34: Fred’s Appliances Shoots On the Challenges in the Retail Supply Chain and More

Written by Rob Stott

August 11, 2020

Troy Varness, general manager of Spokane-based retailer Fred’s Appliances, shares his experience running an appliance shop during COVID-19 and the challenges they’ve had to overcome in recent weeks. He also shares his experience as an early adopter of the NMG-exclusive Assortment Rationalization Tool.

Rob Stott: All right, we’re back on the Independent Thinking podcast and always great when I get the chance to talk to members of Nationwide and that’s what we’re doing here today. I got Mr. Troy Varness, general manager of Fred’s Appliances. Troy, first of all, I appreciate you taking the time and calling in and chatting with us today.

Troy Varness: Oh, not a problem. Happy to do it.

Rob Stott: So just to start out, get in a little familiarity with you and let our audience know a little bit about yourself, tell us just about your retail background and then we can start talking about Fred’s.

Troy Varness: Well, I’ve been in the appliance retail industry for about 28 years. I started out in sales, of course, and some delivery aspects, and then worked my way up and moved several years ago to my current position in Spokane. That was in 1997, I think it was. So 22, 23 years ago.

Rob Stott: Awesome. And tell us a little bit now about Fred’s Appliances. Obviously, you mentioned located up there in Spokane. Opposite side of the country from this Philly boy. So a little bit of a different location. What’s it like up there and how’s business at Fred’s?

Troy Varness: Well, we have 10 stores. We have four stores in Montana, one in North Idaho, Coeur d’Alene area, and then of course Spokane, and then we have one that’s South of us, two hours in the tri-cities area. And it’s a big territory. When you look at the area that we service, as far as delivery and everything, it’s bigger than the whole state of Florida.

Rob Stott: Wow. 

Troy Varness: My farthest store for me to drive there right now is about eight and a half hours away.

Rob Stott: Wow.

Troy Varness: It’s a big area. We just don’t have much population.

Rob Stott: Right. So, that’s got to present some unique challenges, having that big of an area. So what’s that like for you as general manager to try to cover that area?

Troy Varness: It’s difficult. And of course, with everything that’s going on in the world right now, getting to the stores has been a real challenge, and that’s probably been the hardest thing this year is not being able to get out and see everybody and do your visits and check-in with everyone. That’s been the hardest thing.

Rob Stott: Well, the funny thing is I think a lot of the member support managers at Nationwide could relate to you, not being able to get out the member stores and having to do things like video chat with… Is that what you’re doing? Is it a lot of video conferences, trying to stay in touch that way?

Troy Varness: Yeah. That’s all you can do really. Yeah, it’s definitely changed. It’s changed how we do business, not just within our own company, but even with our vendors and everything. It’s definitely different. It’s not the same as an in-person meeting, but you still got to get business done. Right? Business has been crazy, crazy good. And that just makes it that much more difficult when you can’t get out and see everybody. Resources are stretched to the maximum right now, delivery, service department, all of it. Everybody’s just really running hard.

Rob Stott: Right, right. I planned to ask you a little bit more about how these past few weeks and months have been, but before we dive deeper into that, I want to ask you, what’s the thing in your mind that sets Fred’s apart from other… in your area or other independents in general?

Troy Varness: Well, our biggest thing is we try to warehouse and keep a lot of inventory in stock all the time. That is primarily my competition is the box stores. And that is where we win is that I have it in stock and we can deliver right away or they can pick it up. And that’s a big difference. Really.

Rob Stott: Yeah. And, it’s of course, I think very apropos that you mentioned that because I know in talking with dealers and members during this time, during this COVID situation, that having stock, having inventory has been one of the bigger challenges, just because of everything that manufacturers have faced and supply chain issues. So, at the outset, did having that advantage help you guys? Is that something that you noticed for sure upfront?

Troy Varness: Oh, absolutely. When our state first got locked down, there actually was quite a bit of a slowdown in business for about two weeks and then it took off and fortunately our barns were full. I mean, our warehouses were busting at the seams. We had a lot of inventory and even with that being said, we didn’t have enough. I mean, we sold 430 freezers in six days and ran out. And so there are certain categories, we were just really strained in, even though I had lots and lots of them in stock.

