215: Understanding the Cost of Doing Business as an Independent Retailer

Written by Rob Stott

May 7, 2024

cost of doing business podcast independent thinking retail

What if there was a way to benchmark your business against others in just about every aspect? Curious if you’re charging enough for delivery and installation services? How much of your budget is tied up in salaries compared to other like-sized retailers? How much are other retailers paying for their business tech needs? That’s exactly what NMG’s new Cost of Doing Business study aims to solve. Following the launch of the first-ever edition of the report, we sat down with Derek Mattila, VP of Business Development at NMG, to go over the details and explore the report’s future potential.


Rob Stott: All right, we are back on the Independent Thinking Podcast and my absolute pleasure to be sitting down. The only thing I’m disappointed in now that I think about it, we’re not in a tiny home as we sit here. I think the last time we did this at a primetime, we were in a tiny home.

Derek Mattila: I think you’re right. Yeah, I think you’re right.

Rob Stott: Isn’t that crazy? It’s unbelievable, Mr. Derek Mattila.

Derek Mattila: I don’t even want to think about how long ago that was.

Rob Stott: 2019. I think that was in New Orleans, 2019.

Derek Mattila: I think you’re right.

Rob Stott: Wow. Unbelievable.

Derek Mattila: Different age demographic and a different weight class for me.

Rob Stott: Me too, man. Hey, me and you both. No, Mr. Derek Mattila, VP of Business Development. Appreciate you being here, being at the show and sitting down with us.

Derek Mattila: Appreciate it buddy. I love listening to you and you do a great job.

Rob Stott: Thank you.

Derek Mattila: If you haven’t been told today, I’m going to be the first to tell you, your grasp of what’s going on around Nationwide is better than anybody else’s. So you’re really great.

Rob Stott: I’ll slip you that 20 after the show.

Derek Mattila: There you go.

Rob Stott: Awesome. Well, hey, a lot going on at the show and a lot of excitement all over the floor. People that swing to the back corner of the Nationwide booth, there’s a pretty cool thing going on with PriMetrix, a lot going on in that world. But I know specifically I want to dive into something that your team recently launched and that’s the cost of doing business survey and the analysis around that. So before we get to that though, that’s the hook. See, you got to keep bringing the audience in.

Derek Mattila: You do.

Rob Stott: You got to hook them, let them know what’s coming, and then we’re going to ask you first, for those that don’t know, kind of your role and what you’ve been doing here Nationwide. Give them a him the spiel.

Derek Mattila: Yeah, appreciate it.

Rob Stott: Tell who Derek Mattila is.

Derek Mattila: Yeah, well, first of all, thanks for having me again. This is a lot of fun and I appreciate that. We’ve had a great show and this has been a really good venue and we’ve had a good successful return back to Las Vegas, haven’t been here for a long time.

Rob Stott: How about this? Since I’ve been part of the team, four and a half years, we haven’t been in Vegas for a Prime Time. This is my first Primetime as a part of the squad.

Derek Mattila: And I always lose my appreciation for the Venetian and the Sands Convention Center and the way that they do a great job. It’s really going to be another good time in August for the next Primetime. And I think part of my role and what I’ve worked on and been less involved in the day-to-day with the member and product category management, working on trying to bring together new strategic partnerships and really helping us get into new business verticals, leveraging the strengths that Nationwide has and has been building over the years to go serve other independent dealers in other spaces.

So recently worked very, very closely with helping bring in and helping be a part of the FEI group and having them join the Nationwide businesses and utilizing our resources to help their members grow. I’ve also worked on a lot of the Azione partnership and bringing them in on the board and helping shape the face of the tools and resources that we provide to the custom integration space. And I’m working on some other projects that I hope-

Rob Stott: Always.

Derek Mattila: I always say, I’m just one more yes away. Just one more yes.

Rob Stott: I love that. It’s a great way of thinking about it. And you mentioned it, right? The stuff you might not see it day to day or even on the show floor here, but those two names and partnerships you mentioned, major impacts here at Nationwide over the last year and a half. Year and a half, two years?

Derek Mattila: Yeah, two years.

Rob Stott: Two years. Yeah. It’s crazy how fast time flies, but awesome to see those groups come into the fold and start leveraging those business services and other areas of the group. And that CI team, you talk about it, I mean a couple years ago it was just Hank and now you look at what Azione was the first domino, right? And then to see how it’s kind of grown and evolved and I mean what a division that’s been stood up there.

Derek Mattila: They should be very proud, that team’s done a great job and the development of Ellipsis and the branding of Oasis and then taking Azione and the team up in your neck of the woods helping drive a really good experience for those members. And if I’d done my job right, I work in the shadows a little bit, help create something, throw it out there and hopefully somebody swings at it and doesn’t let the joke that we had off-air come and ruin the start of their podcast.

