Jerry Satoren, Executive Director, NATM, provides Dealerscope with a look at the buying group’s annual Member Conference, which just took place in virtual format, and looks at business as it is and as it is shaping up for 2021.
Dealerscope: Normally, we would be speaking in person at your annual Fall Member Conference – but COVID has altered the equation dramatically this year; it has forced everyone into “virtual” mode. With these limitations, how are you orchestrating the collegial interactions among members – and their interactions with the vendors as well, under these circumstances this year? You had mentioned a multi-week “stretch out” of conversations with members, by product category. Can you talk about that a bit and how it has been working?
Jerry Satoren: Yes, every part of our business interactions with both consumers and vendors has been upended in 2020. With virtually (no pun intended) zero business travel since March, we’ve had to rely on the digital versions of ourselves to conduct our business. While these virtual meetings certainly lack the energy and collaborative creativity that result from personal interactions, there were some advantages as it relates to our Conference. I’ll explain.
Normally, our three-day conference is held during the third week of September. Day 1 would have featured our Vendor Fair. This event provides an ideal opportunity for our members to consider new products or services from over 60 prospective NATM vendors. The event is a round-robin where each vendor meets with each of our 12 members for 25 minutes. As this requires scheduling over 700 individual meetings, there was simply no efficient way to do this virtually. While many potential vendors were disappointed with this reality, we look forward to hosting them next year. The next two days are devoted to meetings with our major or “Core” vendors. Day 2 is when these largest suppliers are invited to present to the group en masse. To make this happen in one day, we run the TV, appliance, and IT core meetings concurrently. Finally, on Day 3 we hold our core supplier “roundtable” meetings, much like our vendor fair, where each member meets individually with each core supplier for 30 minutes. For these two segments of our conference, we decided to push ahead and stage it virtually. Not being limited by physical presence in Dallas and mindful of screen fatigue, we thought it best to hold these virtual core and roundtable meetings over a three-week period. TV in Week 1, appliances in Week 2, followed by IT sessions in Week 3. We wound up with 16 of our major suppliers participating virtually and the scheduling and logistics of the entire event ran rather smoothly. And that would 100% be thanks to Mike Maund, our operations director. Even this scaled-down virtual conference required Mike to schedule for over 200 virtual sessions and communicate the correct hyperlinks to the correct participants.
Now that our conference is completed, I can say nothing replaces personal human contact, especially when it comes to buying and selling. But I will also say that I, along with many I heard from, felt this alternative exceeded expectation. Though we were all in little squares on a screen, it was a definite feel-good for all to see the “usual suspects” all in one place for the first time since February. For those in NATM, like me, with multi-category responsibility, virtual provided the opportunity to participate in every single core meeting and was a clear upside. This is never possible in person, when all three category meetings occur concurrently. In the same vein, not having to be in Dallas permitted many more NATM category personnel as well as senior vendor executives to participate in the core sessions and the individual roundtable meetings. In the final analysis, our virtual event at the very least provided a platform for an executive-level exchange of ideas on what has occurred to date, current market conditions and plans for the balance of the year, along with a best guess from some really smart people on business performance for Q4 and 2021.
This year was to be the group’s 50th anniversary celebration. Are you somehow acknowledging this benchmark this year, in even a small way, and planning anything for the future for whenever the situation improves?
Yes, NATM is 50 years old and as strong as ever! But I believe any celebration of this milestone needs to take place when we can all be together. Outside of creating a 50th anniversary logo that we’ve used all year, we hope to be able to properly acknowledge and celebrate this next year.
Please give our readers a sense of the members’ general mood in Month 7 of COVID-19. What are they expressing as their most vexing issues, how have those issues changed from, say, March, and are there any silver linings to the COVID cloud they have articulated to you? For example, has this caused members to further hone their digital and online businesses even more sharply?