Rob Stott: Right. Looking around the Fred’s website right now, I notice the orange banner across the top. That’s probably something, a lot of dealers and… Whether big box or independents are saying right now, and that’s freezers are unavailable right now. It was one of the hot ticket items, I think. And it still is at this point. 

Troy Varness: Yeah. We were getting so many phone calls, and finally we’re doing everything we can just to say, “Hey, look, we don’t, we just don’t have them”, because it is insane. The phone was just ringing off the hook and every single phone call was a freezer call. So…

Rob Stott: Crazy. As we’re several months into this now, what are you seeing? Is it getting better from a supply chain standpoint?

Troy Varness: I think so. I’m definitely starting to see some product break loose. Slowly, slowly, but it is coming in and we’re getting some categories back, but I don’t see freezers recovering for a while, because every time I get 10 or 15 freezers in, they’re gone in an hour.

Rob Stott: Wow.

Troy Varness: Because we have customer waiting lists on them. Yeah. That’s just going to be a tough category for a while.

Rob Stott: Man, that’s crazy. Inventory challenges certainly have been talked about and we know about them. Is there anything else, or… As this time, as this period has worn on, are there any challenges that are cropping up now that maybe you didn’t anticipate?

Troy Varness: Yeah. The increase in business. We were not prepared for that kind of increase in business that quickly, so our logistics, delivery, warehouse, everything, it’s just… I don’t have enough. And getting help is difficult at best. I could use probably eight more guys right now, just here and we’re hiring everybody we can and just doing everything we can to get this stuff out the door. Normally, in a normal time like this, this time last year we would advertise same day next day delivery. Well, that’s impossible right now. I’m several days out to get deliveries done. So that’s been a huge, huge challenge for us.

Rob Stott: It’s interesting in itself. It’s almost like one of those, when someone asks you in an interview, what’s your greatest weakness or your strength and you talk about your weaknesses kind of thing. Does it feel like that where there is a lot of business, so it’s a good problem to have?

Troy Varness: It is a good problem to have. From a customer service standpoint, we always pride… We’re very proud of the fact that we could get people taken care of right away because we have the inventory and we have that delivery capacity. But when the business increases that rapidly because it was literally within two to three weeks, then all of a sudden you’re behind and you can’t react quick enough not realizing that this is coming. There’s just nothing you can do except hire like crazy and get more trucks and give people training, get them on the road as quickly as you can. 

The interesting thing is most of the customers have been what I would consider to be very reasonable and very forgiving. Just the fact that we have it and we’re going to get it to them in a week means a lot to them. In the past, they would have been screaming that, “You guys need to bring it out today.” Well in the world we’re in right now, they’re being a lot more patient with us and that’s been a blessing for sure.

Rob Stott: No, that’s awesome to hear. How’s that relate to, or how does that translate to just the in store experience with them as well? Obviously there’s the inventory side and them shopping with you, but then also the practices of today, health and safety things you have to consider, what kind of feedback have you gotten from that?

Troy Varness: It’s been pretty good. All of our guys are cleaning everything before they leave the home. They’re masked up, of course, tons of cleaning supplies on the truck and sanitization stuff and same thing in-store. So, we’re very, very cautious with the public and just doing our best to follow all the guidelines and make sure that they feel comfortable with us being in their home or in our stores.

Rob Stott: Got you. No, obviously important and that’s something… I think it’s one of those things where you feel like a lot has changed and a lot has happened and because of COVID and what it’s presented, but that’s one of those ones you almost feel like whether there’s a pandemic around or not, it’s those practices that feel like they’re going to stick around after this is all settled.

Troy Varness: I would agree, some of it will for sure. Yeah. We’re all looking at it a little differently. I know my delivery guys hate having a mask on when it’s 100 degrees outside and they’re hauling refrigerators into somebody’s home or apartment complex and it just really wears them out. It’s tough.

