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ULTIMATE PUSHES ACCESSORIES TO OFFSET DECLINE IN MARGINS.

THORNTON, Col. -- Ultimate Electronics Inc. is moving toward a cross-merchandising approach with its video and consumer electronics accessories.

The goal of the move is to maximize the average ring and help make up for diminishing margins.

Ultimate operates 65 stores and had sales of $713 million in fiscal 2004. Between 7.5 percent and 8 percent of Ultimate's electronics sales come through accessories, according to Derek Mattila, accessories buyer.

Accessories sales "really depend on what happens with the TV category," Mattila said. "We have an inverse relationship with it to some extent. When TVs have a very good month, my attachment percentage goes down a little bit. It's simply a function of selling price on TVs and how high they are compared to the accessories."

Ultimate internally divides its electronics accessories into three groupings. Mattila oversees about 800 SKUs focused on home audio/video, computing accessories, cellular and home office. The other groupings are custom installation accessories (about 200 SKUs) and car audio (another 250 to 300).

The centerpiece of Mattila's accessories category is the Monster Cable line, which includes component video cables and surge-protection items. Video cables run from $9.95 to $299, depending on the quality and length.

"Last year, our power sales were extremely strong," he said. "It's really the cables, the connectivity, that are driving the majority of business now."

Ultimate also does a large business in video/camcorder bags.

Other big brand names in video accessories are Sony, Panasonic, JVC, Canon and RCA. Ultimate recently started doing business with a company called Sima, which provides universal camcorder and digital- and still-camera accessories, like power and lens adapters. Also big are original equipment manufacturer batteries.

Ultimate does Sunday print advertising "to stay competitive with all of the retailers who advertise on Sundays, and we do have to stay competitive at the entry-level price points," Mattila said. "However, we also offer a mid- to high-end product selection, which is the dominant portion of our assortment."

Accessories are growing in importance for video and all of consumer electronics categories, Mattila said, because "margins on the hard-goods categories have not been improving over the last couple of years. There has been a diminishing margin through the hard-good categories. The goal is to maximize that margin opportunity on each sale, and the accessory attachments are the way you have to make that up."

That idea, of course, ties directly into solution selling, "providing the customer with everything he needs to fully operate the new products they've purchased," he added. "It is obviously an additional service that can be provided by the retailer. It enables the customer to fully utilize all the features of the hard good they've purchased. And so the accessory focus has increased not only as a way to help out with the reduced margins, but also to help with customer service and customer relations."

Though Ultimate has a number of store formats, the prototypical one has what management calls a "tech tower," which serves as a centralized focal point for high-tech products. Accessory displays are on the tower's periphery.

"Because we have a commissioned sales floor, we believe in the assisted sale and the solution-selling philosophy," Mattila said. "Our merchandising strategy reflects the belief that to centralize those products and accessories makes it easier for us, on our assisted sales floor, to locate and sell specific products and create a solution."

That plan, however, is now being altered, as executives begin to explore the benefits of adjacencies -- in effect, cross-merchandising video and other hard-goods products with their accessories.

"We are changing some of the merchandising strategy as we go forward into 2004 to create some more of those adjacencies," Mattila explained. "Obviously there is a huge advantage to having accessories next to hard goods just so that it's not `out of sight, out of mind.' "
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Author:Riell, Howard
Publication:HFN The Weekly Newspaper for the Home Furnishing Network
Geographic Code:1USA
Date:Mar 1, 2004
Words:638
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