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196: Independent Retailers Remained Resilient in ’23, So What’s In Store for ’24?

Written by Rob Stott

January 9, 2024

To kick off a new year of the Independent Thinking Podcast, we check in with NMG’s EVP of Membership Patrick Maloney who has his finger on the pulse of this channel. After a brief recap of the roller coaster that was 2023, we look ahead to the areas of opportunity for independent retailers in 2024.


 

Rob Stott: All right, we are back on the Independent Thinking Podcast. A fresh year. This will be a debut for 2024, our first podcast of 2024, so you get to kick off the year right for us, Mr. Patrick Maloney. No pressure, no pressure.

Patrick Maloney: Fantastic. This is exactly… I want to be in the starting blocks.

Rob Stott: Get us out the gate hot, all right? You ready for this?

Patrick Maloney: Yeah, buddy.

Rob Stott: First of all, how are you doing? How are things?

Patrick Maloney: Couldn’t be better, yeah. Still loving it every day. Obviously, it was tougher year than expected, it ended up, but I just love the resiliency of independent retailers. They’re going to figure out a path, and that’s rewarding, so couldn’t be better.

Rob Stott: It’s an interesting time for sure, right? You mentioned the resiliency. I know. We covered it, I think, a whole bunch on the blog at the end of the year, specifically around Black Friday, right? How the consumer just seems to see all these expectations from economists and they’re like, “We’re going to go do our thing and we’re going to be fine,” and it’s kind of interesting to see that, right?

Patrick Maloney: Yeah. It’s funny, we saw certainly in November. I mean, it was a tough retail year.

Rob Stott: Yeah.

Patrick Maloney: Industry was flat-ish up a little bit. You know, I think those industry numbers are impacted a little bit by builder as well. So we were seeing a lot of shipments, but the order rights were kind of slipping. And almost through November, we had some aggressive programs for our members, and our members were out advertising every day. And so they pulled some people forward, some packages, but I also think those customers that needed a product were kind of pushing out and said, “You know what? I’m just going to wait to see what comes on Black Friday.” So by and large, we had some pretty good results and we felt that consumers were back in the market and they wanted the deal. I think with what has been happening with interest rates, it’s a challenging time for a lot of folks out there.

Rob Stott: Yeah. Well, question for you, because I had a similar conversation with someone in the distribution space, and it came up even during recently at CDF for our custom integration dealers. When you talk about the year-over-year and numbers slipping, is it tough to compare because of how strong ’22 and ’21 were as years? Do we factor any of that into it when we’re looking at those kinds of numbers?

Patrick Maloney: Yeah, yeah, for sure. I mean, obviously, through COVID, it was just a rocket ship, right? But it started to normalize a little bit at the beginning of last year, and then really in Q4, we were comping some just okay numbers, right? As, I think, a lot of our members put together 2023 plans, they expected Q4 to be like this, but then the economy hit, and I think interest rates just kind of kept people in place. I think the number is like 2.4 appliances per new house. So when someone moves into a new home, they’re going out and buying a couple of new appliances. We got some information the other day that Bank of America said in mattresses, someone that buys a new home spends six times more on mattresses than…

Rob Stott: Yeah.

Patrick Maloney: But with the interest rates so high, people are locking in. They’ve decided, “You know what? I’m at this great interest rate. I’m not going to move.” But they’re also had been very cautious of what they’re spending, and so as a result, I think I’ve never seen a percentage so high. 72% of consumers are buying under duress, right? So they’re not going, “Hey, let’s remodel the house.” They’re going, “I hope this thing lasts another week.”

And I think there’s some actions that we can take from that and some ways to go to market from that, but the reality is was that consumer was not coming out shopping and redoing. I mean, there’s certainly sections of the industry that are doing that, but by and large, they were just waiting for something to break and just replacing that. They weren’t even buying the dryer. They were just going, “Okay, the washer’s done. Let’s go get a new washer. Let’s get it, and you know what, we have a front-loader, but we’re just going to buy a top-loader.” So less people in the market and they’re buying kind of more, I guess, lower-end stuff, not the super-high-end stuff.

Rob Stott: Right. Well, the word you mentioned in there is resilient, right? And that’s kind of what this industry has been, and to sum up ’23 in one year, that might be the word, I think, right? So as you look ahead to ’24, and we can get more in the weeds, but sort of set the stage for what expectations are. If resilient was the word for ’23, what do you think it is for 2024?

Patrick Maloney: It’s more of the same, you know? I think certainly through the first half, I think it’s going to be a challenge. It’s an election year as well, right? So that always kind of throws a little, not chaos, but just kind of-

Rob Stott: Wait and see.

