And Now, Anti-Distribution
A New Kind of Deal From HES
By Jeannette Howe
Back in the 1980s, a specialty CE manufacturer with a roster of 400 franchised retail dealers was considered a healthy manufacturer. Today, the fragmentation of the marketplace has created more dealers than any given manufacturer can profitably service. Generally speaking, there can be 400-plus members of what's called the "van and ladder brigade" in any given major market. Realizing that it costs a manufacturer upwards of $50 to fulfill a single PO and cut an invoice, it becomes clear that some form of re-imagined distribution is necessary to service this smaller volume class of trade. AVAD, the Advantage Group, and other similar services evolved out of the manufacturer's need for a one-stop distribution solution to reach the burgeoning custom installation market.
About a year ago, Sharp made the decision to cut off all dealers doing less than $100,000 in annual purchases. Panasonic recently cut off all dealers providing less than $500,000 in annual purchases. In both cases, the manufacturer came to the conclusion that selling to smaller dealers is prohibitively expensive. This alarming trend is now forcing small to mid-sized dealers to purchase through distribution sources, often at significantly higher prices.
It's a fair question to ask, then, if a dealer with a costly brick and mortar investment, trained sales consultants, and professional facilities should be forced to purchase at higher costs through a distribution network that was initially designed to support the van and ladder brigade?
Home Entertainment Source (HES) is creating a compelling alternative solution. A non-profit cooperative and buying group owned by its members, HES has been warehousing Bose, Panasonic, Samsung, Sharp, APEX, and even Gateway-priced plasmas in their "Expert Warehouses" since last fall. HES members purchase product from these warehouses at the same factory direct prices paid by franchised dealers. There are now three Expert Warehouses across the country (New Jersey, Georgia, and Nevada) and HES dealers need only order $5,000 of any mix of product to get free freight. As of this writing, HES has shipped over $8 milion at cost in CE goods to their membership. By the end of last r, HES had already reached number 11 on Samsung's allocation chart, and it is now already number 6. A state-of-the-art online ordering system allows members access to hot, allocated product, so they can increase turns, buy at competitive prices, and maximize ROI.