Execs from leading CE and CI buying groups dish on trends, challenges and what the year ahead holds
Dealerscope: What are your core marketing and sales strategies this year? What messages do you most want to be members’ main takeaways from your conferences? How are you addressing their pain points?
Hank Alexander, Executive Director, HTSN: Certainly, the connected home has become big for us. We head up a whole division for connected home. We’ve got some group-exclusive programs with Google and Nest, and a big part of connected home is also our AT&T initiative – a group-exclusive program so our members can have in their stores and sell AT&T, DirecTV, internet 5G, broadband, cell phones – anything that’s in the AT&T portfolio. As we head towards connected home and 5G, AT&T is going to be a phenomenal partner in rolling things out. At our Spring PrimeTime, we really hit it hard, and we had 150 people go through an education and boot camp at PrimeTime in August, and that’s a big part of our messaging. It goes hand in hand with connected home and 5G. It’s a big thing for us. Messages we continue to drive include, ‘Work on your business, not in your business,’ and that the last 10 feet are the most important with delivery and install.
Richard Glikes, President/COO, Azione Unlimited: We now have our trademark for ‘Azione Unlimited: The Smart Home Association.’ We are continuing to emphasize initiatives with architects. At some point, business has to get tough, and where jobs come from is architects – they find out about them first. So we’re creating an affinity program for architects, and they’re speaking at our event (in October) – and we have a marketing campaign directed toward them. We’d like to have every one of our dealers capture the top two architects in their market – create a relationship. We’ll do email blasts, direct mail, and we’ve launched a website called techforarchitects.com, which will be fully fleshed out. We’d like to help educate them with regard to technology. We’ve created CEU classes, and we’ll create more of those. And we have a wellness initiative with a new partner: a company called Pure Wellness. They’re the largest provider of air purification systems for hotels, and they’re entering the residential space with Azione…
And then, we have lighting as an ongoing category where we’re putting more effort. As part of that, in the Conference, rather than hit on a bunch of different subjects, we have three tracks: college freshman, senior and grad school, and we’ll spend a little more than five hours on each of three subjects. One is lighting. The next class is on HR (Human Resources) and operations and we brought in an HR professional, Kathleen Brink. The third is on process – because we think a lot of people kind of invent their businesses as opposed to having a regimen. For that, we have Steve Firzst and Paul Starkey from VITAL MGMT and Brian Righetti from Northstar Operations coming in. And in addition, we have a guest speaker, (sales coach) Dan Caulfield. We have a team-building exercise as well. Another initiative, aimed at one-percenters, is the Digital Canvas – art that’s shown on display devices - with Barco and with Blackdove. We also developed a marketing playbook that we’re giving to every dealer – a 100-page document on how to do an event, how to do social media, direct mail. We developed it based on contributions from eight or nine different sources. We’re giving dealers both the road ahead, and the bumpers on both sides. Also, Canada is happening – we’re now a North American smart home association, not just the U.S.
Tom Hickman, President, Nationwide Marketing Group: Going into 2020, two major projects on our plate include continuing to harness all the investment in digital to help our dealers stay in front and relevant, when consumers are looking for product. Regardless of macroeconomic factors, when a washing machine breaks and a consumer goes to their phone [to research], we have to make sure our members are prominent and relevant, and that their digital presence is as good as, if not better than, their in-store presence. A lot of our investments have been to make sure that digital best practices are top of mind with our dealers – Google keyword investment, making sure their websites and content are in great shape, making sure you have custom content and that you’re doing all the things you can do around being where that customer is, and where they’re looking. That’s been an ongoing strategy of the group for a long time, but digital moves fast, and that requires a constant refining of strategy on our side. That will be a big deal for us down the back half of the year – making sure in key drive periods like Black Friday, that we’re top of mind, and that we’re in lockstep with our vendors and their promotional categories.
Jim Ristow, CEO, AVB/BrandSource: Number One - and we can’t say this enough: Merchandise your website. It is not your second store but your flagship store, as it is seen by more consumers and generates more traffic than your physical showroom. Either merchandise it yourself through AVB’s LINQ portal or let us do it for you through our new LINQ4U offering. Number Two: Take advantage of the group’s merchandising programs. The BrandSource merchandising team has worked more closely with manufacturers than ever before to offer new profit opportunities and vendor-sponsored marketing. Likewise, our staff is working hard to make sure the members are aware of, and taking advantage of, all the tremendous opportunities. Number Three: Train your sales team. Salespeople are the last consumer touch point at almost all our members’ businesses, yet retail salesmen and saleswomen no longer get the training and support they used to receive. BrandSource has had great success over the past two years with our Heavy Hitters program, in which we train hundreds of our members’ best salespeople at our conventions. But there are thousands more that need daily training and support. Now, with the launch of AVB University, a video-based online and on-demand learning and testing system, we are addressing the challenge. Number Four: Break away from business to work on business. As the pace of change and the speed of doing business accelerates, our members need to set aside some time throughout the year to evaluate what is working in their business and to make changes as the times dictate. It’s no coincidence that our most successful members attend BrandSource’s shows and regional meetings. When polled, they say it’s the only time when they can truly be updated on what is new and what is changing, and when they can learn not just from educational sessions but, most importantly, from other members as to what’s working for them. Number Five: Our main message is that we are so proud of the BrandSource members, as they are growing share and thriving in the marketplace. Many members are pro-actively making strategic moves within their businesses and leveraging group solutions. The vendor community sees this success and continues to invest more in the membership, which is only adding to the momentum. And of course, as we celebrate the first 50 years of AVB, we will continue to develop new programs, pioneering services and innovative resources for the members, to help extend that success through the next half century.