Patrick Maloney: Optimism is not at its highest. And that’s just typical for every year, regardless of where we are. So I think focusing on your business and focusing on your plan. We’ve got some members that have been successful, but you can kind of see that it’s not by chance, right? They’re methodical about what they’re going to do and how they’re going to do it, both in the marketplace and in their store, and I think that’s it. I think you have to focus on your business and you have to dedicate and have a plan, not just hope they come in. You mentioned COVID, like that was just, you know, “Hey…” They were just rolling through the doors, right? And we were hoping to get product. Now, it’s, “Okay, there’s fewer people coming through the door. How do we maximize that sale?”

Rob Stott: Yeah. So I mean, I think retailers could take a lot from the last year, those that were successful, and learn from that and apply it moving forward. What were some of those things that they did in ’23 that, in spite of these challenges, that enabled them to see some success?

Patrick Maloney: Yeah, I think those that were successful leaned into like advertising, leaned into a plan. I think when business is tough, foot traffic isn’t coming through the door, they’re not buying the premium product, they’re buying kind of more opening price point stuff. It’s easy to go, “Hey, you know what? I’m not going to advertise. I’m going to save my way out of this thing,” and those that are successful did the exact opposite, right? They leaned into advertising. So if you think about, you know, we talked about those 72% of consumers that are buying an address, they’re only in the market for a couple of days, day and a half. And old numbers were they shopped three stores. Now they’re shopping one and a half, and that other half of store is probably going to be online.

So they’re taking and kind of looking at what the needs are out there, right? So dress customer wants it today, so they’re out showing themselves in the market that, “Hey, we have this product, we have it in stock, we have it on display,” and they’re showing price. So the other fear is that… And even if it’s just a couple of models, to show an example of what they can get, a consumer can get. One of the challenges with independent retailers, the perception is, “Hey, they can’t buy as great as the big-box stores,” and that simply isn’t the case, but we also have to tell them that, right? Tell consumers that. So they’re addressing, they’re out in the market every day, they’re addressing kind of the needs of that consumer that could be walking through their door, and they’re showing that they have the product, it’s on display.

Rob Stott: Yeah, it’s staying out there. It’s kind of the same. I feel like it’s not too different from the message. They were rolling in sort of on their own without having to be enticed to come to your store, right?

Patrick Maloney: Yeah, yeah.

Rob Stott: But it was still a great time to work on marketing and not slip up at all or fall behind in your efforts there. So it’s a different time, for sure, different environment, but the message is kind of the same, which I think is comforting, right?

Patrick Maloney: Yeah. And I think the other thing is is like it’s not… And it just doesn’t end there, right? You need to figure out once you have them in the store, “Okay, now what do you do? What’s the plan?” And I think, again, those that have been successful have a true plan to sell. I mean, they are, yeah, sure, they’re buying right, they’re focusing on the categories that those consumers are coming in, like if a refrigerator dies or a freezer dies, you need one immediately, if a dishwasher goes out, you can wash dishes for a couple of weeks, but you have to have those key pieces in the lineup ready to go.

And so yeah, focus on buying right. I know we’ve had a lot of throughput on our prime metrics ART tool, Assortment Rationalization Tool. Find out what the right model is to have, but don’t let it happen by chance once they’re in the store. You need to train the frontline sales folks to, “Okay, this is what we have. This is what we have in stock. This is what consumers are going to come in for,” coupled with the rebate and what the package is and all of that stuff, but it can’t just be by chance, right? It has to be a plan. And now you’re getting less customers in the store, you have to have a plan when you get them in the store.

Rob Stott: Conversion rates better go up.

Patrick Maloney: Well, 100%, right? And I think we feel confident in independent retail about our close rates, but again, if you’re not out in the marketplace telling them that you have great stuff at great prices, then you’re not getting as much many at bats, right?

Rob Stott: Right. No, completely fair point.

Are there other areas of the business too that they should… So obviously, marketing’s number one. Are there other things in a time like this, other things that they could be doing for business to try to set themselves up for success?

Patrick Maloney: Yeah, I think the other thing is is that those opening price point pieces that these duress consumers are buying are generally not the most profitable. It’s not the super-high-end stuff, it’s the more traditional. And so it’s an opportunity for our members to really focus on maximizing the sale and maximizing that basket. And so listen, financing has shot through the roof. More consumers are coming in and getting financing than… And we have a ton of great programs, right? Whether it’s with Wells or Synchrony. But tap into that. Utilize 12, 18-month finance programs. And then we also have a waterfall for second-chance financing so that maybe they come in and they don’t have the greatest credit score, but our systems now can automatically go, “Hey, you know what? Here’s an opportunity for this second-chance financing.” So tap into that, thinking about that duress consumer. Their product just broke, right? It’s a perfect time to talk about product protection. You know, we have an excellent program with Epic Protect. It’s a perfect time to say, “Hey, this happened. If it happens again-“

Rob Stott: Protect yourself. Right, yeah.

