NATM Dealers Slow Expansion Amid Struggling U.S. Economy

While P.C. Richard & Son was quick off the mark to grab former Circuit stores, adding new locations in Danbury, Enfield, Newington and Norwalk, Conn., the chain hasn’t opened a new location there since December. Electronic Express opened a new outlet three months ago in Cleveland, Tenn., in a former 20,000-square-foot Circuit store that had been part of Circuit’s last gasp The City format.

"Whether it was strategic or defensive we had to” expand into Connecticut, said John LaRegina, senior buyer at P.C. Richard, which has seven stores in Connecticut. “We knew we always had to be in Connecticut, but we wanted to make sure the New York and New Jersey infrastructure was right before we moved in” and Circuit’s departure provided the opening. Despite the pause in Connecticut, Massachusetts is “on our radar and wide open” and P.C. Richard will likely expand presence in the Philadelphia market in “the near future,” LaRegina said. “You may not see anything in the next six months, but in the next couple of years, you will know we are there,” he said.

Other chains like ABC Warehouse, which had 35 Circuit stores in its markets, relocated or opened outlets including those in Portage and Lansing, Mich. But ABC doesn’t have plans for new stores on the horizon. And Electronic Express has converted at least three former Circuit locations to its banner. But rather than continuing expansion, Electronic Express may bring its Digital City format stores in Clarksville, Tenn., back under its own brand, President Sam Yazdian said. Digital City opened in late 2009 in a former Circuit store to help broaden the chain’s business in PCs, tablets and videogames, all of which generated slender margins, forcing the chain to reconsider the concept. Yazdian said. The Digital City lease expires in 2012, he said.

"With those chains that got some of the old Circuit locations,” including former NATM member hhgregg, “time will tell,” Abt Electronics General Manager Philip Hannon said. “With cheap real estate, there is no better time to expand, but you have to be able to put a strong business model to it. Just because there are cheap opportunities doesn’t mean you should grow."

Many NATM members are taking a measured approach to expansion. While BrandsMart opened a new smaller format, 42,000-square-foot location in the Miami market last fall, it has no immediate plans to broaden the concept, President Michael Perlman said. And while it’s not opening a new store this year, BrandsMart will likely use a combination of full-size 130,000 to 140,000-square-foot stores and the smaller format to enter a new market, Perlman said.

"I know exactly what to do in any market we open in,” Perlman said. “But right now I think it is more important that we figure out how to make a profit at the business that we have. Opening up even more stores that may not make a profit is not necessarily the right answer."

Nebraska Furniture Mart has narrowed to three markets the potential locations for a fourth store and hopes to select one by early 2012, said Jay Buchanan, CE division director at the chain, which has 420,000 square foot stores in Kansas City, Mo., and Omaha, Neb. It also has a 24,000-square-foot location in Des Moines, Iowa. Once a market is chosen, it will take a year or more to build the store, Buchanon said. While Nebraska Furniture would “prefer” to open in an adjacent market, that isn’t a requirement, Buchanan said.

NATM members are widening the assortment of products they carry. Abt sells jewelry, watches and hot water heaters and recently added Dell PCs, Hannon said. Nebraska Furniture is doubling space at its Omaha location for cellphones and exercise equipment, Buchanan said. Nebraska will continue to sell 121 models of cellphones, but needed to increase space as more people crowd into the wireless section to buy family plans, Buchanan said. In exercise gear, Nebraska is doubling space for the category to 5,000 square feet in Omaha, still below the 12,000 square feet the category get at the Kansas City store, Buchanan said. Nebraska merchandises treadmills, exercise videos, elliptical machines and other gear. To accommodate the added space for wireless and exercise equipment, Nebraska is reconfiguring its PC department, cutting back on business software to focus on the Top 100 titles and reducing the number of CDs and DVDs it carries, Buchanan said.

