25: A Look Ahead to the Second Half of the Year in Home Appliances

Written by Rob Stott

June 9, 2020

Nationwide’s VP of Home Appliances Doug Wrede recaps how dealers in the home appliance category — deemed essential across most of the country during the coronavirus pandemic — fared the past few weeks and looks at what challenges lie ahead in the second half of the year.

Rob Stott: All right, we’re back on the Independent Thinking Podcast. And Mr. Doug Wrede, it’s been a while since we’ve podcasted so, first of all, appreciate you taking the time and logging in from your home and chatting with us for Independent Thinking Podcast.

Doug Wrede: You bet, man. Thanks for having me. I miss you, bud. Let’s do this more often.

Rob Stott: I know. I hear you, man. Like I said, it’s been a while. I was thinking the last time we podcasted, you want to think about how different things were? We were talking about TVs and electronics, and I wasn’t even with Nationwide. So think about that for a second. My, how things have changed.

Doug Wrede: Yeah. A lot of things. I miss you. I miss a lot of people right now.

Rob Stott: No, no, I hear you. And hey, to that end, how’s everything going? How are you holding up?

Doug Wrede: Good, man. I appreciate you asking. We’ve all adjusted to working from home, and the family’s doing good and just the new normal, trying to figure out what that looks like just like we all are.

Rob Stott: I hear you. Getting more use out of our, whether it’s electronics, appliances, furniture, we’re putting it through the paces.

Doug Wrede: Yeah, exactly, man. Thank God for technology and Teams. We’ve about worn this platform out, and I’ve been on probably eight different conference call platforms over quarantine. So I don’t know if I’m on Teams or Cisco or GoToMeeting. I don’t know what I’m on right now. I got them all downloaded.

Rob Stott: I hear you. But it’s definitely… I was talking to someone else. I forget who it was. It might’ve even been on our last podcast with Dev, but it was described to me kind of thinking about… Everyone’s been talking about the new normal. He put it, or whoever it was, put it as the next normal, kind of looking to sort of how things have adjusted and kind of where things are heading because new normal just doesn’t feel right because it’ll be constantly evolving, I think, kind of the way we operate and stuff like that. But next normal is sort of a cool way of looking at it. But to that end, this appliances space that you cover now as our VP of appliances for Nationwide, it’s really been, I think… The category that kind of stands out during all of this… It’s not that it hasn’t been impacted, everything’s been impacted, but are you surprised at sort of how it has performed during this time?

Doug Wrede: Yeah, no question. It has been incredibly resilient during the COVID time period. I would say Q1 we ended pretty strong as a group. The industry was about 1.8% positive in units, and we were about 2.2, so we felt pretty good coming out of Q1. But it was right there at the end of March where things really started to pick up and the pandemic really started to hit a sense of heightenedness and awareness and shelter in place kicked in. So we had a rough April. I’m kind of hoping that April is the worst of it. That month is behind us. We’re looking at closing out May, as we have a conversation right now. We know Memorial Day was strong. So really, really impressed with the resiliency of the retailers and the business and how well it held up.

I kind of have a saying where if it kept your food cold or frozen or kept your clothes clean, you couldn’t keep it in stock in refrigeration or freezers and dish and laundry really, really took off and really became high demand products which is, quite frankly, the headwind we’re going to face for the back half of the year is just availability. But the retailers have been great. We found ways to navigate through quarantine and having stores closed, but finding ways to deliver. And so it’s been good. The business has been great. We all could use a little more product, but happy to see Memorial Day bounce back, and we are optimistic about July 4th.

Rob Stott: And I know you talk about sort of how it has held up, but the category was really, and I say the category, I mean the retailers in the category, were certainly buoyed by the fact that they were deemed essential. It was kind of one of those things early on everyone was talking about what’s going to be an essential business, and certainly keeping the food cold, keeping the dishes clean and your clothes clean was a big part of the reason why this category was deemed essential. So I mean, outside of being deemed essential, was there anything surprising as far as what you saw dealers in the space doing, or maybe even vendors, too, to sort of kind of navigate the uncertain waters that they had to?

Doug Wrede: Yeah. I think I was ever impressed with how our dealers remained flexible and pliable in the environment around them. I mean, the dealers who were not quite omni-channel ready, for those guys to just get on board with making sure their eCommerce omni-channel platform and readiness was there, from adopting chat to payment gateway to curbside delivery and scheduling appointments online, all those things and all those ways to navigate through the times has been really impressive to watch.

Rob Stott: Yeah. And I know we talk about trends, too. There’s a lot to have been following during this time. And early on one of the biggest, I think, surprises to all of us was watching the freezer category, the freezer segment. Everyone was buying up freezers, and we’re not sure why but they were. It was kind of like toilet paper and certain foods and then freezers. I guess obviously to keep food able to be around for longer and store it for longer. But were there any outside of freezers, which I know was a big trend, were there any other trends that you were kind of following throughout this time as the pandemic really set in?

