Clint Engel
Dealers seek higher margins than electronics
LAS VEGAS — Melanie Chumchal didn’t come to the Nationwide Marketing Group buying conference with the idea of buying furniture.

She and her husband, Randy, own a 6,000-square-foot Radio Shack franchise in Wharton, Texas, a small town southwest of Houston, so her eye was on the electronics side of Nationwide’s offering, and its financing programs. But when she walked into the furniture hall in the Venetian resort, she got excited.

“I said, ‘Wow, I can do this.’ The consumer wants it, and it’s not as competitive, especially in my market,” she said.

For many dealers shopping Nationwide’s semiannual PrimeTime show, competition in the electronics category has been driving down margins for years. On a $300 Ipod sale, for example, Melanie Chumchal says her profit is about $3. And the squeeze is getting worse.

“Even gas stations are selling cell phones,” she said, “and at such low margins.”

Now, she and her husband are thinking about opening a small furniture store, filling it with goods from some of the very furniture vendors offering special programs to Nationwide dealers, including Ashley and Urban Classics by Coe — both new exhibitors. In the meantime, she was snapping up home entertainment furniture to add to the Radio Shack store.

Furniture suppliers at the show said they saw dealer after dealer looking at furniture as a way to beef up profit margins.

“We have been inundated with people who we didn’t previously sell — both other furniture retailers and electronics and appliance dealers getting into the category,” said Kerry Lebensburger, president of sales for Ashley’s upholstery division.

Ashley showed in about 3,000 square feet, and brought some 18 furniture and accent categories and 22 people to man the space, including an Ashley Furniture HomeStores representative in case some retailers were interested.

“There were times in here when you couldn’t move,” Lebensburger said.

Sandberg Furniture, with its display of master bedroom, youth bedroom and home entertainment furniture, was showing in prime space near the entrance to the exhibit hall.

“We weren’t open 15 minutes and we had a new account,” said Mike Genrich, vice president of sales. By the time the event was over, “actual written business exceeded what we wrote in Tupelo,” he said.

He said interest was strong in all product categories, including a new version of a Sandberg bunk bed featuring steps instead of a ladder, with canvas storage draws under each step (retailing at $699, or $899 with a trundle bed option).

A top-of-bed program through supplier Melrose, introduced at the January Las Vegas furniture market, was a hit here, too. While Sandberg doesn’t make money on the  bed linen sales, the Melrose alliance supplies top-of-bed sets designed for the manufacturer’s collections and a package that’s easy and affordable for retailers to carry, Genrich said. And it keeps the furniture looking great on retail floors, he added.

Genrich and others here said furniture is a natural next step for the buying group’s primary base of independent electronics and appliance dealers looking to boost their margins. Nationwide says that 60% to 65% of its more than 2,500 members carry furniture in some meaningful form, and the number is growing.

“Our pricing strategy for the (Nationwide) Furniture Smart members allows them to be competitive with the (big-box retailers),” said Mark Phanco, senior vice president of ready-to-assemble specialist Bush’s home product groups.

Bush participated in a cash-back program that Nationwide promotes, offering dealers $5 back on every $100 in orders written here and free freight on orders of $1,000.

Phanco called business here “exceptional,” and said both incentives succeeded in getting dealers to buy on the spot. Hot products for Bush included the company’s Montclair TV cabinets, which have remote controls to move 50-inch TV screens in and out of the base.

In the Parker House space, expandable TV carts — starting at 48 inches and extending up to 72 inches — sold well, as did a “space saver” wall unit, which holds up to a 60-inch screen in a cabinet that takes less than eight feet of wall space.

“We surpassed the previous (PrimeTime) show’s written business,” said Sam Perone, Parker House vice president of sales and marketing.

Jeff Lankford, sales manager for Steve Silver, and Jack Tidwell, vice president of sales for Berkline/BenchCraft’s western region, said they saw a lot of Nationwide rent-to-own dealers.

“They looked for better goods,” Tidwell said. Step-up goods for RTO dealers typically mean they can rent out furniture more times before it’s trashed, and there’s a better chance the consumer will keep the furniture.

Larry Furiani, vice president of dealer relations for Coaster, a longtime supporter of the Nationwide show, said the successful event validates a distribution model that has flown under the radar — aggregate buying and brand-building that puts independent home furnishings retailers on a level playing field with the big boys.

“With (more than $9 billion) in purchasing power, this guy can carry a pretty big stick,” Furiani said.