i3 | June 24, 2017

Larger Role for Dealers

Steve Smith

Sears Holdings said there is “substantial doubt” about the future of the company that owns the 131-year-old iconic department store retailer Sears and the mammoth discount chain Kmart.

Sears Holdings said there is “substantial doubt” about the future of the company that owns the 131-year-old iconic department store retailer Sears and the mammoth discount chain Kmart.

Let that sink in for a moment. Sears was the top major appliance retailer for decades, and among the top consumer electronics retailers along with Kmart. Both chains scared the heck out of independent retailers 30 years ago due to their sales clout, and in Sears’ case, the ability to deliver and service major appliances and electronics. The easy answers for the situation with Sears and Kmart include: Walmart and other chains hit better price points and a poorly executed ecommerce strategy allowed Amazon to hurt it badly. 

Room for More Than Amazon

But other retailers, both privately held regional and local operations, are making a profit today. The reason is that unlike Sears, Kmart, and for that matter hhgregg and RadioShack, they took on new technologies that they could explain, sell and install, learned digital marketing, improved their logistics, emphasized profitable sales and supplier partnerships, and embraced new demographics, realizing that millennials are turning to local retailers after researching home products online.

Ironically for years independents embraced the Sears model of expert sales people, selection and the ability to deliver and/or install products, some sprinkling in Kmart’s traditional price-driven merchandise into their mix to be competitive and garner traffic. Best Buy’s Founder Dick Schulze said when his chain was expanding nationwide that he wanted it to become “the next generation’s Sears” for home products.

Best Buy is thriving again because it revamped its operations, improved its online sales efforts, and embraced new technologies in electronics and appliances. And most independents are now part of national buying groups, which provide product pricing as good as national chains or ecommerce sites receive and often require the organizations that join to provide logistical and distribution support; educational seminars – whether it’s about new technologies or digital marketing; online resources to build, update and maintain sites and check SEO performance and provide video content for their sites.

Two of the country’s largest electronics/appliance buying groups – in terms of membership and buying power – are AVB, with 4,500 members and $17 billion in volume, and Nationwide Marketing Group, with 3,500 members and $15 billion in annual volume. Each group has its own specialty electronics division, AVB’s ProSource and Home Technology Specialists Nationwide (HTSN) with Nationwide.

Independent retailers have improved their operations and have the buying clout, when combined with fellow local and regional dealers in buying groups like these, to be national players in electronics and appliance retailing. 

A decade ago independents benefited when Circuit City exited the major appliance business and dropped

its commissioned sales force. By the time it closed, independents picked up electronics market share also. But most of its volume eventually found its way to national chains.

Independent retailers will not make that mistake again. They along with Amazon, Walmart, Lowe’s and Home Depot are poised to take Sears Holdings’ market share, as well as the volume that RadioShack and hhgregg have left on the table.

More importantly, with the improved operations of independent electronics and appliance retailers, this channel can be a major player in the connected home as IoT developments emerge and become embraced by consumers.

May/June 2017 i3 Cover Issue

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