BrandsMart finds success with no-frills strategy

Despite the garish, high energy atmosphere — or maybe because of it — BrandsMart has become an entrenched power in the metro Atlanta electronics market five years after arriving.

Last week, the Florida-based chain opened its fourth Atlanta area store, and 10th overall, near the Mall of Georgia in Gwinnett County. The 118,000-square-foot — larger than the average enclosed space of a Home Depot — will employ 300 people.

The new store is a show of confidence at a time other chains, most notably Circuit City, have failed.

Entering the fertile but risky Atlanta market in 2004 was an experiment of sorts for privately held BrandsMart, which until then had never ventured beyond South Florida. It arrived about the same time as Fry’s, a rival discount chain with two area stores, and joined an electronics-appliances battle royale that also includes Best Buy, hhgregg, and various big-box retailers.

Since then, HiFi Buys, Circuit City and CompUSA have closed, leaving more market share for the survivors. At the same time, consumers are spending less due to the economy.

BrandsMart – which still operates only in South Florida and Atlanta – does not release much financial information. Chief Executive Michael Perlman said the company rang up just over $1 billion in sales in 2007, but he added sales are now about $900 million annually.

A report by TWICE Market Research on the nation’s top 100 consumer electronics retailers in 2008 ranked BrandsMart 27th for consumer electronics sales, despite its small number of stores. with more than 100 more modestly sized stores, hhgregg ranked 22nd. The top five in order were Best Buy, Wal-Mart, Circuit City, Apple retail stores and Target.

Retail analyst David Strasser, of New York-based Janney Montgomery Scott, said BrandsMart’s volume-driven pricing gives it “an ability to take profitability out of the market” from rivals.

“There are very few stores in the country that do more volume than their Miami store,” said Strasser. “It’s got to be one of the top five busiest retail stores in the country.”

The company makes no apologies for its loud colors or busy ads.

“Bright colors,” said Perlman, “are conducive to rushing people through a store. They are not the most comfortable colors, but they make you want to move. We do large volume per store. We’re happy if you stay, but after a while you really want to move people through your store.”

The primary colors, he explained, were picked by his father, Robert Perlman, who founded the company in 1977 and is still chairman of its board.

The stores’ no-frills simplicity helps keep costs low. But it flies in the face of more conventional retail wisdom, as retailers like Target and Best Buy fine tune displays to entice consumers to spend more.

Still, analyst Strasser says BrandsMart works. “I think it’s a phenomenal concept. Consumers get real good prices,” said Strasser, who follows BrandsMart because it competes against publicly traded stores he covers, such as hhgregg.

The chain mostly owns its own real estate, which usually looms over well-traveled interstates creating free brand awareness.

The company says commissions give employees incentives not just to make sales but also to know products. Hhgregg also pays commissions, while Best Buy hasn’t for two decades. BrandsMart has six full-time trainers who run “BrandsMart University” classes to keep sales techniques sharp.

“There’s so much volume that moves through their stores, and their [cost of goods sold] are so low, it gives them an advantage in pricing,” said Strasser.

Company executives aren’t interested in market niches.

“Everybody,” said Lary Sinewitz, an executive vice president, when asked about the target customer. “If someone needs a TV set that’s my customer. From $300 to $6,000 fridges, to $190 or $8,000 TVs.”

Larry Levine, vice president of operations, acknowledged some shoppers might not get what they want. “It doesn’t appeal to a guy who is buying a custom sound system,” he said. “But it does appeal to just about everyone else.”

“Certainly the BrandsMart format is not going to appeal to everyone,” said Britt Beemer, chairman and founder of America’s Research Group, a retail research firm.

“You’re never going to please everybody but BrandsMart is successful ... as a price house. Even IKEA is a price house. You could argue IKEA turns (some) people off, and yet they are considered one of the most successful retailers in the country.”

In any case, BrandsMart has no plans to tone down its approach.

“We want to establish who we are and what we are so people always know it’s a BrandsMart building,” said Sinewitz. “We’re trying to create an image and a culture.”