Doug Wrede: Yeah. I can’t say trends as much as I was just surprised to see how quickly we recovered. I mean, we really thought and planned for a much worse trend of tough business and headwinds. Now, look, we’re not out of it. Supply is definitely strained. You mentioned freezers. I mean, we’ve got backorders in the system that will not deliver until sometimes October, in some cases. We’re being sold on ETA. So the demand in that category definitely got caught on the tail.

Rob Stott: That’s crazy. And I mean, you’ve been kind of hitting at it a couple of times here, but demand and availability obviously are going to be something that is an issue kind of looking ahead. So what is it… Well, first of all, what are you seeing from an availability and supply chain perspective? And then I’ll follow that up with why do you think some of those… Is it because of the need for those products? Or is it actually… I know we also heard, too, factories were closed because manufacturers weren’t being able to produce. Is it kind of all of that compounding on itself that’s creating those issues?

Doug Wrede: Yeah. If you go back to sort of March, April, really we had a lot of factories that either closed or had to be repositioned to accept the social distancing and precautionary measures. The distance between factory workers had to be enhanced to six feet. So between factory closures and just all those precautionary measures, yields have gone down so we’ve seen obviously a hiccup in the demand because of that. It’s getting better. I would tell you we haven’t really had any factory closures recently. The yields are still down though because of the measures in the factories. I don’t know when we’re going to be out of the clear, but we’re being told and feels good right around Labor Day would be a good time that we could say, “Hey, maybe we’re out of it.” But it’s just really too early to tell.

Rob Stott: That’s crazy. I mean, hindsight kind of 2020 at this point, but looking ahead as you try to learn from this, what’s sort of the message to dealers? How could they have prepared for… I mean, you can’t predict supply shortages and things like that. But what’s sort of the lesson moving forward about being prepared, not for a second pandemic per se, but any situation where there might be supply shortages like this?

Doug Wrede: Yeah. I mean, look, those who may have seen this coming and/or anticipated the needs of the demand in the market, some of our guys did order heavy and brought in product early. There was really no handbook for pandemics, so nobody really knew exactly how fast or how much in inventory they really needed. So getting ahead of that and ahead of advance I think probably will be an indicator that we can learn from. But really the ability to just be flexible, not that there’s a lot of product than what you need or you carry every day, but if you keep your eye on some obsolete inventory and discontinued inventory and some of the core models that some of the guys are working on, focusing on producing, there’s a chance to keep your inventory levels at some stock levels as long as you’re willing to just be flexible with what’s available.

Rob Stott: Gotcha. What about on the other side of that, too? For dealers that are anticipating these shortages and know that they’re coming, obviously we’re talking about them, any advice or tips for kind of how they can manage it? Maybe not full-blown business strategy ideas, but what can they do to kind of alleviate some of the stress that might come from some of these short stocks that they’re facing?

Doug Wrede: Yeah, the answer is, again, still kind of the same, right? We just need to try to be flexible and not be scared to shift the business to another brand if you’re not carrying a brand. If you have one supplier that has product and you don’t normally carry that brand, but under the circumstances, you need to bring in a brand, you need to consider that. I mean, it’s time to consider some of that stuff because we do have some suppliers who are in better shape than others and are able to fulfill goods right now, so we need to make those considerations and take those pretty seriously, even though sometimes those are not easy decisions to do.

Rob Stott: Fair. I’ve talked to a lot of members during this time, a few for the podcast, a few just offhand to kind of see how things are going. And I’m sure you have, as well, members, vendors, all of the above. Any cool stories come out of this for you? Anything that kind of stands out as far as… Whether it’s a win or just something that a member or vendor was doing that really stood out to you that kind of made you stop and think for a second, “Wow, how cool is that?”

Doug Wrede: Yeah, there’s definitely going to be a lot of inspirational stories that come out of this. A couple of things, the vendor side was kind of cool. Electrolux really did a hero pay program for their employees who showed up to the factory and rewarded them for sticking in there and hanging in there. I thought that was kind of cool. In some cases, other suppliers all the way up to their management level team are working in the warehouses and working in the factories and checking temperatures. So it’s really cool to kind of see the participation at all levels kind of get engaged there. From the retailer side, I don’t know if you talked to some, but you shared some of those… I can think of one. Shuee and Sons donated some laundry pairs to first responders in their local area, so that was really cool to see that. And that’s a small example of how some of the retailers really contributed to their markets and the cause.

