The Tough Get Tougher
n Baillio: Margins—they continue to deteriorate and the pricing keeps going down. We’re selling more and more flat panels but the dollars are staying where they were before. Talk about profitless prosperity! The manufacturers are wanting us to hit the same numbers, of course, which are their goals,
but you can do more business and still not sell as much as last year. It’s been a good year, but it’s a little frustrating. Fair trade is on, the government approved that the manufacturers could set MAPs, but no one’s done it in the industry—either in electronics or appliances! We’ve invested a lot in kitchen and home theater vignettes into our store to capture business, and it’s worked well, but so have a lot of people. But you have to do that to stay ahead of everyone else.
n Lavine: The biggest disappointment is that manufacturers who gave retailers somewhat of an exclusivity on their brand have basically thrown that exclusivity out the window. All brands are everywhere now, whereas a year or two ago, there might have been some exclusivity, now they’re going through buying clubs or distributor groups. Even “profit lines” have been clobbered—used as whipping posts for stores like Best Buy and Circuit City. Their entry-level stuff has become the whipping post in the marketplace. So the disappointments are that distribution has been cluttered with very little protection for the specialty retailer. The problem is that manufacturing production is being ramped up and they need to move the product out. If the economy slows down, the product backs up and they need to find a home for it. That’s the simple formula—supply and demand. Obviously, the negative is there’s much more competition that wasn’t there before. On the positive side, more people in the market are looking for flat panel or to upgrade to high-definition TV.