The NATM buying group, boasting the same 12 core dealers and $6 billion in aggregate buying power as it did a year ago, marked its Annual Vendor Conference in late September in Dallas’ Ritz Carlton, starting off the run-up 12 months to its September 2020 50th anniversary with “healthy” members whose solidarity, sharing and kinship are helping them to stave off the effects of a 2019 that’s seen hard-won business gains. “I characterize this year as ‘three yards and a cloud of dust’ – no long bombs, no big plays, no have-to-have-it technologies,” stated Executive Director Gerald Satoren, using a football analogy to describe CE and appliance industry overall business conditions to media at the event.
Last year, he said, the group outperformed the industry as a whole, with members capitalizing on opportunities with customers who became Sears “walkers” when its bankruptcy was declared. “Even for the Sears diehard customers, that watershed moment put them and the market up for grabs. I think we were really successful in grabbing that business – but it was a one-time event.”
For this year, Satoren added, “we are holding our share, tracking with the industry” – despite widespread industry trends pointing to slight dips in appliances sales volume and a TV business that is somewhat stagnant. “There is no runway for any product or technology or brand,” he observed. Nevertheless, he said, “In appliances? It’s growth – double-digit last year, and low- to mid-singles this year.”
Adapting, Executing, Winning
All of that notwithstanding, central to the members’ ability to hold their own in their markets, he said, has been their consistency in “adapting, executing and winning” – which, as it so happens, was the 2019 Conference theme.
“The difference for us,” he said, “is our crown jewels – our stores. We have to have a compelling website and omni-channel experience, but for us, it’s more that we drive that consumer into the store.
“We adapt to stay alive,” noted Satoren. “There is no other model than the local independent that can deliver an appliance to a consumer faster.”
As ever, crucial to NATM members’ success is their ability to excel in the promotion and marketing of the newest TV technologies – including 8K, which Satoren said is already being priced very accessibly “with units within reach of many more people than I thought. But it’s still a premium… All the members are carrying them and we’re thankful for the price points and the margins – because we need big screen and more expensive TVs.” He predicted, though, that the delta between 4K and 8K pricing will “not be outrageous” – or even last as long as it proved to between 4K and 1080p. “[Manufacturers] positioned 8K a little more aggressively to start than I thought, so that’s why we’re going to sell more. For the selling floor, it’s an easy pitch. You can see the difference. It’s night and day.”
These 8K sales, he said, will in part make up for both market share gains by lower-priced Tier Two TV brands in the 4K space, along with the industry now being “on the back end of the 4K transition. We’ve now reached the mass market with 4K…. Clearly, sub-$1,000 4K TVs are fueling the growth… What was selling in 4K at $2,000 or $3,000 three years ago is now $799.”
Dynamics Fueling Member Business
Satoren noted how some of the same dynamics that are at play this year that were there in 2018 are affecting the NATM dozen.
Last year, he said, “consumers paid 100 percent of” the tariff pass-alongs at the point of sale for appliances – prices which were impacted by increases in raw materials costs such as steel. This year, “as for this latest round, vendors may be eating a bit of” the increases; “I don’t think the retailer is footing the bill for them.”
TV, Satoren said, is a different issue. He predicted supplier workarounds to stanch pricing increases could include “shifts in manufacturing. Most of the bigger companies have final assembly plants around the world so they will just move manufacturing around and deal with the tariffs… Not that supply and demand, and the normal rules of price elasticity, have ever applied to the TV business, but this year is no different than most. If the tariffs are a problem, we don’t know, because all I see are lower prices.”
For the holidays, Satoren projected “a good one” in TV, stating that premium-level models will do well with “a resurgence in Tier One brands with pretty compelling pricing.” He stressed that this projection about Tier One labels did not include the Black Friday period – “that little window that premium TVs are not a part of – I think in November and December, we’ll see a fairly aggressive couple of months approaching new price levels.”
He added, “there are no economy issues to impact the holiday season – so it’s a matter of choice as to where consumers are going to spend their money.”
Satoren sees OLED TV technology’s appeal “picking up steam.” Also a bright spot: very large panels in the 80-inch-plus range, specifically – including in the 8K format, which is where picture improvements over 4K are readily apparent to the average consumer. “In the last quarter,” he opined, “premium will have more of a resurgence. We’re looking forward to that.”
Other positives for members include traditionally robust categories such as bedding and furniture. “Our bedding business is growing quite a bit,” he said. “In our furniture business, many dealers have increased their assortments.”
The connected home category is also promising as a profit avenue, he added, and some members are moving to pro-actively support it. “Some of our retailers have made the investment to drive this business forward,” Satoren said, “but I don’t know if Connected Home specifically is strategic for us overall in direction in 2020.”
Michael Maund, director of operations and marketing, noted that some members have added stores this year – always a positive. “Our members morph to what they need to do to still be of value to a vendor,” he said. “They’re adapting, and that’s why they’re still here. They’ve done it well - and when they needed to. The best value to these guys is that [they] can still talk to [one another] and don’t have to reinvent the wheel. They don’t have to go to a consultant and ask, ‘What should I do here?’ They can pick up the phone and call somebody. It’s invaluable.”
“At 49 years,” Satoren said, “we’re all going to come across the finish line profitable.”