Throughout 2018, D&H Distributing has been celebrating a remarkable 100 years in operations. The Harrisburg, PA-based consumer electronics distributor has long served this channel as one of the leading distributors for small and medium sized businesses. They’ve done so with a commitment to staying on top of trends, a business model that’s vastly different than what you see throughout the rest of the industry, and a commitment to putting its customers’ needs first.
Every D&H hosted even throughout the year felt like a different stop on a 100th birthday tour. The final leg of that tour brought the distributor just a few miles away from its headquarters in Hershey for their 2018 Technology Conference: Mid-Atlantic Fall show.
There, D&H hosted more than 100 of its manufacturer partners and nearly 900 attendees for a program packed with education and productive business ahead of the holidays.
Dealerscope was on hand for the show, and we had the unique opportunity to sit down with Dan Schwab, co-president of D&H, to talk in-depth about how the company has been able to remain successful for so long. Schwab, whose grandfather founded D&H back in 1918, peeled back the layers on what makes the company tick, how they stay on top of trends, and the importance of events like their Mid-Atlantic Fall show.
Here’s our conversation.
Dan, thank you for taking the time out of what I'm sure is a crazy packed schedule today to sit down and talk with us.
Dan Schwab: My pleasure. Thank you so much for taking the time to hang out with us here in Hershey.
So, Dan, this is the last event on the calendar for you guys this year, and it's been a big year obviously with the100 year anniversary. With that celebration winding down, looking back on the year, what has it meant to you guys?
This year's been memorable. It's exceeded expectations. Being around a hundred years—I haven't been here for a hundred years, but it's an incredible honor to be part of an organization, and a team, and a family that has been around this long. And we paused during the year to celebrate and to thank our customers and our manufacturer partners, and most importantly our employee co-owners. The way D&H is set up is we're a family-owned business, we're privately owned, but we're also employee-owned. In fact the employees 36 percent of the company, and they didn't have to put a penny into it. It's all been given to them. So there's a tremendous amount of loyalty and pride within the organization. So we used this year—we always like to work hard and have a good time—but this year we really went over the top with events and a lot of creative things to celebrate.
You mentioned the family-owned bit. And, if I'm correct, it's your grandfather who founded the company?
So what's that mean to you—I know right after graduating from Penn’s Wharton School of Business you didn't go right into D&H, but now being part of the company, and you've been here for a while now, what's it mean to you to be part of that celebration knowing this is something that your family started?
Well, it's funny. It's a family business, but it's really not just our family. We have over 100 families that work at D&H. We really try to make the environment so that someone wants to have their spouse, or their parent, or their child work at the company. But being a family member is actually harder than being a regular employee. You mention when I graduated college; I wasn't offered a job at D&H out of school. So we have a family constitution that states we can't work at D&H until we have at least four years experience, and when we start, we start at an entry level position. And throughout our career our compensation will be no different than anyone else in that compensation range. So, in our history we've had three different presidents that are non-family members. So when Michael and I were honored to become co-presidents in 2008 it was a big deal; it's the 10 year anniversary of that, and we're excited that we've got such a great team to help us grow in the future.
Now looking ahead, I know obviously you mentioned you haven't been here for a hundred years—you’re not going to be here in 100 years either. So, as you look ahead, what are you guys doing to ensure that D&H is around for another 100 years? And how are you navigating that path forward?
That's a great question. There's two parts to that. One is something that won't change, which is our DNA. We have a passion. We're all about customer intimacy and exceeding customers' expectations. Most big public companies, they're respondent to shareholder equity. First, second, and third, that's their priority. We are respondent to, first, our customers, second are our manufacturers, and then in addition our employee co-owners. And we think that if we take really good care of those three entities that our shareholder equity will take care of itself. So our DNA is very different than most companies. That's what we're really proud about, and I think it allows us to continue to always pivot.
We did a book for 95th anniversary called "Looking Around the Corner," because we're always looking for the next new innovative technology. Big companies, I think, are really focused on one quarter at a time. We don't care about the quarter. We look at and make decisions for three to five years out. We're always investing in emerging technologies and training our customers on things that may not be fruitful today but that we think are important for the long term. So that's the part that won't change our DNA—bust your tail, but have a good time while you're doing it.
