We all know 2024 was going to be one heck of a rollercoaster, but how are things tracking? And what’s the outlook heading into the back half of the year? Mike Derro, SVP of Home Appliances for NMG, shares what he’s seeing and hearing across the channel.
Rob Stott: We are back on the Independent Thinking Podcast. Mr. Derro, has it been a while?
Mike Derro: It has.
Rob Stott: You’ve done a podcast, right? We’ve done podcasts together.
Mike Derro: We did a podcast when I first joined the company almost four years ago.
Rob Stott: Crazy.
Mike Derro: Thanks for having me back three-and-a-half years later, Rob.
Rob Stott: It’s been a while. We got busy, man. I don’t know what to tell you.
Mike Derro: I’m on my third role at Nationwide, too. Changes happen quick around here.
Rob Stott: No, that’s great. I appreciate hopping back on. It must have been a great first impression you set.
Mike Derro: I guess so, yeah. Thanks for helping out with that, Rob.
Rob Stott: Anytime, anytime. No. We appreciate you hopping back on and jumping into another episode with us, an interview. You mentioned a new role.
Mike Derro: Yeah.
Rob Stott: Back in February, March, around last Primetime? Is that when you started? SVP of home appliances today. You’ve got the period in between Primetime to Primetime?
Mike Derro: Yeah. Essentially, the last Primetime we had back in March, I was almost handling dual roles. The announcement came out that it was official.
Rob Stott: Yeah.
Mike Derro: The official move didn’t happen until April 1st. While at Primetime, I was doing a little bit of my membership position, but also working through the appliance division as well. I was wearing two hats. We had just hired my replacement on the membership side, Jorge Font. That was his first week on the job, was at that Primetime. He shadowed me, while I shadowed a lot of my new team in the home appliance division, and met with a lot of the vendors. It was a little bit of a busy show for me, but it was successful.
Rob Stott: I do remember you running a few different places at the same time, it felt like.
Mike Derro: Yeah.
Rob Stott: We love doing that to people, don’t we? Start at Primetime. It’s a fire drill for you as a new employee, but also a really cool one because you get to learn it all right there.
Mike Derro: I told Jorge when he joined the company. I’m like, “You couldn’t have asked for a better time to start.” Because you’re right, you’re going to see everything that Nationwide, and what we can do to help the independent retailer and our membership, and then you’re going to be in front of the membership. We only get to do it twice a year. It was a perfect start time for him. And also, it really helped me transition into this new role, because I was in front of a lot of the membership, the council members, as well as all of our vendors. It was a good starting point for me as well.
Rob Stott: How have these six months been? Are you adjusted to the role? How are you feeling in this new seat?
Mike Derro: Yeah. The nice thing, for me anyway, is being on the merchant team previously in a different segment. So as far as what we can do as an organization and a division to help the independent retailers, that didn’t change. What did change was the widgets that are being sold on the floor. Some of the learning curve on the product side has been there at the very beginning. But at the end of the day, it’s also how do drive traffic into our independent retailer stores that are looking for replacement appliances or new appliances, and what’s that experience like. All that didn’t really change much.
Rob Stott: Yeah.
Mike Derro: But the product itself is a little bit different. There are some nuances, difference from different categories into appliances. Some of it, driven differently in the macro environment that we’re in. But other than that, it’s been a really good transition. The business climate has been tough, but that’s not so much anything that our independent retailers have done.
Rob Stott: Yeah.
Mike Derro: Or even our vendor partners have done. It’s just the world we live in currently right now.
Rob Stott: Yeah. We’ll dive into that a little bit deeper here in a moment. I want to take you back again, to the previous role, the membership-facing role. Do you take anything … Career history too, obviously on the manufacturing side, and helping our members from the merchant team side. Does that experience in that role as a member-facing position, do you take anything from that into your role now? Does it make you approach it a little differently? Or have you learned anything from that experience?
Mike Derro: I do, yeah. That’s a great question because I think you’re absolutely right. I came from the manufacturing side when I joined Nationwide four years ago. I stepped right into a merchant role. I did have a lot of retail experience in a previous role, for about eight years, where I managed an independent retail channel within a manufacturer.
