2018 Buying Group Roundtable: Dave Workman, ProSource
Retailers, in their never-ending quest to compete for customers’ hard-earned money alongside major big-box retailers and the ongoing threat of Amazon, can really use any advantage that comes to pass. For some, it’s leveraging their local connections within their community. For others, it’s providing a service that attacks a gap in the marketplace or does so at a level no major corporation could ever dream of.
Another strategy: Aligning oneself with a retail buying group.
Buying groups have a way of bringing this industry together for not only the promise of getting better deals on some of the top products in their particular category—though that’s, understandably, one of the biggest benefits for store owners. However, in addition to that, buying groups offer members top-notch education, the ability to network with and learn from some of the top minds in retail, and—maybe most important of all—share their battle stories with other retailers who are likely in a very similar situation to their own.
We recently approached the top executives in the space to let them do the talking. For our annual Buying Group Roundtable, we turned the tables around on those execs and posed some questions around their benefits, what they’re doing in the area of education, and what retail trends and challenges they’re keeping an eye on for next year.
Here’s what Dave Workman, CEO and President of ProSource, had to say.
Dealerscope: What are the core marketing and sales strategy messages you are communicating to your membership this year? What should they expect, coming into your meetings – and what messages do you most want to be their main takeaways?
Workman: The core message we impart to the dealers is: What is your digital strategy? Today, the effectiveness of digital marketing is a question of how you implement, message, how you get your unique selling proposition out to the consumer you’re looking to reach. Not all digital marketing works the same way. The social aspect has a different purpose in building community around your business. For the smaller dealers and CI dealers who deal with a much more limited consumer base, there’s a different set of people you’re trying to make aware of your existence. There’s no one size fits all whether trying to draw brick-and-mortar traffic or trying to build awareness to a smaller set of customers. The fact is, digital is the only mechanism through which you can target those customers. That is backed up against the reality that traditional media simply doesn’t work the same way.
Of course, any time you’re dealing with a new strategy, you will meet up with some resistance from some dealers – [some will want to] ride the horse because they know how the saddle fits, even though the horse may be pulling up lame… there is some of that. But I think dealers are getting it. It’s more about the specifics of ‘how does it work for my business?’ and that’s been the message we’ve been imparting to the dealers – that there’s many different flavors of vanilla and you don’t have to pick just one. Get the research, find out what it takes to have an appropriate website and how to apply search mechanisms so you get found, decide what the message is you’re trying to tell. These are all important to market to the consumer they want, whoever that is.
Despite the many CE/appliance/CI buying groups within the industry, there are dealers and integrators out there who are still unaffiliated with a buying group - or there are those who might be looking to change their buying group affiliation. What’s your elevator pitch (if any) to them as to why belonging to your group would make the most sense for them?
It won’t be a pitch to everybody who’s not affiliated. Roughly, there are about 15,000 CI-type dealers in the market and if you just back into the numbers of those affiliated in a group of the Big Four who have some presence in this part of the business, you might come up to 800 or 900 who are affiliated. That means there are a lot unaffiliated. The biggest filter for us that we have are the requirements for someone to join our group. We ask for a minimum of $1 million in volume, two years in the business, and other vetting, like reputation in market. A lot of those 15,000 do their entire business through distributors. For them, the distributor is their point of supply. We have a couple of different arrangements with distributors, but a lot of those dealers are smaller and are doing just-in-time inventory where they pick it up as they’re doing the job. For a group to provide a certain level of value for the dues we charge, you have to be of a certain size. That, believe it or not, rules out the bulk of the 14, 000 unaffiliated. What’s left is probably 1,000 dealers out there who meet the requirements and for whatever reason are not affiliated with any group. It’s amazing to us how many dealers have been around for a long time and have been unaffiliated. We’re a long ways away from maximizing what available dealers are available for membership in a group. We have to target specific markets – there are those where we’re absolutely full. Where we look for new membership is in underserved markets and still believe there is a tremendous opportunity.
We’ve made some changes in district manager structure to identify where we were geographically weaker and that was on the West Coast - we never really had a dedicated West Coast representative. And so there and Southwest are two prime focuses for us. Not to say there aren’t opportunities elsewhere. In the major metro areas on the East Coast and in the middle of the U.S., we have quite a few members in those major markets. It’s the secondary markets and the West Coast where we see the most opportunity.
