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Batteries Plus CEO on navigating supply chain constraints

Batteries Plus CEO Scott Williams tells Yahoo Finance about his company's recent successes and how they've managed to navigate supply chain hurdles in the age of Covid.

Video Transcript

ALEXIS CHRISTOFOROUS: The global traffic jam of ships carrying goods to major US ports is affecting consumers and businesses across the country. And now with the holiday season quickly approaching, retailers are really feeling the pinch. For more insight from one of the country's top battery and lightbulb retailers is the CEO of Batteries Plus, Scott Williams. We're also joined by Yahoo Finance's Dani Romero.

Scott, thanks so much for joining us today. Look, batteries are typically not a discretionary spend, right? I mean, people need them, and they usually need them pretty quickly, like when your car battery dies. So tell us, how have you been able to keep up with demand, given all of the supply chain disruptions?

SCOTT WILLIAMS: Yeah, you make a great point. What people are looking at coming up to the holidays, a lot of times, they're looking at discretionary spend. And they're trying to figure out, do they buy their holiday or Santa gifts? Should they be buying them now before empty shelves come? In our business, we really have to look at the holiday starting back in April. And we started taking a look at what were the ports going to look like in the fall after we had early congestion?

And the important factor for us is that we're a needs-based business. So if you think about an auto battery and a cold snap comes, and you go to turn the key to your car and your battery doesn't start, you're not going to have a retailer tell you, wait three months and I'll get to you. Likewise, you or your kid drops their phone. They have a cracked screen or a battery. They're going to want the immediacy of need.

So our responsibility is higher, I think, than most retailers to be there for our customers. In fact, of our customers that go online and do buy online, pick up in store, the average pickup time is under five hours. So the need for speed is real. And that's even faster than internet retailers.

DANI ROMERO: And Scott, are you seeing any shortages in specific items? You know, I also heard that there is some sort of a nickel shortage. Will that impact at all any of your business?

SCOTT WILLIAMS: Well, fortunately, as we sit today, we have about four months' worth of inventory, which is about 50% higher inventory than we would typically have. And you ask, why would we do that? Well, we have 600 stores of our 700 are owned by franchise owners. So these are 280 franchise owners that, to me, are the heartbeat of America. They own between 1 and 20 stores. They operate locally in their markets.

And so we could try to get people to go out and buy auto batteries early in preparation for a cold snap, but that's not really very practical from a consumer point of view. So what we do is we look at buy-ins and to get the inventory out into the market to our local franchise owners. And then as a franchise owner, which is that's our responsibility first, we started buying, as I said, back in April. So as we go forward, we've got that certainty of supply. When that cold snap hits, we're able to distribute the product out. And we're basically able to do that across all of our categories.

DANI ROMERO: Yeah, and I guess, back to the supply chain that's been going on, how are you adapting to the inflationary pressures? Will your consumers be feeling that after the holiday season?

SCOTT WILLIAMS: You know, we've been fortunate in that we've only had to take some modest price increases. And it's primarily due to commodity costs increasing and slightly due to shipping charges, but we tried to get ahead of the shipping charges by really shipping it before a lot of the container increases hit their maximum capacity. So what we're trying to do is to make sure that we still have a great value proposition out to our customers and reflect the input costs as we go forward. But what we're seeing is our consumers value availability as much as price. And so we want to be there for them in the time of need.

KARINA MITCHELL: And then I want to go back to the franchisee part of this. How has demand been for you in such a tight labor market? Do you see that-- do you see yourself expanding? Are there going to be many more of them coming out next year? What's your outlook for that?

SCOTT WILLIAMS: Well, it's really interesting. Coming out of the pandemic, we expected a natural surge that there might be folks interested in entering a franchise business. And that may be bouncing out of corporate America. I always want to set up my family for an opportunity for generational wealth. And what we're finding now is we get a new set of questions. And the question is about how resilient are you. So it really has three follow-up questions. Were you essential? Did you stay open? And we were open because we sell, you know, hearing aid batteries and wheelchair batteries and to first responders.

Number two, how are you doing with staffing? And our average store has four to six employees. So we're able to manage through the staffing crunch. Even though there's Now Hiring signs everywhere and it isn't easy, we're able to get the store staffed. And then the third is, do you have the product, and are you stocked? And we talked about that earlier. So the result of that is we've signed 100 new signings on a base of 700, which is really record levels for us. And those new franchise owners will be coming into our family. And we'll open over 50 stores next year.

So we're really excited about it, and they're extra excited about a partnership we have with Samsung, where we're their first independent service provider partner. And that big announcement goes out next month in December, where we're there to prepare to repair Samsung phones, which is another great traffic driver. And it's driving people to come into our family.

ALEXIS CHRISTOFOROUS: You know, Scott, I'm curious what buying trends you're seeing? And have they changed throughout the pandemic in terms of what people are buying? What have their needs been when it comes to batteries and lightbulbs?

SCOTT WILLIAMS: Well, there's a couple of key categories I think are really fascinating. One is that the trends tell you that the average person is going to keep their car 12 years, instead of 10 years. And so there's a bigger investment in cars and people trying to take a look at, really, the performance of cars. That's actually helpful for us because they may actually replace their battery two to three times in a life versus one to two.

Second is we're seeing growth in golf carts. And ironically, although record numbers of golf rounds are through the roof, if you look around, it's interesting how many people are utilizing golf carts in their neighborhoods. And so you'll see kids tooling around and on cul de sacs, being able to use them on farms. A variety of things like that has been really exciting.

And then the third is with our lithium technology, we have an x2 power brand that's fantastic. It's a top end battery performance. And being able to utilize it in boats and for competitive fishing and a variety of things like that, it's lighter and it's faster and it lasts longer. So we're seeing all three of those trends really drive our business forward.

DANI ROMERO: And Scott, we only have 30 seconds left, but can you talk about the impact on the labor front? Obviously, 600 of your 700 franchisees are small business owners. Can you talk to me about how your small business owners are adapting to that?

SCOTT WILLIAMS: Well, it's been very important for us to retain our current employees. We also implement systems where they not only have a base pay, but they have an opportunity for incentives based on much of our product as a product plus a service. So you may be repairing a phone. You may be installing an auto battery. And we talk to our employees about total compensation versus hourly compensation. And that's helped us weather the storm.