But what the membership taught me, the position I was in there, Rob, was really always taking the eyes of the member first. When we go to any type of a conversation, whether it’s a marketing conversation, a product conversation, a programming conversation, that membership position really opened up my eyes. It’s like okay, what’s going to be the best for our independent retail community? In this conversation with this advertising agency, or this vendor partner, or this business service. That’s what’s really opened my eyes when I stepped back into the merchant team role.
Rob Stott: Oh, that’s awesome. I got to imagine it’s cool. You get hit from different sides with the types of questions you’re getting from your immediate stakeholder that you’re working with. I have to imagine getting that exposure to the membership and the things that matter to them too, what’s important, what challenges they’re facing, you can carry that forward into this type of role. Even similar to what you were doing previously, but you get a fresh perspective on it. That’s pretty cool.
Mike Derro: Yeah, for sure.
Rob Stott: Back to the market and today. You mentioned it. It’s been a heck of a year, right? ’24 has been something. How are we sitting right now? What are things looking like?
Mike Derro: Yeah. It’s a great question. I would tell you, I think our network is performing stronger than a lot of the independent retailers. I tell this whenever I speak to a member. It’s, “Hey, if you can be a part of a collective, with just the knowledge, and experience, and wisdom that so many others have in this game.” Just the networking, as we’re leading up to Primetime, that’s a huge side benefit just coming to Primetime is being able to talk with your colleagues and how they’re overcoming some of the challenges.
Overall, I think we’ve done a really nice job and network. We’re lucky enough to have a lot of POS data. We collect about $3.5 billion worth of POS data. That gives us directionally how the entire network is doing. I would tell you, for the most part, between laundry, refrigeration, cooking, and dish, we’re basically right at the industry. When the industry, year-to-date through AHAM, which is a unit perspective, through June was down 2.8%. We’re right in line with that. Even better in certain cases, on more of the luxury side. We’ve seen some of our luxury, higher end products out-perform some of the industry. That just speaks to the macro, which again, generally speaking, most of the customers that are buying anything right now, but appliances specifically, are in a duressed state, Rob.
Rob Stott: Yeah.
Mike Derro: That means if their refrigerator breaks, they’re buying a refrigerator.
Rob Stott: Yeah.
Mike Derro: Where we focus and try to help a lot of our independent retailers try to sell packages, so that’s driven some challenges into the marketplace for us to overcome.
Rob Stott: Yeah.
Mike Derro: We’ve provided some different programs to the membership in order to really try to attract that duress consumer. But the one thing that’s a positive, still to this day right now, is consumers still want to shop. They’re going to start online if you have a great website, but they want to buy local. Our membership has really been able to take advantage of that over this year.
Rob Stott: Yeah, yeah. I want to move past COVID, but I feel like it still has to be part of the discussion.
Mike Derro: Sure.
Rob Stott: Because to your point about the duress shopper, that cycle was reset it feels like, during that couple years, because of what happened with interest rates, and home value, and things. People investing in their home. A lot of those upgrades that may or may not have been duress, a lot of it happened during that period. It feels like it just reset the cycle, like I said. You got to do a little bit more and work a little hard to get that customer out to your store, or get your name out there, and stay persistent in your market.
Mike Derro: Yeah. Yeah, share of voice is huge right now.
Rob Stott: Yeah.
Mike Derro: And to your exact point, I think the majority of our retailers who are succeeding and being successful in today’s market continue to communicate, and message, and market to that consumer. They are still out there buying.
Rob Stott: Yeah.
Mike Derro: What we’re doing is really, any program that we’re currently doing right now is let’s focus everything on trying to drive traffic. But if we can hold our own for the next few months, what we’re going to probably see in the next probably quarter is that the Fed is going to finally start to drop rates.
Rob Stott: Right.
Mike Derro: Because the inflationary pressures have started to lessen. Once the Fed drops rates, and the mortgage 30-year fixed rates start to fall again, then you’re going to start to see the real estate transactions start to pick up again. Probably won’t happen too much until the end of this year, but going into next.
