Mid-Atlantic, Northeast and North Central regions. The
uptick was also achieved without extreme discounting,
the company said, likely due to tight inventory and easy
year-ago comparisons.
MARCH
Walmart’s Vudu Creates Sticky Wicket For
Dealers
Walmart’s acquisition of Vudu is putting dealers in a
difficult position. The video download provider was set
to become a Walmart subsidiary after the estimated
$100 million deal closes this spring, giving the world’s
largest retailer ownership of an embedded service
that is sold by competitors on select TVs and Blu-ray
players from LG, Mitsubishi, Samsung, Sanyo, Sharp,
Toshiba and Vizio. Dealers have voiced concerns to
manufacturers over Walmart’s access to their customers
and data, but it appeared unlikely that vendors plan
to limit inclusion of Vudu on open line models.
HES Pushes Members On New Technologies
Home Entertainment Source (HES) urged dealers
to add home controls to their repertoires to help
offset margin declines in their core A/V businesses.
Executive VP Jim Ristow outlined a new model to members
attending HES’ and parent group Brand Source’s
Spring Summits this month, in which dealers become
“integrators that do A/V specialty,” rather than A/V
specialists that provide limited integration services.
Citing CEA forecasts, Ristow said home technology,
including structured wiring and whole-home sound,
will outpace traditional CE categories this year with 6
percent growth, while disciplines such as automation,
lighting and energy management could increase by as
much as 20 percent.
Meanwhile, dealers and integrators attending the
show reported that business was regaining momentum
following a bruising 2009, and were optimistic
about new marketplace opportunities despite remaining
challenges.
Change Is In The Air
The New Year has brought with it changing roles
and shifting alliances within the retail community. At
Best Buy, a global management reorganization has
given executive VPs Mike Vitelli and Shari Ballard expanded
responsibilities, he as president Americas,
she as president Western Hemisphere. Separately,
the chain said it will convert the center of its stores
into showcases for connections to, and content and
services for, TVs, mobile phones and computers.
Meanwhile, former NATM members P.C. Richard &
Son and Abt Electronics have rejoined the CE and appliance
buying group after long respective absences,
and Brand Source’s MARTA division was renamed Resource
Plus to help tout the group’s focus on member
services.
APRIL
HTSA Leveraging 3D, Tech Expertise For
Growth
Home Technology Specialists of America (HTSA)
is emphasizing its early embrace of home connectivity,
its expertise in that area, and the opportunity 3D TV will bring as part of the buying group’s strategy for
2010.
During its spring meeting this month, executive director
Richard Glikes described his membership as
“trusted experts,” and said the four pillars of HTSA
should be relationship building, idea and information
sharing, economies of scale, and program advantages
that can provide profits during a tough economy.
Glikes said that the challenging times require members
to “revivify” their businesses with “new life and
new ideas.”
Northeast Heats Up As Retailers Fill A Void
The Northeast is shaping up to be the newest retail
battleground as independent dealers including Ultimate
Electronics and a re-merchandised Sixth Avenue
Electronics vie for a piece of that abandoned market.
The liquidation of Circuit City, the departure of
Tweeter from its New England and Pennsylvania
strongholds, and the bankruptcy of Connecticutbased
Bernie’s has left a specialty store void that has
not gone unnoticed by chains near and far.
Laying the groundwork for a coming turf war are
recent expansions by hhgregg, P.C. Richard & Son,
Sixth Avenue, Paul’s TV and, most recently, Ultimate.
What’s at stake, according to estimates by The NPD
Group, is the 33 percent of Circuit City sales volume
left unclaimed by Best Buy and Walmart, on top of any
remaining market share that was abdicated by Bernie’s
and Tweeter.
Walmart Adds LG TVs
LG Electronics has opened up segments of its TV
line to Walmart and sister chain Sam’s Club in a dramatic
departure from its policy of limiting distribution
to dealers with directed sales floors and the ability to sell premium products and new technologies.
The expansion, which follows distribution to Costco,
was viewed by some independent and specialty dealers
as yet another defection of a sheltered TV line to
a high-volume competitor whose pricing policies have
made it difficult for smaller dealers – many of whom
do a substantial portion of the industry’s educational
heavy lifting – to compete.
