Opening Sunday

‘Smaller Footprint’ of New Florida Store Allows BrandsMart USA To Enter Dadeland

October 5, 2010 by Jeff Berman|Top News

DALLAS -- The “smaller footprint” of the new South Miami store that BrandsMart USA is opening Sunday allowed the retailer to enter the Dadeland area of South Miami for the first time, President Michael Perlman told Consumer Electronics Daily at the NATM Buying Corp. conference last week. The approximately 44,000-square-foot store is its first small-format location, he said.

"We've been looking in that area for 25 years,” but it was hard to find the right property, and opening a larger store there would have been “cost prohibitive,” Perlman said. BrandsMart already has a store in the South Miami area, he said.

The retailer now has five stores in south Florida, along with a clearance center there, in Davie, and four stores in the Atlanta metro area. The stores are each more than 100,000 square feet, much taken up by warehouse space that’s been cut at the new location, Perlman said. The older locations needed the extra warehouse space partly because projection TVs required it, he said. But flat-panel TVs, the dominant sets now, take up much less space, requiring less warehousing room, Perlman said. “You don’t have to do” the same level of volume in the smaller store and “overhead is way less,” he also told us.

The new location, on North Kendall Drive, across from the Dadeland Mall, features two floors, with a little more than 20,000 square feet per level, Perlman said. A lot of space at the location, the site of a former Linens ‘n Things store, will be dedicated to movies and music, which are not necessarily profitable but are “traffic builders,” he said. The existing larger stores have three floors each, he said.

BrandsMart will spotlight 3D TV at the new location, and it will be the first of its stores in which 3D content will be delivered wirelessly to all wireless-enabled 3D TVs, Perlman said. The growth of 3D in the home is a welcome development, in part because it pushes consumers to buy “the largest screen they can possibly get in their house,” he said. The 3D effects tend to stand out more on larger-screen TVs, he said. Small-screen 3D “looks terrible,” but 3D on a 70-inch model “floors you,” Perlman said. The 3D TVs also require more active demonstrations by salespeople than other TVs, which will give stores like BrandsMart an advantage over rivals, he said. “I'm very bullish on the future of commissioned salesforce stores,” he said.

Another NATM retailer, ABC Warehouse, opened its 45th store about three weeks ago in Alpine, Mich., Executive Director Dan Schuh said. It’s the retailer’s first location in that city, he said. The approximately 30,000-square-foot store has had only a soft opening, not a grand opening yet, he said. The retailer’s other stores are in Michigan, Ohio and northern Indiana. It also operates 16 Mickey Shorr mobile electronics stores in Michigan and two Hawthorne appliance stores, in Birmingham and Rochester, Mich.

NATM Conference Notebook

TV sales have been strong for ABC Warehouse this year, driven by 3D TVs, Executive Director Schuh said. The retailer is “doing quite well” with 3D TVs, “better than” the industry overall, he said. It has had a “significant increase” in home audio sales this year from 2009, driven by national retailers’ exiting the category and the growing popularity of flat-screen TVs, he said. “Our business has gotten stronger in audio” as screens have become flatter, he said. But most other NATM dealers reported gloomier news. TV unit sales have been fine this year for Cowboy Maloney’s Electronic City, but revenue has been down 8-9 percent from a year earlier, said President Edward Maloney. The Mississippi retailer is doing “pretty OK,” he said, calling that “the new good.” But if anybody says business overall is good this year, “they are probably lying,” he said. TV margins aren’t good, but they're no worse than last year, although it’s not yet clear what will happen the rest of the year, he said. Overall CE sales are just “OK,” with audio down and Blu-ray players selling but not contributing much because they're mostly being given away in bundles, he said. Appliance sales have been good for Cowboy Maloney’s, helped by the cash for clunkers program, he said. Abt Electronics in Glenview, Ill., has been “seeing a little uptick” in overall CE sales in the last couple of months, said Vice President Billy Abt. TV sales were slow early in the year but “seem to be picking up,” and audio has been “strong all year” for it, he said. Consumers were buying 3D TVs early on, but sales “cooled off” since, he told us. The retailer isn’t tethering its 3D glasses down, and some have been stolen or broken because of incorrect handling, he said. The glasses are “definitely a challenge,” he said, but it doesn’t want to lock them up because that “takes away from the ease of use.” It would also be helpful if TV suppliers developed a solution for 3D TV sets being demonstrated to be switched from 3D to 2D and back with the flip of a button, Abt said. That’s “another challenge” because consumers walk by a TV running 3D content and the image is “blurry,” he said. Abt’s online sales, meanwhile, were up about 17 percent year to year, said President Mike Abt. The retailer returned to NATM early this year, leaving the Progressive Retailers Organization (PRO Group). “We love both groups,” Mike Abt said. But, unlike NATM, PRO didn’t support appliance programs. Although CE is key to Abt’s business, appliances make up a larger part of its overall revenue, so a return to NATM made sense, he said. PRO Group’s members are mainly CE retailers.

Things are “tough” for CE retailers and manufacturers, said Al Levene, vice president and general manager for electronics at Haier, after meeting with NATM dealers at the conference. Agreeing, Conn’s President of Retail David Trahan, said there’s a “very tough environment out there for retailers and vendors.” But Trahan said there were “very positive things coming out of our NATM meetings” with vendors. Unlike several other vendors, Haier isn’t engaged in aggressive scan-down rebate promotions, he said. The company considered scan-downs, but decided against them because of the strength of opposition of its retail customers, he said. Executives at two other manufacturers who attended the conference didn’t respond to requests for comment on the heavy criticism of scan-downs and bundles by NATM retailers and Bill Trawick, NATM president and executive director, at the conference (CED Sept 30 p1).

While most retailers were complaining about bundles, Lorne Schmunk, vice president of merchandising at Salt Lake City-based RC Willey, said bundles in which products are combined by it and not the manufacturer can be profitable. He pointed to a package put together by RC Willey that included a 65-inch 3D-ready Mitsubishi TV, two pairs of active-shutter 3D glasses, a sofa, three tables, a loveseat and area rug at $2,599. Sales were initially “a little more sluggish” than expected but picked up after the retailer changed its description of the 3D TV to a high-end TV in which 3D was just one of the features, Schmunk said. It was an “interesting learning experience for me,” showing that consumers remain unclear on what a 3D TV is, he said. Many mistakenly believe a 3D TV can’t play 2D content, he said. That bundle deal was to be offered through Sept. 30. Manufacturer-promoted bundles and scan-down rebates, on the other hand, are problematic and helping to “kill” the commissions of salespeople, Schmunk said. Scan-downs aren’t going away, in large part because Best Buy wants them, but he said manufacturers and retailers are “giving a lot of money away for no particular reason,” because most customers don’t even know about them when they come to shop. Manufacturers are also violating their own minimum advertised pricing policies with scan-downs, he said. Some manufacturers, however, are “starting to come around” on scan-downs, Schmunk said. Separately, state energy rebate programs continued to help appliance sales, but “the effects of that are starting to slow down” since July as overall U.S. consumer confidence started slipping, he said. He doesn’t expect consumer confidence to change much in the next six months, and unemployment is now “the number one issue,” he said. “Some markets are worse than others,” he said. Nevada has been bad, and Utah has been worse -- “a real tough market,” he said.

Some NATM retailers have their own private-label strategies, but it’s looking into whether to offer private-label programs as a group, said Trawick.

The agenda for next year’s NATM conference isn’t set, but the group hopes to hold it Sept. 19-23, again at the Ritz-Carlton in Dallas, said Michael Maund, NATM director of operations. Conference attendance hit “a high of 230” people last week, he said.