Additional insights from leading CE and CI buying group executives on trends, challenges and what’s ahead for 2020
Dealerscope: What category or categories hold the most profit potential for your part of the membership? Is that different from last year?
David Workman, President/CEO, ProSource: It’s not substantially different from last year. The hot categories are shades and lighting, and represent a huge opportunity. Interestingly, premium two-channel audio has been doing well. We’ve see growth in the super-premium brands, across the board – the very high-high end of the two-channel audio market. There seems to be an appetite in the market for that. The general market for receivers has been very soft this year – but the super-premium segment of the market has done well.
I think that once 5G is established, there will be another opportunity there. And there seems to be an emerging interest in energy management. Those are fledgling opportunities, but the ones driving the bus right now are very similar to last year – shades and lighting. For us, I don’t at this point see movement in health and wellness category. There’s ancillary interest in it [relating to] circadian rhythm, and some of the things that get embedded underneath what we’re doing, but we’re not like Best Buy, which is taking very strong initiatives towards health and wellness as more of a consumer-facing product strategy. We’re not hearing a lot about that at this point in time. There is more consideration embedded in the health and wellness and environmental stuff that goes into the home, but it’s a part of a bigger puzzle. I don’t know that it’s a driver, in and of itself.
Gerald Satoren, Executive Director, NATM: I think premium TVs, major appliances, furniture and bedding continue to be the profit pillars for the members. This is no different than last year and probably won’t be much different next year, either.
I believe [that] killer categories for this season and even more so in 2020, are cord-cutting devices and/or TVs with compelling smart platforms built in. While people’s desire to eliminate traditional cable or satellite is reaching a boiling point, there is a comfort level in what they are used to, and expect, in terms of finding and navigating their content. Smart platforms, whether standalone or built-in, that ease this transition will be winners. In fact, these killer categories are both “hot” ones and high-margin ones – i.e., standalone streaming devices are certainly “hot,” but a premium TV with a great built-in platform would turn this transaction into a much higher-margin event.
Jon Robbins, Executive Director, HTSA: It’s no different from last year. I’d say we had serious traction last year in our lighting fixture category and now I’d say we’re at the point of significant traction. That has grown dramatically for us.
And of course, there are the standard categories that everybody’s feeling growth in: outdoor continues to blossom for us. But the biggest growth is in the architectural lighting category.
Richard Glikes, President/CCO, Azione Unlimited: (Responses given as part of an earlier question) We have a wellness initiative with a new partner: a company called Pure Wellness. They’re the largest provider of air purification systems for hotels, and they’re entering the residential space with Azione Unlimited… And then, we have lighting as an ongoing category where we’re putting more effort… The other initiative, aimed at one-percenters, is the Digital Canvas – art that’s shown on display devices - with Barco and with Black Dove as well… I think 8K is kind of interesting. There’s a lot of larger-sized TVs, which means they’re more expensive. We’re now selling 85-inch; 75-inch is a common size these days. 8K is still a premium, which is good.
Jim Ristow, CEO, AVB/BrandSource: In appliances - margin opportunities in accessories and step-up products. Most vendors are also making retail-exclusive models that are not carried in big-box [stores]. These are the SKUs that provide added margin and support. If dealers can stick to the “core” models that most vendors are selling, there is added profit to be had. This concept has been used for a couple of years, but we are seeing more vendors shorten their core focus assortments and increasing the margin on those SKUs. In laundry – front-load, especially, will continue to drive the business. French door refrigeration also continues to be sold at a higher rate than other products in the refrigeration category. In CE – we’re heavily focused on the profitable areas: 8K and ultra-large TVs, meaning 75-inch-and-above panels. And over 90 percent of those panels are delivered by brick-and-mortar, or click-to-brick. They’re not a DIY or an Internet play, and they’re now coming into a price band that our step-up consumers easily digest. So we’ve done turnkey solutions for our members for ultra-large panels with Samsung. The same message bodes with 8K.
Tom Hickman, President, Nationwide Marketing Group: We’ve come off a big show and are spending a ton more energy on connected home – that was our coming-out party, although we’ve been working on it for a while, putting the pieces in place. The show was the big opportunity to present our ideas and our plan and showcase our new division, and how we’re going to help retailers compete in that space. When I look at 2020 and all the product that’s out now, our unique position with AT&T… and our hardware relationships with Google, it will be a really big year for us around connected home. It can be big for the independent retailer if they get it right. I don’t believe it will be sold at big box. In Lowe’s and Home Depot, it’s pitiful at best, and Best Buy has an opportunity to do it very well. But when you look at where that will be sold, that solution, it is a profitable one for our dealers when you view the connectivity, the ability to offer packages, service, diagnostic service, potential recurring revenue, monitoring and all those things that go along with the potential of connected home – everything from the lowest common denominator of connecting a couple of thermostats to running a fully connected home. I think that will be a big part of what we see unfolding for Nationwide and for the independent in 2020.