But LG described the decision as a necessary step
in following the purchasing practices of consumers,
who increasingly shop the discount channel.
MAY
Top 100 Sales Hit $121.3B
CE dollar volume for the industry’s 100 largest dealers
edged up 2 percent last year, TWICE reported
in its annual Top 100 retailer rankings. Aided by the
expanding role of CE in consumers’ daily lives, dealers
grew their businesses despite the worst economic
downturn since the Great Depression by cutting costs,
opening new stores and changing business models.
Not surprisingly Best Buy and Walmart continued
to lead the pack, and together with third- through 10thplace
retailers Apple, Target, Costco, Dell, GameStop,
, RadioShack and Sam’s Club, accounted for two-thirds of all Top 100 volume.
PRO Group Holds ‘Most Upbeat Meeting In
Three Years’
That observation, by former member-turned-supplier
Gary Yacoubian, underscored a decidedly optimistic
spring meeting of the Progressive Retailers Organization
(PRO Group), as dealers and vendors prepared
for growth, projected a gradual improvement in the
economy, and experienced glimmers of pent-up consumer
demand.
PRO’s executive director Dave Workman predicted
that group sales would grow $200 million to $2 billion this year thanks to a slowly improving marketplace; expansion
by members including Sixth Avenue Electronics
and Paul’s TV; the additions of World Wide Stereo,
The Big Screen Store and Bill Smith; and a greater
diversity of dealers than ever before, due in part to
changes within the specialty A/V channel resulting
from the recession.
CE Retail Remains In Flux
Despite the good cheer at PRO Group, CE retailing
continues to give mixed signals about its health. Indeed,
the buying group meeting was overshadowed by the
suspension of operations at longtime member Flanner’s
Home Entertainment due to severe cash-flow constraints,
while Target, Costco and BJs reported year-over-year declines
in CE, led by drops in TV and PC volume.
Meanwhile, other chains continue to expand operations,
including hhgregg which entered Baltimore, P.C.
Richard & Son, which opened two more stores in Connecticut
and BrandsMart USA, which is planning to
open its first smaller-format store near Miami’s Dadeland
Mall.
JUNE
Flanner’s, Ken Crane’s To Close
Succumbing to the recession’s tight credit, high
unemployment and mounting home foreclosures, Ken
Crane’s, a fixture in Southern California TV retailing for
more than 60 years, and Flanner’s Home Entertainment,
the prototype for the independent A/V specialist,
both began liquidation sales this month.
Ken Crane’s found itself “powerfully affected by the
nation’s unusually severe and continuing economic
downturn,” the Crane family said, and “a steep, relentless
decline in same-store sales activity led to the difficult
decision.”
Flanner’s principal John Flanner, a past president
of the Professional Audio Video Retailers Association
(PARA), suspended operations in April after his bank
called in his loan, and was forced to sell off his company’s
assets after attempts at refinancing failed.
Walmart Steps Up CE Strategy
Walmart unveiled dramatic plans for CE that were
detailed in a special report by TWICE. Changes in
store for the No. 1 retail chain include a focus on connectivity,
as reflected in a slew of Internet-capable TVs
and Blu-ray Disc players; a larger assortment of home
networking devices and accessories; a dedicated area
for mobile broadband services; and an expanded selection
of smart phones.
In TV, the chain is complementing an expanded IP
offering with edge-lit and full-array backlit LED models
from LG, Samsung, Sony and Vizio; new “New Technology”
centers in which to showcase them; and a
wider selection of 42-inch and larger displays.
“Customers shop us at every price point,” Walmart
home entertainment senior VP Gary Severson told
TWICE, “and we seek to offer value whether it’s a tierone
or value brand.”
Majap Sales Fall 4% For TWICE Top 100
Retail sales of major appliances fell nearly 4 percent
for the industry’s largest dealers last year, according
to TWICE’s latest Top 100 Major Appliance Retailers
Report. The annual survey of leading major appliance
merchants showed white-goods sales slipping 3.7
percent to $22.7 billion for the ranking retailers, which
represent more than 90 percent of total industry sellthrough.