Here in Month 7 of this unprecedented journey, I can tell you the general mood among the members is one of relief. If we go back to mid-March when states began to enact stay-at-home orders, my answer to this question would have unquestionably been fear. No doubt in my mind that the most vexing question business owners faced in March was…can I survive this? I think every retail business in America, including our members, were doing calculations about how long cash-on-hand would cover their nut. For the many under-capitalized or extremely leveraged retail businesses, that math was beyond scary. Sadly, those fears were realized by several retail businesses, as we’ve witnessed multiple bankruptcy filings since April.
Very quickly though, it became evident that our new world had created a path of very divergent fortunes. And, based purely on luck, the categories you participated in determined the path you’d be on. The unlucky categories like travel, entertainment, and apparel for example have seen catastrophic declines. The lucky categories, like the ones that this buying group of 12 TV/Appliance Home stores participate in, have had a different experience. There is no doubt that our silver lining to the COVID cloud are the categories we sell and our ability to keep our stores open, if we so chose, because we were deemed essential by every state.
Early in the pandemic, the sudden stay-at home / work-from-home / learn-from-home environment we were thrust into created enormous demand for computers, tablets, televisions, and Internet connectivity products. The demand for preservation and “clean” products was through the roof as well. Freezers, lower-priced refrigerators, air purifiers, etc. were all quickly sold out. For many families, these items became necessities whether you could afford them or not. Hence, more of a lower price-point mix. As we moved into late Spring and early Summer, demand continued to be strong but now was fueled by $1,200 stimulus checks and a $600 unemployment benefit bump. What was interesting about this period was we saw a shift in the mix. Suddenly, a higher-demographic consumer that was still employed, who had not traveled, eaten out, gone to a ballgame or concert, and received a stimulus check, had an unusually high amount of disposable income. The demand for the same categories continued, but our group saw a definite increase in the ASP as more premium and aspirational product sold.
So here we are in October, and our members are not only relieved, but grateful that their most vexing problem, at least for now, is acquiring product. Demand has not waned very much at all, and every single one of our major vendors currently sits with record numbers of back-orders.
Would you give our readers a sense about where members’ businesses stand in aggregate versus this time last year – up, down? What are some of the hottest categories they have seen emerging from the pandemic period?
Our business as a group has seen YoY performances that are generally commensurate with some of the various category sell-out data reported by NPD. In addition to the very strong categories I mentioned earlier, we are currently seeing strong demand for anything for the home. The bedding and furniture categories which experienced softness early in the pandemic have rebounded, and sales over the course of the summer have been very strong. The mattress manufacturers have now joined the “oversold” club.
Paint us a picture – what will Black Friday look like this year? What will be some of the biggest challenges faced by your members versus a normal year – and what will be some of the greatest opportunities where they can use their retailing and marketing savvy to the hilt?
It depends on how we define Black Friday these days. Looking at the trending for the past few years, I don’t think that the specific four-day Black Friday weekend matters as much as it used to. In 2019, many retailers started their push earlier than ever with many “Black Friday deals” offered as early as October. Cyber Monday continues to set records each year as well, further diminishing the BF weekend. I no longer view Black Friday comps specifically as a true measure of holiday success. In my view, gauging holiday performance can only be measured by full month comps for November and December, and maybe even the entire fourth quarter.
With that said, Black Friday, as well as November and December, are a big guess for 2020. The TV category, for example, has seen unprecedented sales levels through the Spring and Summer months. How much of this was upside vs. a pull-up of future business? Pile on the fact that Prime Day this year will be in October, just six weeks before Black Friday. Throw product shortages and rising panel costs into the mix and it is very possible that we could see the TV business, led by OPP models, show a YoY decline for November.
The final variable to our selling season may be the biggest one. Clearly, the first round of federal stimulus achieved its goal of propping up consumer spending. But we are now stuck in a political tug of war regarding Round 2. I believe we will see Round 2, but the question is when, how much, and will consumers spend this money to the same levels we saw in the first round.
Although it’s hard to peer into a crystal ball clouded by the coronavirus, does 2021 at all look
“normal” to you? And what do your members think will define “normal” in 2021?