Rob Stott: That’s awesome. It’s cool to see a lot of those things. I forget what member it was, but I know there was a member early on, too, that donated… A local EMT house had a couple of washers and dryers go and to see them just step up and be like, “Hey, here are three sets of washers and dryers for you guys that are living at this EMT firehouse,” and just different stuff like that. I know it’s not specifically appliance, but we have a member that was helping create PPE and members create PPE all over the country. So those kinds of things are always awesome to hear.

Doug Wrede: Yeah, that first example you gave was Shuee and Son-

Rob Stott: Oh, okay. Well, there you go. There you go. So that was them.

Doug Wrede: Yeah. No, that’s cool. It was very, very cool what they did.

Rob Stott: No, that’s awesome. How about kind of any odd, oddball’s the wrong word, but any fun opportunities that exist for the independent dealers out there that you’re kind of looking for, sort of thinking differently that they can kind of take advantage of the second half of the year?

Doug Wrede: I wouldn’t say fun. I think right now we’ve got a critical second half, right? It’s pretty important that we land our plane in the second half of the year, and we stay focused on making sure that we recover well. Inventory is going to be the biggest concern probably on most of our minds. So we’ve really got to do our best to just make sure we, at the independent channel, get our unfair share. So that’s probably priority one is just making sure we get our unfair share of inventory allocation and meet the demand of the customers. Other than that, you’ve seen a lot of great preparations for how we’re going to thrive in the second half if we can make it through Q2.

Rob Stott: That’s crazy. I mean, it’s funny thinking back to kind of that keynote from February, and obviously all signs were pointing positive for 2020, and you never know what kind of haymakers the retail industry is going to throw at dealers. But this channel just finds a way. Whether it’s inspiring or cool to hear the stories, but kind of the one thing that has always stood out to me is just the flexibility. It’s to your point, you mentioned it, the flexibility and ability to adjust on the fly, something that bigger operations, it’s impossible to kind of steer those ships in a way. Adding things like e-commerce or chat so quickly to a website and getting those things deployed really kind of stands out as sort of difference-makers or game-changers for these guys.

Doug Wrede: Yeah. I mean, that’s one of our strengths of the channel is our ability to pivot quicker and not have to worry about a lot of red tape and resources to go through. And we’re much, much smaller, nimble organizations, our owners and operators. Their ability to kind of pivot and turn and adopt a new process has been inspirational.

Rob Stott: And to that end, this is not something I’m catching you off guard with because I know it’s something you’ve been working a lot on and should be excited about, this morning actually, as we’re sitting here recording this, I forgot that we had a call today to talk about a tool that’s launching that I think you should take maybe a minute to talk about, and that’s the ART. You want to tell us what ART stands for?

Doug Wrede: Yeah, I’m not going to claim to be the subject matter expert on ART, but we have a very talented individual on our team, Mike Collier, who’s pioneered the assortment rationalization tool, ART. He’s going to be bringing that to the membership at the back half of the year as a great value tool. It really allows our retailers to make sure that the SKUs they carry or want to carry are being the most productive, providing the most productive results they can in your portfolio. So it’s weighted based on a lot of measures, including industry input, velocity of sellers, margin, all those things. So very, very cool tool and excited to bring it to the membership. I know Mike Collier will do a much better job landing the plane on how that thing works because he’s been living it for quite some time, but it’s a cool tool.

Rob Stott: That’s awesome. And we have plans to get Mike on here and talk to him, as well, but I figured I got the appliance guy on the line to talk about a tool that is certainly… He gave us a quick run through of it this morning, and I really look forward to having him on to dive deep into it. We’ve got some awesome promotional plans around that to get the word out there about what’s going on with ART. And the tagline is something I love. ART, the science of retail. He’s got a lot of exciting things happening there, and I think just another example of just a tool that can be in this independent retail channel’s tool belt and be a difference-maker for them.

Doug Wrede: Yeah. It’s another good example, too, of the ability to use data to arrive at good business decisions. And that’s kind of what ART is going to be able to allow us to do is take out somewhat of the human element and just provide facts and results on facts.

Rob Stott: That’s awesome. Well, look forward to seeing this channel… Channel as a whole has fought during this time, but this category in particular has been one that’s been interesting. I think exciting, too. It’s been exciting to follow to kind of see how resilient it’s been and look forward to seeing what comes through in the second half and how these tools, how all these programs kind of work out for you guys. I expect big things. No pressure on you, Mr. Wrede, but big things. Big things coming from appliances for our dealers at Nationwide.

Doug Wrede: I love it. I live and breathe it every day, and I appreciate you bringing some awareness to the category and the members. So thanks for doing that, Rob.

Rob Stott: Hey, not a problem. Happy to tell those stories as always on our Independent Thinking Podcast. Stay well, man. I hope to be connecting with you in person soon.

Doug Wrede: Same to you, sir. Be well, everybody.


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