Sears handily retained its crown as the king of appliance
retailing with a 32 percent share of Top 100 sales
volume. But despite steep and relentless promotions,
the company continued to lose ground to the home
improvement channel, which grew its majap share 4
percent to more than a third of total sales.
The report revealed the first wisps of recovery from
the now four year-long majap malaise, as sales declines
eased from the 4.7 percent drop in prior-year
revenue, and bettered the 6.5 percent falloff in total
industry volume in 2009.
Sales rebounded this spring, however, as a one-time
$300 million stimulus program helped spur whitegoods
business across all 50 states.
JULY
Faceoff In Philly
Philadelphia, which had been devoid of a regionalchain
presence since the demise of Tweeter Home
Entertainment, is quickly becoming a CE/majap battleground
as Sixth Avenue Electronics and hhgregg
backfill the market with big-box stores.
Sixth Avenue opened its second area store this
month and has begun work on its third, while hhgregg
entered the market in May and New York powerhouse
P.C. Richard is set to come into Philly later this year
with two superstores of its own.
Sixth Avenue’s operations VP Tom Galanis doubts
the market can support three specialty chains, but
said his company is well-versed in the high costs, cutthroat
competition and sophisticated customers within
the New York-Philadelphia corridor.
Dealers Planning For Tough Q4
Dealers, distributors and buying groups are girding
themselves for a tough holiday selling season based
on lackluster summer and back-to-school sales. Working
with manufacturers, merchants are already planning aggressive Black Friday promotions that may begin
earlier, and last longer, than last year’s extended
event period.
If the current environment is any indication, costconscious
consumers will eschew step-up products
for good-enough fare, as evidenced by current supply
constraints in 720p plasma and a surplus of higherend
LED TVs, industry executives told TWICE.
“This economy is the new normal,” observed Mike
Temiz, president of Sixth Avenue Electronics, “and
you’ve got to learn how to do business in it. There’s
less room for error. You have to be stronger and work
harder and smarter.”
One-On-One With Dunn
In a revealing one-on-one interview that appeared
this month in TWICE, Best Buy CEO Brian Dunn reviewed
his career, the state of the industry and his vision
for his company with Gary Shapiro, president/
CEO of the Consumer Electronics Association (CEA)
at the trade group’s CEO Summit.
Among his observations: What drove the market
during the booming economy was “consumers taking
home equity out for consumption. That open to buy is
gone. Consumers are buying … more for utility. So the
sales highs are higher in some parts of the year, but
there are deeper lows.”
Dunn added that the CE market has become event
driven. “ They buy more for Dads and Grads, Mother’s
Day, Back to School … and they come out for new
technologies,” including smartphones and tablets.
AUGUST
Retailers Foresee Q4 Sales Growth
Retailers are looking past this summer’s placid
CE sales to a more robust holiday season.
Despite pockets of strength and gains over 2009,
business has been coming in fits and starts
through the summer months, adding urgency to
a strong finish to 2010, dealers, distributors and
buying group executives told TWICE.
A Yuletide recovery appears to be in the offing,
fueled by pent-up consumer demand and
enticing new CE devices and form factors, including
3D and IPTVs, motion-sensor gaming
and tablet PCs. Also priming the pump will be
a surfeit of bundled promotions and ever-earlier
holiday sales events designed to deliver value to
recession-weary shoppers, they said.
Nationwide Gains Market Share
The Nationwide Marketing Group has been exceeding
industry performance in CE and majaps
this year through a combination of aggressive
promotions and step-up sales of premium products.
Executives of the buying group told TWICE during
its bi-annual PrimeTime meeting and buy fair that promotional
offers and package deals were getting customers
into members’ stores, where they’re wowed by
3D-, IP- and LED-TV.
On the white-goods side, steep discounts tied to
holiday sales events helped Nationwide dealers outpace
industry growth two-to-one during the first half of
the year, the group said.
Microsoft Planning More Stores
Microsoft COO Kevin Turner said the company
is planning to open “dozens” of new retail stores.