Rob Stott: Yeah.
Mike Derro: Those retailers that are prepared to take that share when it’s there-
Rob Stott: Ripe for it.
Mike Derro: They’re going to be in a better position to succeed.
Rob Stott: Now year-to-date, you say we are tracking with the industry and looking good there. As far as what expectations were, does it match what we thought this year would be like? How are we tracking there?
Mike Derro: Yeah. We are tracking basically where we thought we were going to be from a forecast perspective going into this year, Rob. That’s a good question. We knew this was going to be a challenging year. We all know the macroeconomic factors, as far as inflation, and pressure, and consumer spending. But we’re also in an election year.
Rob Stott: Yeah.
Mike Derro: When an election year happens, it’s always a little bit of a difficult second-half, because the majority of the advertising is going to going to political campaigns. And then, a lot of people just take a wait-and-see approach too, before they start to go back out and buy goods and services. We’re going to be up against that in the second half, but we’ve been preparing for that all year.
Rob Stott: Yeah. I think that’s encouraging to see. It’s a sign that things aren’t worse. At the very least, they’re not worse than what we thought. Knowing that you have that positive outlook past the second-half of this year, once we get past the election cycles and things like that. It seems like the proverbial light is at the end of the tunnel, as far as interest rates and what we’ve been hearing from the Fed.
This channel has always been like that. Not wait-and-see approach, but just resilient in nature. Conditions, they fight through it. Independents have always been a channel that they don’t let those factors really impact their business too greatly. Or at least, their outlook on business. They’re a resilient bunch, and need to see that sort of message, and what you’re seeing as well. The positive, it’s there.
Mike Derro: I’ll tell you, that’s what makes me most excited most days that I work for Nationwide, is that that’s our sole purpose here is to help the independent retailer in whatever way that may come up, as far as an end result. We know that the closer we are to the membership, the better they perform. When they perform well, so do we. We’re in them with it, every single day, battling through the macroeconomic factors. And then, we’ll all be successful when we come out to the other side, when times are good again.
Rob Stott: In conversations with vendors, obviously they’re ongoing.
Mike Derro: Yeah.
Rob Stott: I know obviously they happen regularly. What are you hearing from that side of the business as well? Where does the independent retailer stand in their mind? In what ways are they working with you guys and Nationwide, to make sure that our members are successful?
Mike Derro: Yeah. They’re seeing the same things we are. They are trying to plan and make sure that they are prepared for success moving forward. They also know, the majority of the vendors, that we need to do what we can to be successful in ’24. I don’t want to say keep our ahead above water, but basically if we can maintain where we are currently today, as the GDP starts to grow again moving on into the next year, we successfully follow consumer sentiment, consumer spending, Fed rates coming down, housing transactions start to improve again in ’25, we’ll all take advantage of that.
Mike Derro: All the vendor community is saying, “Hey, we know it’s going to be a tough year this year. We know units are probably going to be flat to a little bit down. We know that next year, when things start to get better, we’ll be able to take advantage of that. Let’s make sure that we, one, provide traffic driving programs for our independent channel and community.”
I think a lot of the members that come to Nationwide Primetime will see that and what they’re doing, as far as messaging, communication, rebates, consumer rebates, buy more save more opportunities. Huge cashback opportunities. They’re going to be able to backfill their inventory and be margin healthy with the inventory they have on hand. So when they go after Labor Day, when they go after Black Friday and December year-end marketing promotions, they’ll be really well positioned from an inventory perspective. That’s really been a ton of the work by the vendor community, allowing those products and the pricing programs to be capitalized on by our independent retail channels.
Rob Stott: You mentioned, and not that it sneaks up on us, but the opportunity is abound in the back half with all those holidays that are forthcoming, and everything like that. I know that there’s plenty of opportunity to continue to see success as we approach the end of ’24. It’s crazy, end of ’24. I feel like we just started 2024. Didn’t we? It’s wild.
Mike Derro: I know. Yeah.
