Nationwide launches central buying

Television Digest with Consumer Electronics, Feb 23, 1998

Nationwide Direct Plus (NDP), which so far has agreements with 4 vendors - Daewoo, Pioneer, Samsung, Sharp - is centralizing buying responsibilities traditionally handled by individual retailers. Group is targeting at least 85 members and will charge 10-25 basis point fee at start that will be included in purchase price to cover administrative costs, Operations Mgr. Jason Clubb said. Purchasing group was introduced at Nationwide's annual meeting in New Orleans last week.

"The idea is to increase the buying power of the group rather than have 155 separate deals negotiated with vendors," Clubb said. At start, retailers will fax orders to NDP, which will get clearance from financing provider Transamerica and send order to vendor for shipment. Goal is to process orders via electronic data interchange (EDI), Clubb said.

While Winston Salem-based NDP has been in development for 2 years, many dealers were learning full details for first time and some had reservations. NDP is headed by former Nationwide member Edward Kelly, who serves as dir. "We occasionally have individual deals with vendors and I want to make sure I can preserve some of those," west coast dealer said. Clubb conceded that some "bumps" remain to be smoothed out, but that NDP received "strong" interest from dealers.

Meeting also featured unveiling of new 4Cost Internet Network designed to link consumers buying products on line with nearby Nationwide dealer and first appearances by Primestar and Sprint PCS.

Details of PC plans still are being developed, but dealers said goal is to expand category beyond 24 members currently carrying product by adding sub-$1,000 PCs. Packard Bell/NEC is Nationwide's top CPU brand, although group in past has experimented with PC software and Compaq hardware via D&H Distributing. Some members carried Proteva's build-to-order product in 1997 and sell products of Brother, Canon, Lexmark, Tatung.

"For some Nationwide dealers who have had success in other categories, but not PCs, maybe we can look at PCs from a promotional prospective," east coast dealer said. But for other dealers, many of whom are entrenched in A/V and major appliances, change won't come easy. "It may give you more volume, but you won't make any money," said Audio Video Appliance Corp. Pres.-CEO Harold Ferrell. "You can't be everything to everybody, and that's one thing we don't want to be."

Also PC-related was new 4Cost service expected to be available within 90 days. Customers paying $13.99 annual fee will be able to use 4Cost Web site to find products by brand or model number and locate closest Nationwide dealer via first 3 numbers of Zip area - regions covering 100,000 people. Service also details dealer cost, factory incentives, financing programs. "We're aiming to attract the customer that is shopping mail order online and redirect them to a local dealer that will sell on a cost-plus basis," Sales Mgr. Charles Sutton said, referring to dealer cost of product plus profit margin.

Monroe, La.-based 4Cost, whose principals also own retail store, will enter data and maintain Web site, while I-America provides Internet access via T-3 connection, Site Development Mgr. Jerry Mayfield said. Dealers that serve as source for product pay $225, $200 or $175 monthly per area Zip based on 1, 2 or 3-year agreement, respectively. As incentive, 817 "charter" 4Cost members also will receive 15% of Web site subscription income less transaction cost, Mayfield said.

Primestar, which is readying retail push for spring with IRD priced at $149 after rebate, pitched Nationwide dealers with free store installation of service that normally carries $500 fee. Retail strategy has been delayed in past pending FCC decision on request to transfer Tempo license for 11 transponders at 119 [degrees] W. Satellite will be base for 120-channel service that's expected to be stripped of sports to focus largely on entertainment programming when it launches in April. DirecTV, EchoStar and U.S. Satellite Bcstg. (USSB) already sell service to Nationwide, while Primestar has agreements with Associated Volume Buying (AVB) and Key America. "This is a business that flourishes in the selling floor environment and that relates easily to the knowledge of an independent," said Primestar Retail Sales Dir. Jeffrey Repka.

Also courting Nationwide dealers was Sprint PCS, which is looking to buying groups to expand phone service that's available through national chains Best Buy, Circuit City, RadioShack. Unlike cellular phones, which some Nationwide members carried before dropping category 7 years ago after running into problems with regional providers, Sprint is nationwide. Retailers sell phones while Sprint handles service. Only RadioShack, under exclusive arrangement granted as part of store-within-a-store format, gets residual from sales of long distance and other services.

"The regionality of cellular carriers made it difficult because they cared if they sold the hardware and they made it very difficult to be in a market and not buy the hardware from them," dealer said. "With national players, it looks like something that is do-able."