Jon Robbins, Executive Director, HTSA: We’re leading the charge with our members, suggesting what we think is really important. This [selling] relationship science format we’re doing with Keith Esterly has taken on a life of its own. By the end of the year, we will have trained over 200 of the membership’s people since he started with us in March. It’s pretty incredible. We will continue that; he is already fully booked for immersive relationship science classes and they’re the ones where he spends the better part of a week with entire staffs. We’re already booked out through all of 2020. A big challenge is obviously recruiting and keeping talent – we’re constantly looking at what our best strategies are for addressing that. We’ll be introducing quite a few of those in late October at our Fall Conference.
Gerald Satoren, Executive Director, NATM: The message here is pretty simple. Our clear advantage, of course, is our physical stores and the broad range of products, especially premium products, that are displayed in them. The biggest pain point for any brick-and-mortar retailer in any business these days is foot traffic. So whatever marketing strategies and tactics are employed by our members, they need to revolve around getting consumers into the showroom. Successful independent retailers know that if they can convince the consumer to walk through the door, they have a great shot at satisfying that consumer and closing a sale.
David Workman, President/CEO, ProSource: The most urgent need is in digital marketing – and trying to custom-tailor their message of their specific type of business to the client that they are looking to appeal to. That is a work in progress in partnership with AVB Marketing to develop the right marketing messages. We have dealers in a vast variety of sizes and capabilities, so the marketing services we provide can vary, based upon the dealer. The larger ones can maybe benefit from more efficient rates with Google search and some of that stuff that is provided by AVB, but don’t necessarily need content generation as much as a smaller dealer. Underneath all that is the move towards video content as being a prime method of delivery. Millennials want content in a different fashion. So you have to make it engaging, entertaining and informative. So we’re working on that – to deliver a robust set of videos for our dealer base.
[That focus also extends to] the custom installation (CI) dealer base. A lot of their marketing has been local reach-out to designers and architects. And so much of it is word of mouth and referral-based, that in many cases, they hadn’t had to polish a traditional reach-out message, because their business is built on a reputational stance with a group of consumers, both B-to-B and otherwise, that came from work they’ve done in the past.
Dealerscope: What marketplace issue or issues do you think will influence your members’ businesses the most (tariffs immediately come to mind, but some possibilities are the economy, the housing market, emerging technologies, etc.) – and why?
Alexander: We live in an age where information is at our fingertips instantly. If the market goes up or down, people’s moods seem to follow those ups and downs. The housing market has been good for the HTSN members, but when the market drops a few points, consumers might think, ‘Do I need that 77-inch OLED today?’ It doesn’t mean they’re not going to buy it; it’s just will it be today. They might kick the purchase down the road, and then the market goes up and everybody feels warm and fuzzy and they buy it.
Glikes: At the end of the day, tariffs aren’t so bad at this point. Vendors raised prices, but if you’re selling something that’s more expensive, but the margin stays the same, you have more gross profit dollars. In other words, if a $100 item is now $150 and you were making 40 points before, in one situation, you were making $40; in the other situation you’re making $65. So you’ve actually got more gross profit dollars. Not such a bad thing. What happens is it [could] get to the point where now, things are priced out of the range of affordability, which would slow business down. But short term, it’s actually not a bad thing because of more gross profit dollars. Psychologically, though, tariffs are a bad thing.
We’re not getting people spending as much time in their homes, which is when they buy new speakers and new TVs, etc., because it’s been so warm – and that could have affected September. Usually, when football kicks in, there’s a big jump in TV sales. I think 8K is kind of interesting. There’s a lot of larger-sized TVs, which means they’re more expensive. We’re now selling 85-inch; 75-inch is a common size these days. 8K is still a premium, which is good. Amplifiers are good; that business is solid, but receivers are down – because it’s distributed audio, and an amp doesn’t necessarily have a tuner in it and a preamp – which is what a receiver is. The housing market dipped and now interest rates are going down, so it should perk back up.