Patrick Maloney: Protect yourself, yeah. And so those are also profit centers, right? Financing, I don’t know what the exact number is, Chris Kirk could share it with us, but an average financing ticket in a perfect world is a thousand dollars more or $800 more than one that someone’s buying on a credit card, because they go, “Oh, wow, I didn’t know I could afford this.” I’m not saying those deltas are happening today in this environment, but they absolutely go, “Oh, you know what? Maybe I don’t need to buy the cheapest one. I should get this one, this stainless one or this one with ice and water.” So it’s increasing the basket, increasing profitability, and really doing the right thing for the consumer. Product protection is a great thing for a consumer, especially, like I said, one that’s coming in the door going, “Man, that thing broke again.” Those are the things that I think we are seeing our members that are being successful are kind of adding to it all.

Rob Stott: Yeah. So aside from, I feel like foot traffic might be the number-one answer here, but the challenges, what are you hearing from members out from the field team that are coming back and saying, “Hey, this is what the…” Are there any consistencies across what challenges are right now?

Patrick Maloney: Yeah, I mean, you said it, foot traffic, right? The other thing is big-box stores are aggressive. It’s funny, we saw maybe Depot at the beginning of the year going really, really aggressive, and now Lowe’s has suddenly picked up. So the environment is becoming more hostile in that I think they’re just going for share, right? So they’re screaming from the rooftops on what their value is and what their opportunity is. And certainly we can contend and certainly we can compete and compete profitably, but again, it has to be by design. It can’t just be by chance. That starts, I think, with that advertising, get them in the store, have a plan, and then add to that basket.

Rob Stott: Yeah. And I mean, it’s more than just price, right? What’s kind of the response to a dealer that comes in and say like, “Well, they’re saying this,” and of course they’re always going to beat us on prices, but the service is incomparable, right? So what’s kind of, you mentioned a couple of the things there, tactics they can take, but what would be your suggested response to a customer coming in like that?

Patrick Maloney: Well, think about that consumer, right? Like they’re under duress, they need help, they need… And so price is not all they should be concerned about, and I think if discussed correctly, they’re going to have to get that old one out, they’re going to have to get the new one in. “Oh, by the way, what if it needs to be serviced? Does your local big-box have that? No. And Mrs. Jones, we’ve been here for 50 years.” That’s part of that conversation. So not only product protection, but the fact that we can deliver, install, remove the old. It just takes all the kind of questions out of the consumer’s head. And I think, again, the live inventory ready to go, you know? We’ve got members that are doing next-day, same-day delivery. And so when we start comparing apples to apples, not only can we hit the same price point, we can deliver so much more value in the surrounding, whether it’s that delivery, install service, all of those.

Rob Stott: Yeah. And it’s one of those things, too. I think there’s some conversations we’ve had on here with members of the group that it’s putting a face to the business, right? And it’s hard to do that with those other entities that are out there that you kind of walk in, you don’t know who you’re talking to, and you have that. If there’s a leg up, it’s that you’re part of the fabric of that community and-

Patrick Maloney: One hundred percent.

Rob Stott: … something you can absolutely lean into.

Patrick Maloney: You have to lean into. And I think the other challenge, those duress consumers, it’s a transaction. They just want in and out, they need to get something in quick. And so, like I said, you need to make sure you’re feathering in both the value and the support you’re going to give for them in the future.

Rob Stott: You’ve talked about a lot of the products and services and things like that that are out there, but as well the field team. It’s been almost a year, right? We’ll be coming up on a year by the time this publishes since the regions, the formation there of the new regions and everything, and we’ll be in the midst, I believe, as this goes live of some first ever regional meetings.

Patrick Maloney: Yes.

Rob Stott: So we could talk about the prep work. I wish we could see into the future and talk about how they’re going, right? But I’m sure they’re going to be phenomenal. But talk about the-

Patrick Maloney: Yeah, I can see it.

Rob Stott: Yeah, right? I see it now. But talk about the prep work going into that and those opportunities and what they present for each other’s regions.

Patrick Maloney: Yeah, you’re right. And we spent some time designing these new regions for a bunch of reasons, and most importantly was acting locally. Scale is important, really important when negotiating programs, but we also need to be nimble locally. So these smaller regions allow us to act and make changes and make real differences in the local communities. And so one of the cool things that is coming out of this is we’ve created these smaller councils of dealers by region that can help guide us and help, “Hey, here’s the biggest challenge. Here’s where we need to focus. This is a challenge, but it’s probably fifth on our list, so let’s attack these ones.”