Speaking at the company’s annual Worldwide Partner
Conference, Turner described the showrooms as “an
incredible learning vehicle” that is helping its designers
and developers create next-generation products
based on end-user feedback.
“We’re going to keep building them,” he said. “That
direct contact with consumers in the community is
awesome.”
Microsoft opened its first four stores within the last
nine months in Arizona, California and Colorado.
SEPTEMBER
Custom Installers Seek Growth Ideas
Custom installers are turning to new technologies
and business strategies to reinvigorate a market whose
main growth drivers – new home construction and remodels
– could remain soft for several more years.
As a result, many electronic systems contractors
(ESCs) attending last fall’s CEDIA Expo are turning to
retrofit installations and have diversified into light- and
medium-commercial installation, networking and secusecurity
to help cope.
For its part, CEDIA
unveiled its first New
Technology Pavilion to
highlight potential profit
opportunities in such
emerging areas as energy
management, home health
monitoring and residential
communications.
Brand Source Entering
New Categories
Brand Source, the $14
billion home-goods buying
group, is getting connected
through a new turnkey
program that will provide
members easy entrée into
the broadband, content
delivery and mobile categories.
The effort, along
with a possible solar-power
program, are intended to help members diversify
their assortments and build business within a sluggish
marketplace marked by deep discounting and sagging
consumer sentiment.
CEO Bob Lawrence described the summer months
as “the toughest” 60 days in his career at the group’s
fall convention this month, while keynoter Jim Campbell,
CEO of GE Appliances, urged dealers to temper
their product mix to remain price-competitive with bigbox
chains.
Best Buy Counting On Connectivity
Best Buy sees broadband connectivity as its salvation
through the recession and beyond. Despite a lackluster
retail environment in which TV revenue stalled
and same-store sales slipped, CEO Brian Dunn pointed
to Best Buy Mobile as the company’s “single-biggest
profit driver” during its second fiscal quarter, and
“the tip of the spear” in its connected world strategy.
Connectivity, he told analysts, has brought the CE
industry to “a pivotal, transformational inflection point,”
on par with the analog-to-digital transition that began
15 years ago.
RadioShack Looks Beyond Mobile
Meanwhile, RadioShack, whose mobile business is
similarly booming, is looking to revamp its CE assortment,
which has variously included TVs, video gaming,
PCs and personal media players. The company said
it will undergo a series of product transitions over the
next few quarters based on a category’s ability to drive
traffic and fill market baskets with accessories and
other attachment sales.
OCTOBER
NATM Hangs Tough Despite Weak Market
The NATM Buying Corp.’s 11 leading regional retailers
are riding out the recession by cutting costs,
opening stores, entering new categories and otherwise
hunkering down until the economy recovers.
“Our members are strong and well-financed,” the
buying group’s president and executive director
Bill Trawick said during NATM’s annual fall meeting,
and the group is maintaining its market share
in a stagnant, if not declining, environment for TVs
and major appliances.
The dour sales environment has left Trawick
looking forward to Black Friday, when even fiercer
CE and majap promotions, and the suspension
of MAP policies, “should bring people into
stores.”
HTSA Sets New Sales Goals
Home Technology Specialists of America
(HTSA) has set its sights on growing group revenue
by $100 million over the next six months.
The plan, which also includes a new membership
drive, an “aggressive” online attack, a focus on Black
Friday, and continued marketing and public relations
efforts, was announced at HTSA’s annual fall meeting.
Richard Glikes, executive director of the 58-member
buying group for specialty A/V dealers, custom
installers and system integrators, said the $100 million
increase would help offset but not compensate
for sales losses over the past two years that
reduced group revenue to less than $400 million.
Distributors Predict Steep Holiday Discounts
Distributors anticipate that heavy holiday-season
promotions, beginning in early November and particularly
in TV, will drive good sales volume during the fourth quarter. Retailers will need to promote aggressively
to get consumers into their stores, but once
there, tablet PCs, e-readers, Blu-ray players, digital
cameras, HD camcorders, accessories and flat-panel
displays should enjoy strong sell-through, distributors
told TWICE.