What category or categories hold the most profit potential for your membership? Is that different from last year – and if so, how?
They’re largely the same. Lighting and shades are big profit areas and have gained a lot of attention. More dealers are getting into low-voltage indoor, and there are a lot of brand relationships that go into that that we’re in the process of building, helping dealers become educated on how to do the business. We’ve established a Lighting Committee within the group; we tend to use our members for our brain trust. We’re making progress in a category that holds promise. Shading has been established in the CI dealers’ suite of products. Networking has become table stakes today, whereas it was a new frontier years ago. All those represent growth and profit – and beyond that, core competencies we hold – better audio, and areas where the group has gotten back in because of programs that have been developed with some of the TV manufacturers – returned areas to our business that they can now make money on that had been sort of ignored when margins became compressed.
The basket isn’t changing in its value – but it is changing in terms of what is represented in the basket. There are technologies that are clearly taking up less of the total spend, like control, and it’s being replaced with some of these other categories. Customers seem to be spending as much as they ever were, but are spending it differently.
In what areas will members need the most help from you next year – and how is that different from last year?
Education and training comes up constantly and delivering it on terms that make sense for the dealer, because time is their most precious commodity – they don’t have a large staff, they’re on job sites, and they don’t have the luxury of going to a seminar every day. Beyond that, our focus is on how to help dealers become better business people. That’s equally, if not more, important because you can be technically a genius but have to learn to become business persons. There’s so much we’ve learned about recapturing margin and running an effective and profitable business, and that’s one reason we’ve aligned ourself with the Bravas group. We felt they have a solid view on how to make businesses better and more profitable.
What marketplace issue or issues do you think will influence your members’ businesses the most (some possibilities: the economy, tariffs, the housing market, the results of the midterm elections, etc.) – and why?
The one that’s most current is that there is an admitted labor shortage on the home construction side. When we talk to dealers, we hear a very optimistic outlook about the business, and it comes from what they see as their order book – the demand side. What we’ve also seen is that jobs are not necessarily finishing out on the same schedule as last year – there are delays because homes are not finished on time. It’s created a little of a “we’re not in control of our destiny” about when jobs finish up, because projects are taking longer from the construction side to finish. There’s always going to be comments that it’s difficult to find qualified installers; dealers continue to work on that to find solutions. The general construction labor shortage is creating certain timing issues with the way they are finishing projects. We have a mixed message – an optimistic tone because of demand, but the timing has changed.
Map out the rest of the year for your part of the group – will business be up or down, about how much either way, and what factors will most profoundly influence the outcome for members?
We, unlike some other groups in this space, are a bit more diverse in that we have ecommerce to large regional retail to CI under our flag. We see all ends of it. So I’d say we will see positive growth, tempering a bit of the expectation for growth in the holiday period. Last year was an extremely solid and good holiday season. There is a chance that while we’ll see growth, expectations have to be tempered a bit from the gains we saw last year.
You still have the ongoing transfer of share to ecommerce – it’s growing as an overall percentage of the business, and there are categories that can become more commodity in nature and with the self-directed consumer, you can’t ignore that Amazon is an outsized competitor with share unlike anyone else in those businesses – even moreso than Best Buy.
It gets back to, if you’re brick and mortar, you’d better have a compelling proposition. You can’t just be an item-and-price seller and expect to grow your business in the face of more convenient options. It comes back to solutions, brands and positioning. If you’re in ecommerce, you need to find things that are special, and opportunities and ways to get into that sea of transaction with something that’s differentiated for you. You can’t just hang out there with the same thing at the same price as Amazon. There isn’t room for you in that type of transaction.
For our dealers, there will be continued demand for their services. As technology continues to come into the home, there are a lot of customers out there for us – we don’t have to be relevant to 50 percent of the market. We don’t even have to be relevant to the top 10 percent. If you can gain real presence with the top five percent of the demographics out there, you’ll be able to do very, very well. The beauty of CI dealers is they don’t have to go out with a message with broad demographic appeal. They can be who they are, do what they do, and appeal to the top demographic, and do very well.
Don’t forget to check out our other 2018 Buying Group Roundtable Q&A’s. Here’s the entire rundown: