Dave Workman, president and CEO of ProSource, was frank in his assessments of the current state of the market and his group during a recent discussion in San Antonio. Retail sales for the group in January and February were slow. He said, “Based on general [industry] trends. It wasn't a train wreck… it was slightly slower from last year. By the middle of March sales started to kick up and March ended very strong. April followed and became positive months.”
The dynamics of the CI business involve booking home and business installation jobs well in advance of their completion, unlike traditional retail. Workman noted that the CI business also started off slowly “in some parts of the country, since [CI sales] usually follows home building.”
But recently, he said, “The CI business is universally strong. I haven't seen a market where the dealers said business stinks. The bookings are not out as far but the deals are getting more expensive. In the hotter markets like Dallas, Denver and Atlanta, there is more business than [CI dealers] can handle. There is plenty of business in any area where you have a [hot home] market. The only limitation is how many people they have working for them.”
The categories that ProSource members rely on are upscale products and services which provide margins not only for retailers and CI operations, but their suppliers too. One of the key categories for ProSource is premium Ultra 4K TVs. Workman noted, “Audio is always going to be the driver of our business but premium TV has actually been a driver. In some months it’s the number one growth category for us. OLED has been fantastic. Premium TV has done very well for us.”
The entire TV business is usually volatile in terms of pricing and even on the premium side, which ProSource specializes in, promotions are often used to drive volume.
So far this year there have been fewer price promotions on the premium side, with the culprit being higher panel prices due to limited supplies. However Workman warned, “It is not going to last. Everybody came out with premium Ultra 4K TVs this year [with higher prices] and the industry would tell you that sales started off slowly [this year]. Our business in TV has been a little bit better than the industry, so far. But if you speak to the dealers you will hear, in general, that premium TVs are not selling through properly.”
He noted that TV makers entered the year, “Loud and proud with products at prices higher than should be. That’s the general view of the [premium TV] market. Prices are $1,000 to $1,500 higher than they need to be. It is not a question of if [TV suppliers] will lower prices, but when they do it.”
As far as other categories are concerned, “Audio is our horse, month in and month out, in all forms and fashions. Whether it is Bluetooth, traditional receivers, headphones, it’s all growing. There is a resurgence in premium two-channel audio. There is a growing market for that,” Workman stated. On the CI side of the business what a decade ago would have been very unconventional categories for an installer to deal with like shades, lighting and networking and control are common now. “The shade thing happened out of control systems and customers wanted it,” he said.
Workman noticed the change a few years ago. “We went around [the country] with our town hall meetings and we asked about networking, and every dealer said, ‘Networking? That’s computers. We don’t touch computers,’” and he chuckled at the memory. “Today they won’t touch a job unless they do networking.”
And an emerging category for ProSource and the industry starts with outdoor lighting. He says, “Outdoor lighting is one of the categories we haven’t really touched on yet. In parts of the country, outside [entertaining] is just another extension of people’s lifestyle. They are already doing outdoor sound so why not do lighting and TVs?”
This entire subject of CT growth categories, profitability and future opportunities is a far cry from the headlines surrounding the demise of hhgregg, problems with Sears, and bad news from other types of brick-and-mortar retailers this year. ProSource members and veteran retailers Rick Souder, executive vice president of merchandising for Crutchfield; Walt Stinson, president of ListenUp; and Bjorn Dybdahl CEO of Bjorn’s Audio Video; all said in brief conversations during the meeting that at retail, along with having the right product, the store experience has to be top notch. And there is no excuse for sales associates not knowing the technologies they are selling and trying to provide customers with solutions.
When asked if the demise of hhgregg and all the talk about “the end of retail” headlines this year hurt ProSource, Workman volunteered, “It is too early to tell. The demise of hhgregg helps regional appliance dealers more than the regional electronics dealers. It was narrowly in premium TV, they were trying to make steps in that mix. I think that Best Buy will benefit most, more so than any single retailer in TV. The big regional guys like Abt Electronics and Brands Mart [associate members of ProSource and full-time members of the NATM Buying Group] and those types of retailers will benefit as well.”
Workman volunteered that if Sears would leave the market this year on top of the hhgregg closing, “There would be a huge benefit to the major appliance business.” He explained that if Sears joined hhgregg on the sidelines, “You are removing about 15 percent of [the nation’s] retail appliance volume. That has to go someplace. There is no event in the CE business with a closing at retail that has taken away that large a share of the category ever. The closest would be when Circuit City went out of business. And what the vendors did they authorized Amazon for everything. And they changed the business model what they would do with the warehouse clubs.”
The ProSource CEO maintained, “The appliance vendors don’t have the same options. They have to roll up their sleeves and figure out how they can do business with the players that are out there. They can’t expand their distribution.” Workman concluded, “Ironically the last move by electronics vendors after Circuit City went away was they [over supported] hhgregg’s expansion which proved to be its demise.”
Steve Smith was the longtime editor in chief of TWICE and a member of the Consumer Technology Hall of Fame.
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