Rob Stott: But they actually do knock it out of the park.

Derek Mattila: Yeah, they do, they knock it the park.

Rob Stott: They take that opportunity.

Derek Mattila: But it’s a lot of fun to see a lot of the projects. I’ve got a chance to, and I don’t know what the right word is, but I invest a lot of time and energy to try to get certain projects like PriMetrix.

Rob Stott: Yeah, absolutely.

Derek Mattila: The tiny home was a concept piece that helped create some awareness and attention around the custom integration business and the potential here. And then having Kitchen and Bath Alliance be a part of the Nationwide and Primetime shows and the offering. Flooring and as we start to work around the house and the different channels of business, hopefully the next, now in the next couple years, they’ll be helpful in bringing us new sales and sales opportunities to all the members and then everybody and all the vendor partners that are part of Nationwide.

Rob Stott: I mean, the work you’re doing is, it aligns so perfectly with a message that I thinks being delivered and has been over the last several years, we’ll say, to Nationwide members about thinking about your business and how it can evolve and getting the proper way to evolve, right? And that includes looking at other areas, whether it’s the fact that you’re a furniture dealer and maybe I want to bring TVs in. We talk about the partnership with Samsung there, or you’re a mattress dealer and you want to start thinking, “Well, maybe I do need appliances in my site.” Just that way of thinking. But this is wider scope, right? That’s not just categories. This is moving to different areas of the home and different strengths within the business to be able to just expand your tool belt, if you want to throw a cliche at it.

Derek Mattila: It’s interesting because you think about our purpose is to help independent dealers thrive on their terms. And you think about that purpose, it’s easy to say that, but then when you start to go into the independent spaces and the convertibles you’re in, there’s multiple ways that that can be done. And what-

Rob Stott: Differentiators.

Derek Mattila: They’re differentiators, they help drive demand, help profitability for both the supplier and for our members. But it’s really difficult to bridge across different sales channels. And every one of our core businesses has got contract and builder and remodel and multifamily and retail and wholesale channels. And we have a really difficult job of trying to figure out how to serve those independent dealers across all of those. The great thing is, we’ve got a whole great number, a great toolbox of solutions that we can mold and put them into place. And it’s a lot of fun, right? Because you’re definitely helping the cause and sometimes it goes faster than others, but it really is-

Rob Stott: It’s one of those things where who says a square peg can’t fit in a round hole? You make it happen.

Derek Mattila: That’s right.

Rob Stott: You find ways to do it.

Derek Mattila: No, I’ll show you, it’s a big hammer. It’s called a big hammer.

Rob Stott: And not even a rubber mallet. We’re talking like metal heavy mallets. That sucker’s going down.

Derek Mattila: It will go in.

Rob Stott: No, that’s awesome. Well, to bring it back to, we’ll finally talk about that hook we threw out at the beginning and that’s the cost of doing business survey that launched at this show. A really neat product and tool that you guys have developed on your team to give retailers a way to benchmark themselves. So I’ll let you give the high level, the elevator pitch on what this tool is and then we’ll dive into it.

Derek Mattila: Yeah, I’ll take two minutes on history and it’s really important because it actually does help explain the path of where we got today and a little bit about why this tool is so important. But many years ago, 20 plus years ago, a lot of the members of Nationwide were also part of a group called NARDA. And what NARDA used to do was aggregate the balance sheet, the P&Ls and all of the performance of the companies into one kind of analysis so that they could benchmark and see against their peers how their operating expenses looked and what was their starting gross margins and what was the average volume by store and the average volume by location and how much were employees making across the business and what was the employee and the SG&A looking like and all of these things that go into profitability and getting to a very bottom profit number.

And at some point over history, evolution, that kind of went away. It went a different path and it didn’t become as important to other groups and us included should provide that service. As we were launching PriMetrix, and you go back to the early days of PriMetrix, which I had a lot of involvement and I wrote the market report for old program called Prepare for Share and it evolved into PriMetrix. It became the market analysis and the long funny story on that, we can tell over a beer sometime.

Rob Stott: Oh my goodness.

Derek Mattila: But we were doing that and I got a chance to speak and talk with a lot of members. I mean, for me coming in brand new, it was the best way I could have even imagine to get introduced to the culture of our membership and to meet a lot of great people. Well fast-forward to now, we heard a lot of feedback about NARDA. We heard a lot of feedback from the market analysis about that’s a really good position, but I need one more level down where it helps me benchmark my business.

And Mark Spear, who works on our team, had been working really hard with another partnership with some other groups and came across of a company that could help us aggregate and pulling all this stuff together and put the resources together to deliver a new cost of business survey. Now we’re going to call it the Business Benchmark Tool. It’s going to be used to benchmark and show performance for the participating members. And we’re going to get some really valuable insights. Not only that will help the members better manage and understand how their peers are performing and spending in key categories like advertising and employee wages, but also what is an effective turn and how quickly are they managing inventory and what are the turns of their business, which is holding up cash and is a utilization of a very valuable resource.