But we’re also creating communities where we can have some peer-to-peer interaction. And so we are launching, we’ve got six region meetings scheduled within around the country in those different regions through the month of January. And the spirit of that is, “Hey, we’re going to talk about business, we’re going to talk about how to drive profit. We’re going to actually have some members do some presentations on how they’re driving their business, how they’re looking at their profit sheet,” and some different unique ways of looking at your day-to-day business. But we’re also going to have just roundtables where we’re talking, “Okay, this is what’s happening here. This is what’s happening in my location.”

I think that peer-to-peer interaction with our merchants, with our business service teams, that’s where the light bulbs really go off. It’s actually shocking to hear. It’s so great to hear that our members get together, and we just listen. And it’s the stuff that comes out you think are these little tiny things, little tiny nuggets that, “Oh my gosh, like yeah, we’re…” These guys are all on islands, right? And once they start communicating like, “Oh, I’m feeling that, too, I’m feeling that, too.”

So we are excited about that launch for a bunch of reasons, but I think most importantly, I’m kicking off 2024 with a bang and putting ourselves and our members in the right position to be successful, a big kickoff to Q1.

Rob Stott: There’s something about those settings, too. Even, and there’s absolutely value to it, so I don’t want this to come off the wrong way, but like an in-store visit, you’re still in kind of your environment, in your retail location where you do business. The ability to, for a day, remove yourself from that and just have those conversations, there’s no bigger difference than being able to just go somewhere and kind of think about it and talk with other people and be just out of that environment to clear your head almost as you’re talking about it.

Patrick Maloney: And you’re a hundred percent right, right? You can be sitting at your desk having a conversation with someone, but you’re thinking, “I got to put fuel in the truck,” “Can I pay the insurance?” “So-and-so’s calling in sick tomorrow,” so to take yourself out of that environment is pretty important.

The other thing that we like about this is it’s a day and a half, you know? It’s a dinner and a day, and it’s a drive. So PrimeTime is wildly successful. We have thousands of dealers and thousands of people there from the vendor community, and new product introductions, and NLAs, and all of those things, and they’re great, but it’s a plane ride and it takes two or three days out of your business. These are going to be more frequent and easier to attend. So we’re already seeing some really cool numbers for buildup for that. The registrations are out there, we’re seeing them start to fill in, and this is something we’re going to continue. Again, it’s not only just for the member, it’s feedback for us and for the vendor community.

Rob Stott: Yeah. And important word there, frequent, right? Something that just because January may come and go before you know it, there’s going to be other opportunities, and we haven’t heard about it, but I’m sure they’re already hard at work on where that next slate is.

Patrick Maloney: Yeah, yeah.

Rob Stott: It’ll be exciting, especially away. There’s a Northeast, right? And I think they’re in DC, if I recall-

Patrick Maloney: Yes.

Rob Stott: … that schedule correctly. So I don’t know. I could vouch for a Philly event. I got a pool if we do it in the summer. We’ll get some members over here, a cookout, you know?

Patrick Maloney: Yeah, we will certainly move them around, like I said, to try to have a drive-in. Some people are going to drive three hours, some are going to drive an hour, and so we will rotate them. We can do them in smaller cities. We don’t have to hold our breath twice a year to go to Las Vegas or Nashville. They can be in more modest communities.

Rob Stott: No, that’s awesome, and excited to hear, too, because actually, there was a Philly regional event not too long ago that I got to sit down and experience some of that, and just those smaller rooms, it’s cool to watch the interactions happen. Of course there’s the presentation style, like learning from Nationwide, but it was, it’s those roundtable discussions of two members talking like, How much do you charge for delivery and install?” and it’s like, “I’m charging only this,” like, “What an opportunity. I could be doing…” You know? It’s those quick turn light bulb moments, like you said, that are really cool to witness and just see it, the impact it has on the member.

Patrick Maloney: It’s absolutely awesome and humbling. You’re like, “Oh my gosh, these…” And I mean, to see the passion and intensity these folks have about their business… And again, nothing’s by chance. These guys are so deadly focused on serving their communities and, hey, making some profit along the way, but really solving a problem in their community.

Rob Stott: Yeah. Incredible. Cool. Well, we look forward to all of that, participating in those, seeing what comes out of them, and then, of course, too, looking ahead to the new year and seeing how this community continues to be, your word, resilient, right? So it’s-

Patrick Maloney: Yeah, buddy. Yup.

Rob Stott: … strap in.

Patrick Maloney: I love it.

Rob Stott: Awesome. Well, Mr. Maloney, we appreciate it. This was, as always, a lot of fun, and I’m sure I’ll tie you down for another one before you know it.

Patrick Maloney: Yeah, appreciate that. Thanks for the opportunity.

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