We have folks that are more fluent, and if you look at our HTSN dealers, they are incredibly dialed in [to that]. So there’s every color of the rainbow when you look at all our guys – some are just selling hardware and have not figured out the installation piece, some are installing connected kitchens but have left money on the table with broadband and with more integrated home theater products. There are 5,300 members. I think awareness is rising just because of the energy our vendor partners are putting into it – such as GE and their Kitchen Hub, Whirlpool and all their connected products and obviously, Samsung and LG.
There is a much larger drumbeat from the vendor partners around this; it may be the year where we’re really making it a viable, go-to category that’s a little less mysterious.
(Besides connected home), we’re going to continue to expand our AT&T relationship to get more mobility into our dealers – selling cell phones, DirecTV and AT&T TV. That will be a focus for us. I think we’ve just scratched the surface of outdoor – we’ve had a couple of good years but we’ve got a lot of growing brands in that category and I think it will be another big year for us as people continue to focus on recreating outside the house, and grilling. And I’m looking for a rebound in bedding; it’s had a tough couple of years but it is stabilizing and I’m looking for a better year there. Fueling the rebound is a healthy MattressFirm – that probably helps. There’s been a settling of all the ecomm players that is helping out as well. Our guys developing better strategies around ecomm and bed-in-a-box is going to help our business, too.
Hank Alexander, Executive Director, HTSN: Besides AT&T and connected home, we continue to work on figuring out RMR (recurring monthly revenue) – AT&T helps with that opportunity, and there are a couple of other initiatives related to that. Shades and lighting are important; we just signed a deal with a company called PowerShades. Those categories require a specialist – not everybody can integrate automated shades into a control system. There’s profit and opportunity there, and it’s a good thing for us – and we had never been in the shade business before. This is the first year for us for that.
Dealerscope: Map out the rest of the year for your group – will business be up or down, and what factors will most profoundly influence the outcome for members?
Glikes: We’re up for the year and I think we’ll have a strong fourth quarter. If the vicissitudes soften – don’t go too low or high – steady news would be good [because] affluent clients can turn off the spigot pretty easily… It’s an exciting industry; the technology changes fast. We have to be light on our feet and move and adapt quickly.
Hickman: We’re very bullish on 2020 as a group. For the first six months, our members opened 300 stores – that may be one of the big reasons we have a people challenge. We expect that number to accelerate in 2020; there are tons of dealers who are already planning 2020 store openings right now.
We’ll finish the year up over last year as a business. Appliances will be up, electronics will be up and it will be tough for us to be up in furniture and bedding. If we can get close to par [there], we’ll be happy. Fall has been a little more stable for that.
Ristow: We’re on a multiplier trajectory, outpacing the industry in appliances, electronics and home furnishings. And we’re, again, growing share. Overall, our members are doing much better than the industry – folds better, actually – and we see that trend continuing through year end. It’s because the members who are promoting, especially with digital assets today, are outpacing those that aren’t.
Robbins: We’re going to be up again double digits – I’m proud to say, for the fourth year in a row. And that is in HTSA vendor purchases. We’re in full acceleration mode, and we’re going to sprint to the finish line for the end of the year.
Alexander: CE will be up, unless something catastrophic were to happen in the last 90 days; but we don't see anything. Our CE business will finish up very healthy this year, very healthy. We’re nearing double digits up. Our business is very healthy.
Workman: It depends on which part of the group you’re talking about. I think you’ll still see somewhere between a five and 10 percent growth our of our CI business for the rest of the year – on trend, driven by hot categories and overall demand.
On the retail side, the holiday season is anyone’s guess. It’s probably ranging anywhere from down two percent to plus two percent – a fairly tight range, and I don’t see anything in place that would give us a breakaway holiday season. At the same time, I don’t think it’s going to be recession-type levels of decline.
The group is extremely healthy, we continue to grow and to see interest from dealers out there who haven’t been affiliated with a group or even if they had been, we’re still managing to grow membership. We are having to be a little more selective in bringing in new members because some markets are absolutely full with high membership concentration. But there are still opportunities out there and we do expect to continue to grow our membership – maybe not at the same pace as the last couple of years, but that’s primarily driven by being a bit more selective about where we go to find a dealer where we may not have somebody at this point. That, and we do have criteria [in place] to belong to the group. All in all, I’d say the group is still very strong, very healthy, and our forecast for next year will be one of continued growth in the marketplace.