At the most recent Nationwide PrimeTime, held in August in Nashville, Nationwide Marketing Group (NMG) and Appliance Dealers Cooperative (ADC), announced a new partnership that will not only let NMG’s members order from ADC’s more than 70 appliance brands, but also enable ADC to access Nationwide’s wide variety of financial and other services. It’s a win–win for both groups. We sat down with ADC CEO Ken Miele, ADC Facilitator Kenneth Kohn, and Nationwide EVP of Membership Patrick Maloney, for an exclusive interview about this partnership, including the strengths that ADC and Nationwide bring to the collective table.
What’s the history of ADC?
Ken Miele (KM): ADC, which is going to be 50 years old in January, is an appliance cooperative owned by its members. We’re based in Monroe, N.J., and provide appliances and consumer electronics to our members in 12 states. We have 31 of our own trucks. Our fleet of trucks delivers to our members. ADC supports our vendors, keeping them in business, and thriving, with our ability to provide them with better pricing based on volume. As such, our members can compete with the big-box stores, day in and day out. We’re proud that 50 percent of our members are small specialty mom-and-pop stores, while the other 50 percent are some sizable dealers. Regardless, with us, everybody runs and operates at the same level playing field — a $50 million dealer doesn’t get product before you. It’s first order, first get. That’s pretty much what ADC does in a nutshell, and we do it well, now to the tune of more than $600 million, and more than a million units in three distribution centers in Monroe, N.J., and Harrisburg and Pittsburgh, Pa.
What is your relationship with NECO?
KM: We are one of the four chapters that own the NECO Alliance buying organization. NECO puts the programs together, and we buy off of those programs. So we all buy together. Combined, we’re close to $2 billion. So that $2 billion gives us the buying power in the industry to have competitive prices with the big-box stores.
Impressive — so this new partnership with Nationwide is big news — but it’s not the first time you’ve been with Nationwide. Why are you coming back to Nationwide after being with BrandSource in recent years?
KM: Nationwide has always been a better fit for ADC, even from the time we left and went to BrandSource. We kept relationships here, and BrandSource wasn’t the right fit. So we’re thrilled to be back. It’s like being home. We feel that we can help Nationwide’s retailers by delivering to them with our fleet of trucks in the Northeast. I don’t know too much about the history, but we just know the dealers at Nationwide better. Also, Nationwide offers a lot of services like financing with Synchrony and Wells Fargo, which every one of our dealers definitely needs. And Nationwide has relationships with other services such as AT&T. On top of that, if any of our members want to get into bedding, Nationwide has a tremendous variety of offerings there. Or even tractors and lawnmowers, which Nationwide has but we don’t. So with Nationwide, there are so many opportunities for product that we don’t carry. We felt that BrandSource did not have the breadth of offerings that Nationwide has.
And of course, Nationwide members will benefit from your relationships with brands such as Miele, Weber Grills, and Viking.
KM: Yes, it’s going to be very rewarding to ship to the Nationwide members, to be able to get them product, due to our buying power and size, that they probably can’t get now, and ensure that they don’t miss a sale.
Patrick Maloney (PM): Ken has some unique brands in there. Some of these aren’t available at scale to a lot of our members, but with ADC, they’re in the barn and can be put on a truck with proper authority from the manufacturer or franchisee, along with every other piece they buy today, so it’s a really unique opportunity for our members to drive margin.
Kenneth Kohn (KK): So we have the ability, in most cases, to get product to our dealers, in 48 hours or less. One of the things that I think we do really well, and it was a program that was developed by Ken, is that we have four people in the field — myself and three other people — that touch our dealers on a daily basis. We do more than help them acquire product. Most of them will not make a move without talking to one of us. We have a vested interest, because in a lot of instances, we ourselves were dealers. So we get it. And we know what it is every day to go out and battle against the big-box retailers. Now, with the help of Nationwide and the services that it has, thanks to this new alliance, we’re going to try to get that same kind of service to everybody that we handle, and we feel that’ll make it easier for them to grow their business.
KM: When you factor in what Kenny said, we have the expertise, logistically, we have the brick and mortars, and we have the operational areas to make everything happen. Nationwide has so many other assets that our guys are going to be able to use. We don’t have those assets, but also Nationwide doesn’t have the assets that we have. So when you blend all this together, it’s going to be very powerful.
What does Nationwide think of this renewed partnership?
PM: What ADC does better than anybody in the industry are logistics and distribution; it acquires product in bulk, brings it into a warehouse, and breaks it down, so it’s getting great pricing and passing that on to its members. The members also have the ability to mix different brands together. So, for example, in the free world, a member has to buy 15 pieces minimum from Whirlpool, Frigidaire, LG, Samsung, and other vendors. With ADC, they can mix all those products on one truck. So the power of that distribution model is what is the real strength behind ADC. Nationwide, as an organization, negotiates pricing on behalf of 5,000 dealers across the country, but we don’t buy in bulk, so these dealers still buy individually. What we do for our members is get a great price that they can buy individually from manufacturers.