Rob Stott: Yeah, for sure. Another potential challenge, just wanting to get your take on, forecasting seems like it’s impossible right now, just because of everything that’s happening from whether it’s a supply standpoint or even what you anticipate from a sales perspective. So, how are you managing that, trying to look ahead to future quarters with so much uncertainty out there?

Troy Varness: We started probably back in the first part of May just ordering like crazy knowing full well it’s not going to ship, but to get in line for the product and hopefully get some of it to ship. There’s probably a pretty good chance there’ll be some orders that are going to be canceled if we get much farther downstream and they can’t give us ship dates. The last thing I want to do is go into the end of the year with a barn of appliances, especially not knowing what’s coming. But we have them on order and we’re waiting in line. You got to be ready.

Rob Stott: Got you. Well, one thing that does, and I know we wanted to get to this too, is talk about forecasting appliances. I know you guys are… Fred’s is one of the early members that have been participating in the assortment rationalization tool, which is a mouthful to say, but simplified down to ART through Nationwide. I want to start just by asking you, how was the tool presented to you? How did you come to learn about ART and what it offers?

Troy Varness: I was trying to remember, it’s been quite a while ago now. Mike Collier presented it to us and got our input as to what it needed to look like and what we should show and shouldn’t show. We were fortunate enough to be somewhat involved in the development of it, I guess. All his work, don’t get me wrong, but we got to put some input in and then some time went by and I think they were tweaking some things and doing some different things to it. And then we finally got our first good look at it a couple of weeks ago. And it’s a fantastic, powerful tool.

Rob Stott: What were the early looks that you were having? What were those initial thoughts that you had about what it could do or the potential of what you saw in the tool?

Troy Varness: Well, I think one of the biggest things is, is it lets you go in and look at your core line up, if you will, especially on your floor. You can go in, you can look and you can see what SKUs are delivering margin to you, and you can see which SKUs are selling and which ones are really not getting the terms. So they’re just sitting there. And then using the other information from the other members that’s on there, you can go in and say, “Hey, in this price range, this SKU is working really well for dealer X. Maybe we should bring it in and give it a try and look at the margin.” And it just allows you to fine-tune your floor and find those models that you might be missing. It’s really, really… It’s a great tool.

Rob Stott: Yeah. As Mike was walking us through it, from internally, pitching the tool to us and explaining how it works, I know one of the things when you’re looking at it, it’s one of those things you have to see. It’s hard to explain because there’s a lot there, a lot of different breakdowns, like you mentioned, the price ranges and things like that. So as you’re actually using it, it’s one thing to talk about how it can be talked about and how members won’t be overwhelmed. But as you’re in there as a member using it, do you ever find yourself getting overwhelmed by the amount of information that you can pull out of it?

Troy Varness: Absolutely, if you allow it to. There is a ton of information. You can spend an awful lot of time, maybe even too much time, trying to analyze it. But I think looking at our data and then comparing it a little bit with the members’ data, the other members’ data, is valuable for sure. And that doesn’t take too much time. You can go right through and see what’s going on.

Rob Stott: Well, and to your point there, how is it that you make sure you stay focused in the tool so that you’re not getting overwhelmed?

Troy Varness: Well, first of all, don’t ever try to conquer more than one category at a time. If you’re going to do French doors, then just stay on French doors until you’re comfortable with it. And you can just overwhelm yourself if you’re trying to do too much with it. You just need to take it off in small chunks and get it right.

Rob Stott: Got you. Have you been able to utilize it in your store?

Troy Varness: We have been crazy, crazy busy, like I told you, and I’m not using it like I want to, but I have analyzed the French door category and I got a little bit more work to do on it. But it is powerful. I really think that it’s going to make us more money and we’re going to do better with some of our vendors because of it.

Rob Stott: You talk about the work has to be put into it in order to get something out of it. But if you’re pitching this to a member, another member, someone comes up to you asks why they should look into using a tool like this, what’s the way you explain it to them?