Rob Stott: Yeah, absolutely. And if there’s one thing as a listener to pull out of that or a viewer is that there are so many facets of what you just talked about in terms of what goes into a business and being profitable and areas to look at and different metrics and KPI, everything that, this is going to be a resource that is invaluable, that’s what they’re doing. And able not just one resource, but the way that you can look at it and slice it and dice it, this thing gets down to so many granular levels of the business.

I mean the amount of seeing it in print form is one thing. I can only imagine the amount of Excel spreadsheet lines, we’re filled with data and what that looks like because it could be overwhelming to look at. But at the same time, the way it’s organized and structured, and I think this first product that we have here organized into category. So you’ve got appliance looking against other appliance dealers by size. So talk about that a little bit, how it’s structured and what a retailer, when they open it, how they should approach using this tool.

Derek Mattila: You nailed it. Data is data, right? Data doesn’t tell a story. People tell a story and we’ll be arguing about AI telling the story, but we’ll talk about that later. Another podcast, another day.

Rob Stott: Another beer too.

Derek Mattila: Another beer. But people analyze and pull out the insights from that data. And our goal is to take all of that detail and information and make it manageable, put it in bite-size bits that it’s easy to understand and not have our members wading through a lot of dirty information. So part of that is, is we’ve elected to try to do some benchmarking so that we can look at the typical type of appliance, mattress, bedding store and what the margin profile would look like and compare that against a high-profit store. So some interesting stats that come out of those things, and you look at the numbers that come out of the initial past is that the dealers are working really, really hard and their profit at the end of the day before taxes or EBITDA, the earnings before interest in tax and depreciation and amortization is… Sorry.

Rob Stott: Yeah, I got you there. I know what you’re doing. I saw what you’re doing.

Derek Mattila: It’s in a really low single-digit area, which if you look at all of the numbers, you’re like, “Wow, that’s a lot.” And then you start to work your way up from profitability back up the P&L and you start to see, we’re spending a lot extra on maybe trucks or there’s a lot in excess expense on or a very low margin profit margin that’s driving the margin down or the inventory turns are very, very low and it’s costing in other areas of the business that they’re having to compensate for to create more profitability.

Rob Stott: It’s unbelievable. I mean, the amount of detail and attention, I think an important thing to point out about this, you mentioned the way we’re gathering this and P&Ls and sheets that are being submitted to us all anonymized. At the end of the day, this product is something that data-safe-

Derek Mattila: Data-safe.

Rob Stott: … is similar, same story with PriMetrix, right? Similar to plugging your POS into what PriMetrix does and getting the benefits of everything that platform has to it. This analysis is something where you upload into a dashboard and then from there, it gets aggregated and we’ll slice it and dice it and present it out. But at the end of the day, it’s you looking. You’ll have your numbers, you know your numbers, and then you can compare to others in the industry.

Derek Mattila: That’s right. And we will continue to do more splitting out as we get more participants and we’re asking for people to help participate. And part of the survey is if they contribute data, they’ll be able to get the report out as part of the package, and for free. All you got to do is contribute the information. There’ll be more analysis and there’ll be more breakouts to talk about key categories and key insights and ratios that are matter to driving performance within the business. And it’s cool. It’s really cool.

Rob Stott: Yeah. And then the other thing too I have to imagine that you think about is on our side and then of course the benefit to the retailer then is the analysis over time and how things change and maybe being able to tell why they’re changing or where impacts are happening and all those kind of key trends. We can continue to follow year-over-year as this report gets published.

Derek Mattila: And you’re exactly right, and this is where it gets really fun because as we start to build this out and it’s going to happen, and I’ll kind of wrap it up as it relates to how it fits within all PriMetrix, there’s a lot of ways that people get information and the industry gets information about how that category, that segment is performing. We’re very, very lucky. We’re collecting a very, very large piece of, a really big part of the entire industry, and we’re building out the knowledge and understanding of what’s really happening within each of these independent businesses. We’re as a group becoming the authority of what’s happening within the independent selling space. And so it’s really cool to see that happen because it takes a lot of people to believe that we’re going to help provide meaningful insights. It takes a lot of people to believe that we’re going to treat the data with respect and help them grow their business. And by the way, it’s going to help the industry also.

Rob Stott: Yeah, absolutely. At the end of the day, I mean the more data that you have feeding into these things and the more we’re able to tell and a better picture, we’re able to paint every other cliche related to that, the better it is for the industry because a lot to be learned. And speaking of learning, as you look at this first iteration of this report, I know it’s a benchmark, so it’s kind of just that ground level and then we learn from here, but anything interesting to share from it that came out that stood out to you about some of that data?