Well I think everyone’s definition of normal, at the very least, means there are no longer any government restrictions and America is open for business. It also means the fear many Americans are experiencing wanes and they are willing to leave their homes. I do believe we will get there sooner rather than later, and I do believe our new normal will be a lot more like our old normal than some pundits predict. But I don’t think we will see that until we get through Q1 2021.
In my mind, two things need to occur before we get there. The first one will happen this year – and thank goodness. The chances of a pandemic hitting in an election year is only 25% but unfortunately, we hit the short odds. And because we did, we have a perfect storm of misery. The worst pandemic in a century combined with what is probably the most emotional election in a century. Sadly, COVID has been politicized and depending on where you consume information, you get the red version or the blue version. I think once the election is settled and the political spin is removed, we will see a much more unified and calmer messaging and a clearer path to returning to “normal.” Second, and more importantly, is where we stand on a vaccine and therapeutic treatments. We are currently making progress with treatments and are already seeing better outcomes with cure rates rising and death rates falling. I pray, and suspect, that over the next few months we will continue to find even more effective ways to treat COVID patients. We should also see a vaccine early in 2021 and that will be a big step forward for sure.
Once these things occur, we will return to normal. Again, I see that day arriving by early Spring 2021. So that’s what my crystal ball tells me about when and how we get past this pandemic. However, my crystal ball has no comment when I ask what our new business normal will look like. Too many questions remain about the financial fallout from all that has occurred in 2020. Once things like eviction protections, government stimulus, etc. expire, what does our 2021 economy look like? I’m not sure anyone has that answer right now. And, as it relates to our specific businesses, how will we comp the astounding growth we’ve seen in many categories in 2020? All of this suggests that we may not see growth next year. I think it behooves both vendors and retailers to manage business expectations realistically and plan with a focus weighted toward financial results vs. revenue results.
Despite the circumstances, would you say you were able to engender a good level of idea- and best-practice-sharing among membership this year – which is always a hallmark of your yearly Conferences?
While we did enjoy excellent exchanges of ideas with our vendors during the virtual sessions, we were not able to replicate the many interactions between the members that typically occur when we are together in person. Having said that, we are planning to hold one or two virtual best-practice sessions in early November so we can exchange ideas on what we’ve learned from our experiences this year, and how to best apply them to the various disciplines of our businesses in 2021.
Any other thoughts you might have on any other aspects of business – and what sort of “new normal” might emerge for your members when COVID-19 is in the rear-view mirror?
These days everyone is thinking about everything and every aspect of business. Another silver lining of COVID is that many changes in how we operate our businesses, that maybe we would have never tried, were forced upon us. And because of that, we can now measure results and apply them as appropriate going forward.
For retailers, we’ve been forced to do so many things differently. Though the consumer’s experience in our physical stores is what sets us apart and always will, the pandemic placed our on-line capabilities front and center. Thankfully, all our members have been investing in their websites over the past few years. With the sudden jump in on-line activity in 2020, we get to grade ourselves. Were we able to handle the growth and provide the same positive experience our consumers are accustomed to in our stores? What’s working and what do we need to improve? Another key is to consider is how and where do we expend our advertising and promotional resources. Have we found more effective and more efficient ways to reach consumers and engage them? A third big one, which probably applies to every business in America, is what were the results of remote working? Who needs to be back in the office and maybe who doesn’t? There are many other examples like this for us to analyze whether they should become standard operating procedure or go by the wayside.
The vendor community is in a similar position. For them, I think the biggest thought provocation resulting from COVID is how their promotional cadences should or should not change in the future. Because of tight availability, vendors have limited and/or eliminated many models from holiday promotions. NATM has always felt, especially in the appliance business, that promotional windows are too long and include way too many models that simply don’t seem to have much price elasticity. So, we are hopeful that their analysis tells them exactly that and results in a better promotional and value proposition for themselves, the retailer, and the consumer every single day of the year.
Nancy is a contributing editor for Dealerscope.
