How long before Independents’ Day?

By Steve Bohling April 01, 2015 Industry features & issues

What’s the outlook for independents? What do they think? And where to from there? Are the stars aligned for the two independent groups to become one? Steve Bohling reports.

To view a PDF of the complete feature as it appeared in April 2015's Wares magazine, click the download button at the bottom of this page.

We at Wares have been talking about what the future holds for New Zealand’s independent appliance & consumer electronics retailers for some months now. 

The issue of the ongoing viability of the indies – many of whom continue to just about get together the sheer willpower to carry on – has been simmering away in the background, in pubs and at industry events. It’s all been off the record, of course, 

All of which makes it difficult, if not impossible, for a business to business magazine like Wares to document in a fair and (importantly) totally transparent manner, in a way that actively advances the issue rather than just reporting it.

But this train of thought has been kick started back into action by several instances of longstanding indy retailers talking about everything “just getting too hard” with some simply closing their doors, not just because they’ve given up, but also because they couldn’t find a buyer or due to financial pressures.

 

IS THERE A FUTURE FOR THE INDEPENDENTS?

The latest catalyst in this saga was when long-time member Heathcote Appliances exited Appliance Connexion at the beginning of this month. 

More to do with the operation having performed to a level where it has outgrown the need to bear someone else’s banner rather than being about to fall on its face, this change nonetheless started another series of broader conversations. 

Some of those conversations were so vehement, the participants so passionate, that we decided to put them out there. Some were more measured but the underlying reason for including their thoughts in this issue is that our sources almost to a man, were insistent that action was required sooner, not later. 

Equally unanimous among those who agreed to share their views publicly was that they would only do so on the understanding that they were not identified.

These conversations took place in the first days of April with 10 independents. They range from across the country, north and south. One is unaligned while the others wear one or other of the two independent banners. Some are large, a couple small, but none are big box operators.

 

IF SO – WHAT IS THE FUTURE?

As you read the opinions expressed below, it will become obvious to you that it was pretty well unanimous that there is a future for the independents despite some apprehension. 

It was made very clear however, that the survival of the indy sector was dependent on ACL and Appnet joining forces, and doing so sooner rather than later. A matter of urgency would be the consensus.

Here are the thoughts of our two handfuls of independent retailers, in no particular order. Bear with us, there are a few interesting asides in all this, but the nub of the matter is pretty consistent…

“There is a future, but time’s running out for the small ones. The larger independents will survive because the suppliers need us and will make sure we survive. But we need the little fellows too as their combined purchases exceed a single big guy. 

“However, if we can’t get one combined independent buying group together, a lot more small retailers will drop off the perch. This must happen and suppliers would support such a move!”

“Yes of course there is a future but we need to be even smarter and more organised. Eventually we will all end up in one group. For this to happen there must be a will from suppliers, which I believe there is, and a point of difference between independents and chains will evolve. 

“In fact, the chains also need to change the way they do things, as we have seen from some recent results, or they will get into trouble as well. This year is about change and by the end of it we will see a different marketplace.”

“Absolutely there’s a future for independents, but some attitudes need to change. Having said that, the multis have similar issues and they will need to change as well. The industry needs to change! 

“I think specialisation is very important and dealers have to identify where they want to specialise. Not just independents, but corporates as well, need to align themselves more with suppliers in partnerships. I would love that to happen. Rationalisation of suppliers would be great, and ultimately of buying groups as well.”

“I would like to think there’s a future for us independents, but I think suppliers are trending towards online sales as well, expecting us to be their flagship showroom where the customer gets all the information before making a decision. Miele do it very well in that they put the stock in for us, put their prices on it and when we sell it we get a margin paid back. Our service department is a key strength for us.”

 “Independents in more rural areas will be OK so long as the cities don’t come closer geographically because of modern transport and roads, and internet shopping too, although that’s more confined to smaller items at present. 

“There is a body of thought that in the big cities it is heading for a duopoly with independents disappearing rapidly over the past few years and, unless someone comes up with some bright ideas pretty soon, that may well continue.”

 “There’s definitely room for independents! Many have formed and developed their businesses around being specialists in certain products and in my opinion they now really have to draw a line in the sand and get back to being specialists in things they know and do well. 

“An independent isn’t capable of being everything to everyone so we should be the best we can with whoever we choose to partner with. Going forward, for a ‘coalition of independents’ to survive, there really needs to be just one buying group. That’s the obvious change which needs to happen.”

 “Sure, the independent sector will survive but dealers can’t expect to stay the same to do so. Several probably wanted to get rid of the service department back then but now it props up retail and their retail business won’t survive on traditional appliances alone. They are being slaughtered in the price wars.