BrandsMart also is adding spiffs to the hourly wage that staffers get for selling PCs and wireless, Perlman said. BrandsMart introduced in-store pick-up of products purchased from its website, he said. While the service initially crashed BrandsMart servers in August, the chain has since resolved the issue, Perlman said. While Abt’s Internet sales account for 23 percent to 24 percent of its annual revenue, that’s short of a 40 percent target, due to the “efficiency” of the online market, Vice President Billy Abt said. “It’s an unbelievably efficient marketplace so that if you lower your price $1 another guy lowers it within 10 seconds by $2,” Abt said. “It’s also tough to sell our service on the Internet because we can’t deliver a TV across the country.”

NATM Notebook

Boscov’s will reopen Oct. 5 its 274,000-square-foot store in the Monmouth Mall in Eatontown, N.J., Chief Merchandising Officer Ed McKeaney said. The Eatontown location was one of 10 Boscov’s stores that closed as the chain filed for bankruptcy protection in August 2008. Former Boscov’s CEO Al Boscov, armed with money from personal funds, family and $35 million in state of Pennsylvania-backed federal loans bought the chain out of bankruptcy for $307 million. The Eatontown store will have a 4,000-square-foot CE department, slightly smaller than the 5,000 square feet typically dedicated to the section at Boscov’s other 39 locations, McKeaney said. “Our emphasis has always been on ready-to-wear clothes because it is so profitable, but you have to sell a lot of dresses” to match TV sales, Divisional Merchandise Manager Howard Samuels said.

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NATM, with 11 members and 292 stores, has nine and 11 percent shares of TV unit and dollar sales in the 43 designated market areas (DMA) in the U.S. in which its dealers have stores, said Jack Cruse, market development manager at The Stevenson Co. In the 50-inch and up screen size, the unit and dollar marketshares increase to 14 and 15 percent, he said. There are 210 DMAs in the U.S. In a survey of 40,000 customers in NATM markets, 52 percent shopped for TVs online and 16 percent purchased them via the Internet, Cruse said. In the total CE category, a survey of 223,000 customers, showed 50 percent shopped on line and 24 percent bought products. Eighty-two and 65 percent of consumers compared TV prices or checked product specs or features, Cruse said.

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Paul’s TV will be the first bricks and mortar retailer to carry Amtran Video Corp.’s JVC brand LED backlit BlackCrystal LCD TVs, said Tom Paterniti, vice president of sales and marketing. The chain will have 42-inch ($665, $775) and 47-inch ($849, $999) TVs with 60 Hz and 120 Hz refresh rates in stores by month’s end and also possibly market them in the Living Spaces stores, he said. Paul’s operates a store-within-a-store format at Living Spaces. Amtran, which licensed the JVC brand last year after JVC dropped TVs, also has 32- and 37-inch LCD TVs with LED backlights. The line includes CCFL-based 32-, 37-, 42- and 47-inch LCD TVs. The sets use LG Display panels and Mediatek Arm and MIPs processors to handle scaling, deinterlacing and other functions, Product Manager Allan Hsieh said. Amtran held off launching larger sets amid Sharp’s aggressive pricing, Paterniti said. “We would have brought in a 65-inch, but that would have been suicide,” Paterniti said. “If we tried to come in at $2,499 we would still be underwater in trying to get enough margin for dealers.” Sharp is expected to promote a 70-inch LCD TV at $1,999 in Black Friday specials in November. As it readies TVs, Amtran is marketing an AVC brand SPZ-210 soundbar packaged with a wireless subwoofer ($239) that ships in October. The 2.1-channel system contains a 50-watt soundbar with four, 3.3-inch drivers and a 60-watt, 6.5-inch subwoofer with 120Hz to 20kHz and 38Hz to 120 Hz frequency responses. The soundbar features SRS Labs’ TruSurround HD4 technology. In addition to the soundbar, Amtran is weighing other components including wireless speakers. The company will introduce 802.11n-based, Internet-capable LCD TVs in January at CES.