Rob Stott: You mentioned a lot of great things that vendors are doing on behalf of this channel too, to ensure some success. In this period, what is that message to retailers? I feel like we’ve talked about a bunch of different things that they can do, and a mindset they need to have. What’s your message to an independent retailer right now in this current condition? What should they be focused on or thinking about as it relates to their business, to set themselves up for that success at the end of the year and moving forward?
Mike Derro: Yeah, for sure. First and foremost, again, take advantage of the buy opportunities over the next few months, because that’s going to be really healthy margins for you as you promote these programs near the end of the year. Then, secondarily, yes, for Labor Day, for Columbus Day, for fall savings, for Black Friday. Make sure you’re out in the marketplace and messaging that. And more importantly, make sure you’re doing it digitally. 98% of the consumers are going to shop their journey online. If your store is online with some opportunities, and if you have an ecomm capability, more and more sales are being transacted online. Make sure you have the cart functionality to it.
Then make sure you’re promoting financing. What’s happening out in the marketplace right now is yes, consumers may not have as much disposable cash as they did over COVID, when they had some influx of monies and savings were going through the roof. It’s a little bit more of a cash reserve. Promote over the bigger holidays, use digital platforming. Then finally, make sure you’re promoting your financing, which obviously we have some great programs with Wells Fargo and Synchrony to promote those. Consumers are using that more and more today than they have been in the last 12 to 18 months.
Rob Stott: Yeah. No, great points for sure. Great advice and tips for our retailers listening to set themselves up.
One last question for you. As you dive deeper into this channel, what excites you? What are you excited to learn more about? Now that you get to wear just one hat at this show.
Mike Derro: Yeah.
Rob Stott: I hope. Just one hat at this Primetime coming up? What excites you?
Mike Derro: Well, one hat so far. We’ll see if that changes in the next few days.
Rob Stott: What are you excited to learn more about as you dive deeper into this segment, and get more familiar with it?
Mike Derro: Yeah. This is going to be my first opportunity to really start to dive in with some of the executive teams of the vendor communities that are going to be speaking to our network. On Sunday, at 3:00 during Primetime, we’re going to have an Appliance Vendor State of the Business. I’m really excited to hear not only what they’re going to be doing at the show for our members, but also what they think they’re going to see in the back half of this year. And probably more importantly, how they see ’25 shaping out.
Rob Stott: Yeah.
Mike Derro: It would be great to hear from our top vendor partners and the executive teams of how they see the business, and what they can do to help support our independent retailers. But also, what they recommend our independent retailers to do to prepare for success in 2025. I’m really looking forward to that.
I haven’t had a chance to see any of the NLA education courses from the home appliance division on the past, so I’ll be able to do that this time as well. There’s some new product that’s going to be launched at our Primetime, with both luxury and core products. I’m excited to see some new introductions.
Rob Stott: I love everything you mentioned. I’m kind of sad you didn’t mention Doug the Pug, though.
Mike Derro: Oh, wow.
Rob Stott: The fact that he’s going to be at Primetime. Certainly a highlight of this show was swing by that Whirlpool booth, bringing his people along with him. I imagine. I don’t know if he travels alone, or how that works.
Mike Derro: He’s got a much bigger following than I do on social media, so he’s doing something right.
Rob Stott: Listen, I think you could take all of the Nationwide network and combine it, and he’s still got a larger following. That dog has quite the amount of influence on social media. No, that’s awesome.
Mr. Derro, this was fantastic. Appreciate you peeling the curtain back a little bit, and letting us in on what’s going on in home appliances, and your world. Look forward to bumping into you soon, man. We’ll make it slightly less than three-and-a-half years, how’s that sound, between podcasts?
Mike Derro: Yeah, perfect. I appreciate it.
Rob Stott: Awesome.
Mike Derro: See you in Vegas in a couple days. Or a couple weeks, I should say, when it’s 110 degrees. Can’t wait.
Rob Stott: Hey, we’ll have some fun. Stay cool, man.
Mike Derro: Yeah. Thanks, Rob.