“Independents should define an area of expertise and diversify into a product group others are not so good at. Pick kitchens, pick something else, but be different!”

 “Yes independents will be there, but it’s a question of relevance. Some suppliers talk about New Zealand retail being a race to the bottom. It’s just crazy that we are selling cutting edge, new technology at the prices we are and a shame that mass merchants are driven by constant discounting. Suppliers don’t want to see independents go because then they would all have to fight in a duopoly situation and that’s likely to be unprofitable. 

“Also, I don’t know of too many independents with a succession plan. At conferences there is a lot of grey hair, so maybe the answer is to sell the business to a chain store Prop or Manager who is younger but doesn’t want to move around the country. I guess it depends on a lifestyle choice. 

“Back to relevance and the next 6 months. The independents as a whole have to be one group, so that’s where it has to start and, hopefully, the national chains, having secured market share, will now look to making some money. Probably they need to, looking at recent published results.”

 "The last few years have been a shambles, so something has to change. With our population there’s probably only room for one independent buying group (although I’m happy with two) plus Kitchen Things as an alternative, and the local dealer’s name should always come first, not a logo. The logo means nothing whereas the dealer’s name has been around for a long time and the owner is usually well known in the local community. 

“Constant 20% off-type promotions, week in week out by the chains wear you down and no-one makes any money – take 20% off then see how much is left. The public just buy on price and we give all the information away free. Hardware chains are getting into the act more and more too with kitset kitchens including knocked down prices for whiteware. So yes, things need to change, and soon. Not just the independents, but the industry as a whole.”

 “As independent dealers continue to fall over, falling volume becomes an issue for suppliers so, at some stage soon, the current buying groups need to merge. Customer perception also plays a part. For instance, our customer base is getting older and, by and large, these people prefer to shop where they get the best information, service and the same person each time they come in. Price is not the main issue and they make a decision based on information. 

“On the other hand the younger shoppers, the majority, those under 45, just go where the deal seems best. Greater product differentiation would help. As it is now, ‘Brand A’ may have an exclusive model for three groups but the differences between them are so small the customer ends up going with the cheapest price.”

 

SAME QUESTION, SAME ANSWER

Asked the same question – “is there a future for the independent retailer and if so, what is it?” – suppliers we talked to appeared to be singing off the same hymn sheet as the retailers quoted above. 

One major supplier shared this opinion: “Yes there is a future for the independents – we need an independent channel to service the smaller communities where it’s not just about price but about the whole service package, delivering goods and contact with the local people.”

Asked the $64,000 Dollar question, “can the independents survive without real scale?” however, the answer was explicit: “No. Long term, no.”

Many or our readers will have both spoken and heard these sorts of comments over a beer or three over the years. Many will be thinking: “Yeah right but after the heat of the moment things usually go on just the same.”

Making change happen requires belief, energy and determination. Not to mention an ego or two to be put on hold.

 

CHANGE YES, BUT HOW TO MAKE IT HAPPEN?

What do the two independent buying groups – in the form of their respective support office functions – think of all this? Appnet General Manager Grant Sheridan offered the following:

“One of the key strengths of the independents is their local identities and this is one of the real positives that separates us from the ‘Big Box’ operators but the opportunity to develop a new model has become more top of mind with recent changes in the market. 

“The independents are open to change, but change for the right reasons, and done with the retailers’ profitability and long term survival as key focuses.”

Does Peter Drummond, CEO of Appliance Connexion, envisage a joining of the two organisations? 

“We certainly wouldn’t rule any merger or acquisitions or opportunity out,” he says, adding that although ACL Support Office would welcome all and any ideas, he too adds the clear proviso that any major changes “would need to make the boat go faster!”

So yes, there is a willingness to explore change but there’s an old saying – “talk is cheap” – and indeed it is. In this instance it is clear there is not only clear need and motivation for change but we also have a sneaking suspicion that there’s the willpower to follow through.

I feel justified in closing off this feature with a quote from the film Independence Day. It’s the President’s address to the fighter pilots just before they fly off to almost certain destruction at the hands of the invading aliens:

 “We can’t be consumed by our petty differences anymore.

“We will be united in our common interests.

“Perhaps it’s fate that today is the 4th of July, and you will once again be fighting for our freedom, not from tyranny, oppression, or persecution – but from annihilation.

“We’re fighting for our right to live, to exist.

“And, should we win the day, the 4th of July will no longer be known as an American holiday, but as the day when the world declared in one voice:

“We will not go quietly into the night!

“We will not vanish without a fight!

“We’re going to live on!

“We’re going to survive!

“Today, we celebrate our Independence Day!”

Well, maybe not today, but soon at least? We fully expect to follow this up in the June issue with concrete news of a step change for New Zealand’s independent retailers.  

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