Hickman: Information [about tariffs] is critical – and when we get it, [what’s important is] filtering out the noise. Our dealers are very busy running successful retail stores. Are they concerned about tariffs? Sure. Do they want to know what it means for their business? Absolutely. So it’s our job to filter through the possibilities, give them what we think the most likely are, and then provide some direction. Up to this point, most of the tariff activity has been in the supply chain rather than in the end-user direction. But that will change with some of the next classes that come down; we will see challenges for consumers… But I don’t think it’s going to change the overall business trajectory when you look at the total overall products that are sold. I think it will be a cause of some political unrest, and when I look at 2020, I think less about tariffs and more about an election – one day the market’s up and one day, it’s down. Historically, in election years, it’s always a little more interesting than a normal year when it comes to consumer behavior. But if you look at consumer confidence right now, and housing and unemployment and interest rates, all those things are in a good place.
We expect to finish this year strong… 2020 still feels really good to me. For every recessionary point there’s a non-recessionary point to offset it. It may just be the political and economic environment we live in these days, for better or worse.
Ristow: Our message to our members is: focus on today, and any variables we can control. Anyone predicting, I believe, is simply doing that: predicting. We can only control certain things. So we’ll have our members continue to focus on today, as far as the tariffs go. As the tariffs have happened, though, our members have continued to grow share. So just focus on what we can control.
Robbins: We will be addressing tariffs, obviously, at the next conference and talking about best strategies on how to communicate them properly.
I think the other thing affecting everybody is the shortage of labor. There is just not enough to get the work done – and not only in our channel but, I believe, in the construction channel. They’re challenged by the same things. There’s just not enough labor force out there; with unemployment being so low, there are not enough people to complete the amount of projects that are being done out there. If it changes, unfortunately, I guess that means the economy is getting tougher. So it’s a double-edged sword. The nice thing would be to find a healthy balance.
A lot of how members are addressing it now is through training. If you train people better they become more efficient – it’s not only to make the technicians more efficient, but also operationally to make our members more efficient so we’re wasting less hours. This year, we’ve trained probably over another hundred technicians but operationally we’re always talking to our fellow members about efficiencies. One of our common themes is always talking about profitability per man-hour.
Satoren: I think that tariffs have the most potential to influence our business results for the 2019 holiday season. However, this could cut both ways. If we get a trade deal done with China, it would be a nice confidence boost for the economy and provide a welcome spike in spending as we finish the year. I don’t see any other headwinds that would have much of a negative effect on our business. My call for this holiday selling season is more of the same as we have seen all year long – flat to slightly up, even if we don’t get a trade deal done.
Now, 2020 is another story. It is an election year. Election years are very predictable for retail. Consumer spending starts to slow as we approach the summer and escalates until it’s almost non-existent by the first Tuesday in November. I know I am not looking forward to it.
Workman: Tariffs are top of mind – we’re starting to see the flow-through of price increases. I’d say on the retail side, it’s unclear yet... it’s just unprecedented for us to have the wholesale price increases we’re seeing across those affected product categories. The feedback I’ve gotten from a lot of the dealers, with the current round of tariffs, was that it may have reflected the higher cost – and it does not appear, at this time, in the large custom projects, that it is creating a lack of demand. But some of the dealers were caught off guard with bids that were out in the marketplace they couldn’t change, and so there was some short-term profit that was lost when the tariffs came through on products that they’d previously spec’d.
Once it was known what was going to happen, and because of the inevitability of it, most of the manufacturers were getting out to the dealers where it was affected, with their price increases. And they’ve been able to factor them in and incorporate price increase for future bids. Time will tell. The feedback from dealers I’ve spoken to specifically on this is that it doesn’t appear to be holding off demand - customers are saying yes as before, even with a slightly higher price. And of course, some of that gets engineered out – if someone says they have $50,000 to spend, once you know your cost factor, you build a bid with the margins you need based on the available budget of the customer. It’s not as transparent as it is with individual-item pricing we see at retail, so it will be more interesting with price hikes that have been passed through with the home speaker category, and some others, how the consumer reacts. We just don’t know that yet.
The only other issue that’s a concern is the fear-mongering going on out there, trying to convince consumers that we’re going into a recession. The danger is in overhyping the possibility of a slowdown to becoming a self-fulfilling prophecy. All of the core economic numbers are still positive, but the impact of a prolonged trade war with China will eventually slow down manufacturing and have a ripple effect and we probably will at some point have a slowdown. The question is whether it will be deep, or minor. We’re in a record period of expansion.
One school of thought is things will probably hold up for next year, because it’s an election year and they bring out all the stops to keep the economy humming, and then 2021 might see a slowdown. It’s just a question of how deep or prolonged it will be. For now, it appears the market is holding up OK.
Especially at retail, some of our core categories are soft this year – TVs, and audio receivers. Speakers have held up a little better. But we’ve seen some category weakness this year, more at the retail level. I have to take a very cautious approach to the holiday season based upon the trend of what we’ve seen so far at retail.
The CI side of the business had a tough start, weather-related and otherwise, but it recovered pretty well, and has done pretty well from the spring forward through summer. All reports are that demand is still very solid and in place; the order books are good. So that side of the business appears to be chugging along just fine.
Interviews conducted in early Fall. Visit dealerscope.com for comments to follow on other industry topics by these executives.