Troy Varness: I would explain it not unlike what I just did for you, which is it will help you get rid of stagnant SKUs on your floor. It can also tell you that maybe your… As an example, I’ll just use this example. Maybe I’m flooring a stainless French door on my floor and I see that the member data that people are doing quite well with maybe a black stainless one and I don’t floor it. Maybe I should have a couple in stock though. And then I go and look at our sales history on it and realize, okay, yeah, we are selling them in black stainless even without showing it. So it can help me with my floor stock. It can also help me with my back stock and making sure that I ask them SKUs that are moving that maybe I’m not noticing on a daily basis.

And the second thing I would tell a member that’s thinking about using it is you’d be crazy not to because it will get you more involved in your merchandising. And I think that’s something, especially when we’re really busy like we’ve been and everything. But I think that’s something that a lot of people lose sight of is their merchandising. Oftentimes what’s on the floor is what the salespeople want, not what’s best for the business. This lets you make a business decision on your floor inventory and your back stock and not just what a salesperson wants to drive. So it’s worth it. It will make you money.

Rob Stott: As you’re using it now, any benefits that you didn’t expect to realize with it or any ways that you’ve been able to use it that wasn’t necessarily pitched to you as to how you could use a tool like this?

Troy Varness: You know, Rob, not yet. I just barely hit the surface on it. Again, I’ve only had it for a couple of weeks, but I can see right away… And even actually when Mike presented it to us months ago, I could see right away that there’s some real value here, just so I have better knowledge of what’s going on out on my floors, margins, assortment. Are my guys selling up? Are they selling down? Why are we selling the cheapest one when we should be selling a mile above that? There’s so much there.

Rob Stott: Yeah. You’re talking to the potential of it and just from that perspective… You mentioned you are just scratching the surface with this. Is there anything you anticipate from this? What do you see as how important of a tool or how integrated this tool will become for you guys at Fred’s?

Troy Varness: We’ll be using it a lot, because already it’s going to affect my French door line up. And again, that’s the only category I’ve played with. I suspect when I get into dishwashers, which is… That is a big, big category, that there’ll be a lot of changes in the dishwasher category. We probably carry too many models on the floor, number one. Number two, I know that there are stagnant models, models that we just simply don’t sell. The salespeople aren’t going to it, customers aren’t asking for it and we need to eliminate them. Floor space is at a premium. All the colors that are out now and everything, you’ve got to be able to set your floor correctly to it, things people are looking for and not just what you think is good, or what your rep thinks you should have on the floor.

Rob Stott: That, I’m glad you say that, because that’s the thing that, if you want to boil it down, it takes that gut feeling out, I think is the way… I know that a lot of that’s been described as you have… You, as someone in retail that is in charge of making sure you have the right product on the floor, a lot of it to date has been gut feelings. Is that a fair way to describe it?

Troy Varness: Absolutely. You’re 100% correct. I’m an old retailer. I’ve been doing this for a long time and for years… I’m dating myself here by telling you I’ve been in the business for 28 years. We didn’t even have computers when I started. Everything was on paper. And so you couldn’t do research that you can do today and stuff. And so, yeah, I was trained to do everything with my gut feelings. This is real data. This eliminates that guesswork. And am I making the right decision or I’m making the wrong decision? It’s real data. It tells you what you’re doing. It tells you what your company’s doing, it tells you what your peers are doing. That’s what I’m saying. It’s a very, very powerful tool.

Rob Stott: Behind that power and that, this is something I want to be sure to ask because I think there’s a lot of confusion or maybe even some hesitation too. You talk to people about data and the things that have to be plugged in for this kind of thing to work for you. How do you get over, or was it even a concern for you? I know supplying things like point of sale data and allowing access to see how numbers work at your store for them to be able to funnel into a tool like this, any concerns from you as a member, or how did you justify the needing to supply data to get access to something like this?

Troy Varness: If you would’ve asked me that question five years ago, I would’ve said I’m absolutely not going to supply it to the point of sale data. I’ve always felt like that was protected. That’s mine. You don’t need to know about it. I don’t want the vendors to know. I don’t want my fellow members to know, all that, but times have changed and Nationwide has made me very comfortable with sharing the data with them so that they can do things like this. I think that moving forward, you have to. If you want to keep up, you need these tools and you need to be able to send the data. They’re always trying to help. Nationwide’s always going to try to help you stay in business and do business and make money and do a good job. 

And so you’ve got to change, you’ve got to change your attitude. And after seeing the information, I’m glad we did it and we’re going to continue. So…

Rob Stott: No, that’s awesome to hear. That kind of sentiment or way of talking about it is true to just independents in general. It’s all about flexibility, adaptability. And it’s one of those things that I think this space has that you won’t find at a big box or corporate chain. So that’s a testament to you guys for being adaptable and flexible. So…

Troy Varness: Yeah, you have to be. It’s the world we live in now. You might as well give it to them because they can figure it out. They might not be able to get it exact, but it doesn’t make any difference. It was time to do it. We fought it for a while. I’m not kidding you. We didn’t want to do it. And then when Mike showed us this, that changed my mind, honestly.

Rob Stott: Wow. So, well, that’s interesting to hear, because I know that there’s a lot of back and forth that goes on obviously between members and what these tools need, the benefit of them and how we can get to this. So this was that straw that convinced you guys.

Troy Varness: It was, because of several factors, the things I’ve already mentioned about setting your floor and making sure you have the right SKUs. But something we barely touched on, but it’s pretty important to most appliance dealers is margin. 

Rob Stott: Yeah. 

Troy Varness: I can see if I am negotiating and getting a good deal on a piece or if I’m not based on the other members. And so that gives me the tool to go and leverage my vendor or I want to carry this SKU, but I need my pricing here and I know you could do it because other people are getting that price. So that’s another asset. It’s margin, it’s money.

Rob Stott: Oh, awesome. Awesome to hear. That’s one of those, if you want to call it a… Not unintended because of the data’s right there, but those ancillary benefits of having a tool like this. So, it’s more than just having the right assortment as the name of the tool says. It’s about maximizing the efficiency of that assortment. So…

Troy Varness: Correct. Correct. And it’s all right there. You can see it, you can see what you’re selling it for and you can see what other people are selling for, and the average price being paid for it. And it just gives you the ability to negotiate.

Rob Stott: No, that’s awesome, and cool to hear. And like I said, I appreciate you taking the time to share this. I know, Troy, you got a big territory up there. So I don’t want to take too much more of your time trying to get you to talk about this. So I know you got some work to do, so…

Troy Varness: Always.

Rob Stott: Don’t we all. No. But hey, I appreciate you taking the time. I look forward to seeing how this tool, the ART tool, works out for you guys. And I know more members as more signup, so I appreciate you spending a few minutes chatting with us about it.

Troy Varness: Yeah, no problem. I appreciate it, that you’d allow me to get on to chat with you about it because it is something that everybody should look at, at least look at it.

Rob Stott: Hey, we hope so. Having stories like yours certainly helps get the needle moving in the right direction. So thank you for sharing.

Troy Varness: You bet. Anytime.


Connect With Us!

More Podcasts

212: How Much Better Can TVs Get? We Ask TCL That Very Question.

212: How Much Better Can TVs Get? We Ask TCL That Very Question.

The TV market is a truly fascinating one to follow. Screen sizes continue to get bigger and picture quality continues to get more vibrant and clearer. But how much better can these displays actually get? We sat down with Bruce Walker, product evangelist at TCL, to get a – ahem – clearer picture of what’s in store for TV technology.

211: Checking In with Chris Whitley and Ellipsys Commercial Technology Group

211: Checking In with Chris Whitley and Ellipsys Commercial Technology Group

A year in, we sat down with Chris Whitley to talk about the launch and growth of Ellipsys Commercial Technology Group and what’s ahead for his expanding network.

210: An Economic and Inventory Financing Overview with Wells Fargo

210: An Economic and Inventory Financing Overview with Wells Fargo

You can’t have a conversation about the retail industry without talking about the current status of the economy or where it’s heading. We did just that with Velicia Sutton, managing director and general manager for Wells Fargo. In addition, Velicia dives into the world of inventory financing and shares how independent retailers can leverage this available benefit to free up cash to focus on other areas of their business.