NEW YORK -- The National Association of Service Merchandising will cease operations Dec. 1, NASM president Gary Ebben told SN last week. NASM is a trade association that represents the service-merchandising sector of the industry. It consists of some 420 members -- 70 service merchandisers and 350 manufacturers.
In an interview here, Ebben described an unusual course of events that is expected to lead to the organization's shutdown, including the disposition of as much as $700,000 that will be left in its coffers on shutdown day and the dispersal of its membership.
The Chicago-based organization expects to divide its net assets into equal parts and contribute half each to related organizations, the General Merchandise Distributors Council and the American Wholesale Marketers Association.
In exchange, NASM members will obtain a year's membership in
each organization and be free to maintain membership in either, neither or both associations. It was reported in last week's SN that NASM might not survive the year and was seeking merger opportunities and other alternatives. Ebben said the links with GMDC and AWMA might be viewed as a merger, although the legal definition might end up being a "dissolution and distribution of assets."
NASM membership is expected to vote on the shutdown plan at NASM's 15th annual convention, to be held Oct. 27 to 30 in Palm Springs, Calif., with the vote being virtually certain to uphold the plan, Ebben said. NASM was formed in 1978 by the merger of three predecessor organizations: Service Merchandisers of America, Toiletry Merchandisers Association and American Rack Merchandisers Institute. SMA was formed in 1958, the other two in 1951.
Asked why NASM was folding, Ebben said, "The organization is ceasing to exist because we felt it could not provide the kinds of services that would benefit the membership."
He said a poll of the membership revealed a need for educational and research services and activities that the group could not develop on its modest budget. Both GMDC and AWMA have significant educational foundations, and NASM's resources will be contributed to those foundations and earmarked to fund activities that serve the needs of service merchandisers.
NASM's shutdown plan is an outgrowth of a board decision made last December to seek alternatives for the group. The decision was driven by the fact that, while financially sound, NASM was clearly spiraling downward in terms of total monetary clout and numbers of members. Even the creation of a fairly vibrant new class of members 18 months ago, the service-only firms, was not expected to prevent the group from going out of business over a period of several years.
The forces of industry consolidation, competition from other associations and the departures of several of NASM's largest members in recent years were all seen as factors in the group's long-term decline, Ebben said.
On the positive side, its highly praised conventions had been profitable over recent years, and the group accumulated a cash reserve that approached $1 million a couple of years ago. While that sum has since been partly depleted, $600,000 to $700,000 should remain to be distributed in December, he estimated.
That cash reserve gave NASM some negotiating power in its search for a merger partner or partners during the past eight months, Ebben added.
At an April NASM board meeting, executives from GMDC and AWMA were invited to make presentations on merger prospects, after which the NASM board recognized that it could not choose to merge with either group without displeasing half of its members. It determined at that time to send separate task forces to negotiate with each group simultaneously.
"We approached these two organizations from a position of strength. Our task forces have negotiated activities which will be in the best interests of our members," Ebben said.
The two task forces reported their results to the NASM board on July 29, at which time it decided to split its net assets between GMDC and AWMA.
In each case, the task forces successfully persuaded the organizations to accept former NASM members on their boards of directors, to permit all NASM members one year of free membership and to earmark funds for executive management and educational programs, Ebben said.
All that remains is for the NASM membership to ratify this course of action at the convention. Based on proxies already received and an informal poll of the membership, Ebben anticipates that the vote will be overwhelmingly favorable toward the plan.
Top executives of both GMDC and AWMA have been invited to address the AWMA membership at the October convention.
Said Ebben, "This has been a very orderly process, a rational process that has really led to some healthy decisions that are in the best interest of our distributor members."
He explained that the NASM board recommendation was carefully arrived at by placing the business interests of its individual members ahead of the association's survival.
He anticipates that after the first year, roughly one-third of NASM members will remain with GMDC, an equal number with AWMA and the remainder will remain members of both organizations.
The four-member NASM staff, including Ebben, will be out of jobs when the association shuts down. The organization is providing severance packages to the employees and is allowing them to pursue job searches during the interim period.
Ebben praised the organization for fully honoring his employment contract, which made it easier, he said, to preside over what amounts to the elimination of his own job.