TWICE Lauds Top Dealers
The winners of TWICE’s seventh annual Excellence
In Retailing Awards were announced this month, recognizing
best-in-breed dealers across five distribution
channels and a new category, Best Retail Executive.
This year’s recipients were: Staples, Best National
Retailer; Nebraska Furniture Mart, Best CE/Appliance
Dealer; J&R Music & Computer, Best A/V Specialty
Dealer;
, Best Consumer Direct
Dealer; Apple Stores, Best Vendor Retailer; and Best
Buy CEO Brian Dunn, Best Retail Executive.
NOVEMBER
CE Shines On Black Friday
Consumer electronics was a major star on Black Friday
as shoppers packed retail stores and went online
to find unprecedented deals on TVs, Blu-ray players and computers. But the real winner over Thanksgiving
Weekend was e-commerce, where free-shipping offers,
competitive pricing and the convenience of home
shopping led to a record $1 billion in sales on Cyber
Monday, representing the single-biggest dollar-volume
day ever for e-tailer.
Conversely, brick-and-mortar sales remained relatively
flat to last year, as month-long promotions pulled
business up into the early weeks of November.
Majaps Enjoy Big Black Friday, Too
CE, toys and apparel weren’t the only beneficiaries
of Black Friday sales. For the third year in a row, major
appliances have joined the pantheon of Thanksgiving
Weekend promotions as retailers and manufacturers
sought some holiday cheer for an otherwise stagnant
category.
“Major appliances are now an important part of
Black Friday,” observed Betsey Owens, VP of Sears’
private label Kenmore brand. Sears helped establish
the tradition of hot appliance promotions three years ago, Owens told TWICE, and since then, “We’ve
seen cost-competition on the day after Thanksgiving
become something consumers anticipate. They know
there are great deals out there.”
3D TV Gets Failing Grade
In a wide-ranging interview conducted by TWICE
executive editor Greg Tarr at the NewBay Media 3DTV
2011 What’s Next? Conference, Sixth Avenue Electronics
operations VP Tom Galanis said the industry
dropped the ball on 3D’s debut.
“As an industry we could have done a better job
launching it,” he said. “We should have had standardized
glasses and we should have presented it to the
consumer as a feature of a higher quality television.”
Galanis described 3D TV sales forecasts of 3 million
to 5 million sets for 2011 as overly optimistic, and
pointed to the active shutter glasses required by many
models as the primary stumbling block.
He said retailers with trained sales staffs, like his own
A/V chain, are better positioned to sell the category
due to its complicated nature, and can explain to shoppers
why they should spend more for the technology.
DECEMBER
Conn’s Gets New Lease On Life
Conn’s successfully completed a refinancing plan
that extends its loans out as far as 2014 and provides
access to $500 million in capital. The package provides
some breathing room as the multiregional CE and appliance
chain looks to regain sales momentum and return
to profitability following an especially bruising year.
The company’s off to a good start: it trimmed its
losses during its fiscal third quarter and enjoyed double-
digit sales increases on Black Friday thanks to a
better mix of fully-featured large-screen TVs – including
a 55-inch 3D LED model that “blew out the door,”
CEO Tim Frank said.
Chains Release New Round Of CE Promos
With Christmas little just two weeks away, big-box
chains including Best Buy, Walmart and Sears let
loose another round of CE sales promotions on TVs,
Blu-ray Disc players, laptops, gaming bundles and
smart phones, including an iPhone 3GS giveaway by
Best Buy.
Meanwhile, the retailers’ online arms continued to
offer free shipping on many if not most CE items, and
pure-play e-tailer
extended its own freefreight
offer to Dec. 17.
CEA Resumes 3D Demo Days
The Consumer Electronics Association (CEA)
brought back its National 3D Demo Days event for a
pre-Christmas run the weekend of Dec. 17-19. The instore
showcase, first deployed last September, drew
some 70 dealers, including Abt, Best Buy, CompUSA,
Fry’s, ListenUp, Nebraska Furniture Mart, Ovation,
Paradyme, Sears, Starpower and Video & Audio Center.
Content was provided by ESPN and Hollywood’s
Digital Entertainment Group (DEG).
