Retail Observer

RETAILOBSERVER.COM SEPTEMBER 2014 54 Patrick Maloney Appliance Trends A t the finish of 2013, sales were up, consumers were back in the market, and the future looked bright. Well, the future still looks bright for independents, but we have to look a little harder through our sunglasses to see the rays. The first two months of 2104 were particularly hard for retail. Price increases and foul weather across the nation led to fewer footsteps in our stores. We have made a huge come back, but retail continues to struggle. This has driven retailers and manufacturers alike to take dramatic actions to right the ship. There has been a steady increase in consumer demand since Jan/Feb and the trend continues. One of the biggest challenges we face as an industry in today's' market is the prevalence of wholesale and retail promotional phases. These phases give the retailer a set window of dates to purchase products at a discount and a separate window to offer these products at a promotional price to a consumer. While these wholesale offers are enticing, they create a particular challenge when merchandising and managing your inventory. If you buy right, you have the opportunity to generate foot traffic and margins. If you buy wrong, it could destroy your margin portfolio for the quarter. It doesn't seem that long ago that an appliance vendor handed you a price sheet at the beginning of the year and that was your price. Occasionally they had some over stock items that they were looking to move, but for the most part, your price was the same all year. Outside of transitions or price increases, there really wasn't much in the way of price changes throughout the year. Well, that bucolic life has morphed into something completely different. It all started with those "crazy guys" in electronics advertising hot price points during something called "Black Friday". It was a short window, where, in an effort to generate foot traffic, stores offered door buster specials for a few hours in the morning. As we all know, appliance manufacturers and big box stores could not resist the pull from this type of foot traffic, and soon the appliance industry was fully involved. All this would have been fine, we could have managed had the carnage been left to those few hours on Black Friday. But, Black Friday grew into a week, and then a month long event. It has also spurned excesses in all holiday promotions. For example, the 4th of July promotion we have just come out of lasted three full weeks and we saw some of the most aggressive prices we have seen in a long time. Most of this can be attributed to shrinking demand. As the total appliance industry has constricted over the past decade, appliance dealers (mostly Big Box) have taken more aggressive approaches to capture this ever-dwindling consumer base. Likewise, manufacturers are muscling for their fair share of volume during these periods. Once ingested, by both the retailer and the manufacturer, this drug generates a spike in volume that they continue to crave year over year. This has created a perfect storm that, if not managed correctly, could blow many of us out of the water. So how do we manage our businesses in today's environment? How do we maintain turns while maximizing our wholesale opportunities? And, perhaps most importantly, how do we go toe to toe in the market place and remain profitable? This ebb and flow of promotional cycles bring into clear focus the importance of step up merchandising. During particularly aggressive promotional periods, the open price point merchandise may offer limited margin. This is where it is key to have a merchandising strategy set for your store (and entire organization) to ensure your maximizing your opportunity. Like the DES (Draw, Escape, Sell) merchandising model, you should pick a short assortment that you can maintain reasonable stock levels on. These models should have clear and definable steps between them with increasing profit opportunities. This principle holds true for your everyday retailing strategy and is even more important during the storm of activity around holidays. MANAGE PROFITS MONTHLY With the proliferation of promotional maps and declining margins during retail promotions, it is easy to get a negative taste in your mouth. If we look at our profit on a daily basis, the story looks pretty bleak. However, we cannot afford to close our doors to avoid the BLEND YOUR MARGINS, MANAGE YOUR PROFITS, LOOK AT THE BIG PICTURE

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