Jeannette Howe is national membership manager for the Home Entertainment Source (HES) buying group.
What is HES doing to help its membership cope with inventory management issues?
Our group has taken on the whole issue in a way no one else has. With our Expert Warehouse Program, which began in October 2003, we are buying for our dealers to get inventory they couldn't otherwise get for themselves due to allocation issues. For example, I was talking to one dealer who, in calendar 2003, did $250,000 with a manufacturer, and they were told by that manufacturer that they were now number 1,911 on their allocation chart. With CEDIA as successful as it has been, there are hundreds of small dealers in any given marketplace and they're all either buying through distribution, which is very expensive for them, or they have no other alternative. The big guys get the allocation, and the smaller guys are under the radar.
One supplier, for example, made the decision to cut off all dealers doing less than $100,000 a year with them two years ago, and told them they had to buy through distribution. A few other manufacturers have even higher bars. What this means is that the dealer who has the investment in brick-and-mortar is now being forced to purchase through the same channels designed to cater to the guy who has no overhead who works out of his home. And they can't afford to do that.
We buy from manufacturers and put inventory in our warehouse program, and then the dealers can buy at the same price as if they were buying factory-direct.
We began with Sharp and Samsung, and in their cases, if you're an HES member, you are automatically authorized to buy their products through this method. Other lines need separate manufacturer authorization, such as for Bose, Pioneer, Pioneer Elite and the Hitachi Directors Series. We've added JVC as well, and then, because Brand Source is our partner (which is the buying group for appliances and more entry-level consumer electronics), we've also added that class of trade. The volume we did in December 2003 compared with December 2004 was about an 800-percent growth.