We also have loads of services that fit around the business itself. So, think financing, consumer financing, inventory financing, health insurance, websites, ad marketing, a Google relationship. We give them access to brands that don’t typically go to small independent retailers. For example, we have exclusives programs with Element Appliances and AT&T that our members can get. What this marriage does is take the expertise of ADC, this delivery and logistics, and then powers it with all of the stuff that Nationwide does. So it’s ADC’s logistics, powered by Nationwide’s business services and Nationwide members.
Besides services, are there any other products that Nationwide offers that would be a benefit to ADC members?
KM: Yes, if there’s any product that Nationwide has programs with that we do not, we will certainly look at bringing those products into our warehouses for our members
PM: I imagine ADC would lean into where Nationwide is really strong in appliances, as well as consumer electronics, furniture, and bedding. It’ll be easy to order, and also mix up items and brands in new ways, because you could have, say, a Miele dishwasher via ADC with an Amana range via Nationwide.
KM: I’ll give you a good example. We have a dealer that we recently partnered with, and it does about a million dollars in volume; with us now, it’s now going to probably approach three. Its volume is on the upswing thanks to us. Why? Because, as Patrick said, it doesn’t have to go to the GE, Whirlpool, or Bosch website to order. Its buyers just go into our system and place an order for all brands and then get a mixed truck to deliver that mix of items. When the first one showed up, the dealer was blown away that there was mixed product from LG, Samsung, you name the brands. Everything was on that truck, whereas normally 15 different trucks a week would have to come in and unload those various brands. This has allowed the dealer to get to Number One and get rid of some inventory, because it only has to buy what’s sold.
So if a customer comes in today on, let’s say, Tuesday, a retailer can say to its customers that they’ll have something by Thursday, since their truck comes in from the warehouse every Tuesday and Thursday. And regardless of whether you’re in South Carolina, Florida, Ohio, or West Virginia, if you place an order by 7 pm, in at least 10 of our states, you’ll get your product tomorrow or at least within two business days. They don’t have to have a warehouse, or have to tie up inventory financing.
We had a dealer who said to us the best move he ever made was going to ADC. He said “I should have done it five years ago because I now have an extra million dollars in the bank.” Why? Because he got rid of all the inventory that he had, and that turned into cash. That’s what we do for dealers.
Inventory, and lack thereof, is a big issue currently. How has ADC handled supply issues?
KM: During this time, the fish are jumping in the boat, so to speak. You don’t need a fishing rod in order to sell appliances right now, and we get more than our fair share from the vendors. So we’re exploding; our sales every month have just gone crazy. Every month is better than our previous month, and that’s why we’re now approaching around $650 million, which is a lot of appliances, and we are getting the product. When we were going through this last April, May, and June, when it was pretty bad, our inventory dropped from almost 60 million down to 20 million. So we did see a big hurt with the inventory as well, but we were able to get so much product in that we were taking in 15 trailers a day. No one else was, but we were. And because of our volume and the way we turn product, we were able to keep our dealers satisfied. That said, it depended on the vendor; GE was the best supplier, but other suppliers were horrible. Regardless, we’ve been pumping out $55 million to $60 million a month, every month, which is crazy. Our inventory went down to 20 million. And then it went back up; now 35 is about the highest we’re at during this pandemic. Normally, we’re 60.
PM: It’s also more efficient for the manufacturer to have the economies of scale. It’s more efficient for the manufacturer to sell a truckload of one SKU to one location than it is to sell smaller quantities.
How do you stay on top of all that volume?
KM: Our cost to serve, to haul and ship, is ridiculously low. The more volume, the lower your costs, but you have to have an infrastructure in place. We’ve worked hard at that for years. So the infrastructure was in place, and when the volume went crazy, we didn’t have to go out and do anything. Our normal staff handled it. And frankly, when the inventory was reduced, it became easier to operate because there was more room in the warehouse.
We’ve kept our competitive edge because, again, it’s our volume, which allowed us to get a decent amount of product in so we could shift what we shipped and to keep our dealers in business. Our dealers thrived, but so did most dealers throughout the country. Because with people not traveling, they spend money on their homes. So every dealer has benefited; the difference with our dealers is that our dealers are not waiting a year for product. We’re pretty much on top of the food chain.
KK: Here’s another thing we do really well. Regular independent dealers, they buy a truck, let’s say, of GE, and they’re mixing all the categories within GE, but if they’re a little bigger, they’ll buy a truck of refrigerators or buy a truck of washers. What we’re able to do is buy straight trucks of one model, which the vendor likes because it’s easy: It comes off the line, it gets put on a truck, and it goes to us right away. So we get prioritized, because we’re buying straight trucks of models, not just categories, and not just one product individually.
How did you get so good at logistics?
KM: It’s 50 years of experience. You keep building blocks to a house, and that’s what happens in this business. We keep building block upon block of expertise, and the logistics builds up that way. For us, it’s been pretty easy, but if you go back 50 years ago when this all began, people and all the other NECO chapters said ADC was crazy, that it wouldn’t work. Now it’s been done right for a long time. Our founding fathers like Mike Napolitano and a few others should be very proud of themselves; they built a model that can’t be matched right now.
Tom is the Editor in Chief of Dealerscope.