Derek Mattila: Yeah, I think I mentioned a little bit of that about the turns. I think this is a really eye-opening experience and especially in each of the appliance and furniture and bedding of mattress and CE categories that we serve. But I was very, very surprised. I had a theory beforehand that our turns were significantly lower as an industry than what Nationals typically see. And the first pass is showing that to be correct, is that if you have something less than three turn into business, that that is probably not, it’s not a success model for managing and creating the most flexibility with a business’s cash.

And we have some inventory build-up that we’re going to have to take a look at and see how do we help create tools to help alleviate that and help improve the turn performance of our members. And that’s just a first, an interesting insight and certainly as we dive into margins and costs and advertising and what percentage is being used there, those are all will be the next areas that we’re going to dig in and try to find out how do we create a tool to improve those areas.

Rob Stott: Yeah, I love it. And I think we both know, both number nerds, not afraid to admit it, right?

Derek Mattila: Yep. Not at all.

Rob Stott: I’m very excited about the potential too, to share these stories with the industry. Because I know the back of the book, if I recall, I had a lot of key findings and things like that that easily digestible. There’s quick things to learn about what the numbers are telling us. So I’m very excited about the potential to continue to talk about this and get those numbers out there and some of those learnings as we move forward because it’s a lot to be had.

Derek Mattila: To that point, there’s one of the key findings that came out of the survey was the amount of business that’s being done online.

Rob Stott: Yeah, Oh my gosh.

Derek Mattila: So the industry, if you track through certain third party industry is running 12 and a half, 13% of the business being transacted through online sources and the independence base is significantly lower. We’re in the two range. And so that has a really eye-opening experience about being able to bridge the gap between e-commerce shoppers and buyers and in-store buyers within an independent store. And so we’ll see that. I don’t know how that’s going to transpire. The fact that we now see this number in front of us with clarity and fact, it helps us get centered that that’s a key topic for us to address.

Rob Stott: Yeah. And I think we might’ve been touching on this kind of throughout, but to ask it directly, the future of this report and kind of what we’re building and what your team’s building, what gets you excited about that and where do you hope it ultimately leads us or leads the channel?

Derek Mattila: Yeah, so first of all, one of the things that’s really important, and I’ll go back to PriMetrix, right, the set of tools that were part of PriMetrix, you have PriMetrix Market and we’ve had PriMetrix POS benchmarking, which is invoice and invoice benchmarking for our membership. We had an assortment rationalization tool that helps make the right decisions on what products go in what place. This new business, benchmark tool fits right between market and POS Benchmark.

And so it’s the peeling back of the onion, right? Where you go from market to business benchmarking to invoicing benchmarking to actual decisions on the floor. We’re actually creating the full picture and delivering this full picture through this PriMetrix Suite, which is a really good thing to add back into the PriMetrix toolbox. Ultimately, I’m hoping that we take this information, we’re able to help create tools that help better manage both inventory and sell-through performance. And it helps to drive clarity. And as we’re looking at it, we’ll start to identify how do we improve terms, how do we do it? We’ll look at ourselves and look at the membership and create programs and training and resources to help improve turns and what does that mean?

Rob Stott: That’s at such an important point. I kind of upset at myself for not thinking of it initially, but a lot of what I’ve been asking and we’ve been talking about is the benefit to the member of this. Obviously we’re going to learn a lot, right? And to the point of being able to see some of these trends that these numbers are telling us, and then just to take your words right from you, be able to find ways as an organization to then support the retailers to improve those numbers.

Derek Mattila: That’s right. That’s exactly right. And it’s great to have the clarity now, right? These discussions that we’ve had without having the facts or not having all the facts aggregated into one tool, this is why this is such a big deal and this-

Rob Stott: Oh man, now I’m even more excited.

Derek Mattila: This is why this is a benchmark. This is a benchmark. Your kind of milestone moment for PriMetrix and the development of the tools.

Rob Stott: Something we’ll do for this episode if members got to this point, that’s awesome. I also want to make sure if you are listening, you look in the description, we will have a way to be able to share if they’re interested in participating to get access to this report. We’ll share that link in the description of the video episode, however you’re watching this. But man, this was awesome.

Derek Mattila: I appreciate you buddy.

Rob Stott: You know I absolutely appreciate you coming over and spending a few minutes here and chatting with me and peeling back the layers of this tool, so look forward to diving into it more in the future with you.

Derek Mattila: You keep doing a good job, buddy.

Rob Stott: I’ll try.

Derek Mattila: I really appreciate what you do.

Rob Stott: You bet.

Derek Mattila: This is good to allow us to help talk about these things and let me know anytime, I’ll talk about anything.

Rob Stott: I’ll take you up on that all and those beers we talked about too.

Derek Mattila: Yes, exactly.

Rob Stott: Awesome. Thank you, man.

Derek Mattila: All right buddy. Thanks.

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