The part that will change is the products we sell. We went from being the largest distributor of TVs and appliances in the United States to IT products, to today we're selling such a broad array of categories. It's amazing to me. And I think we're always looking to diversify for D&H's benefit, but also for our customers because if you're today primarily only a TV retailer and that business isn't growing, well how do you grow your business? How do you get in the audio business? How do you maybe go in the B2B segment? How do you diversify your offerings?
You talk about that kind of strategy, and that’s very much in tune with the challenges a lot of our audience faces, in terms of staying on top of trends and pivoting their businesses. How how are you guys doing that? How do you stay on top of the trends and almost sort of audit the type of products that you offer as a distributor?
I think it's just part of our DNA. We have an entire team that focuses on new and emerging products and technologies. That's something that's very core to what we do as we're always looking for those new products. So we go to the Consumer Electronics Show and we have 50 people meeting with new and innovative vendors. So that's something that's really core to us.
But what's just as important to us is training our resellers and retailers on those new products. So everyone's talking about augmented reality and virtual reality. Those all seem big and they're being hyped, but how do you implement that? How do you sell it and what is the end user looking for? Is it just the consumer end user? Is there an educational opportunity? That's where we spend a lot of time, and I think that's what makes D&H sticky to a lot of our partners is that we not only just offer them the products, but we help them train and leverage the products.
I was going to wait to ask about this, but since you’re talking about education—at this show, there's the the trade show itself, but there is also education that goes on here as well. What kind of topics are you educating your retailers on, and why do you land on those topics as you build the show program?
So when we look at it, we don't do it ourselves. We ask our customers. I think that's one of the smartest things we do is we're not saying that we know all the answers. We query our customers on on a monthly basis to ask what's important to them, what trends are they seeing, what pain points they have, and where they see opportunities. We match that up from our own industry knowledge, and that's where we developed basically our curriculum or trainings for the show.
A big area of opportunity we’re seeing is in Pro AV. A lot of our dealers are looking to get more into selling conference room upgrades, whether it's audio conferencing or replacing the projector with with an AV solution. That's a big opportunity. If it's digital signage, training our customers and selling digital signage to a doctor's office, a small real estate firm, a bar, or restaurant. But then from a product standpoint, we mentioned augment and virtual reality before, we have demo units within the entire training area. We actually have eSports—eSports is a big focus of ours, so we have sports pods where people can play and see how you set it up so you if you have a small university asking about it you could help them deploy it.
In fact there are, in Harrisburg, in the middle of Harrisburg where we're based, Harrisburg University just hosted the largest eSports collegiate tournament in the country. 32 teams. Penn State, Ohio State University, Georgia—it's amazing to me how that is growing. In fact, eSports is the number two watched sport in the world after soccer.
It's unbelievable and that's something we've been following and it's been cool to see. I think I was at the show a couple of years ago here where you guys introduced that gaming pavilion and brought all those vendors together and made that collection of products. You showcased it in a way that kind of puts emphasis on how big of an industry gaming has become. That's kind of a nice segue into talking about this show specifically and the the way it's evolved over the years. What can you tell us about the background of this show and how it has evolved over the years?
This show's been—for over two decades we've been having this show, and we're still one of the few companies that do shows like this. We're kind of old school, very relationship driven, and also we think it's important to touch the products and play with the products. Not all of our our partners have manufacturers knocking on their door every day. So our job is to pick the best manufacturers that have the right channel margins and programs and make sense to our dealers and retailers, and promote them. So it used to be a table top show where we'd have 100 plus people and you'd walk the show, and you would negotiate deals. It was an old fashioned thing, you know, I'll take 100 of these, and what's my price, then OK, and you store it. Well, today it's much more of a just-in-time model. Most companies aren't looking to maintain large inventories, but it has really pivoted. So it still has the table top element to it. There's still the touch and feel, and see the way this technology works. So, if you're into video gaming we have the fastest refresh monitors, you know, the 28-inch curved monitors for gaming. We have the high end graphics accelerators. All those things. But separate from that is we have training. So we have well over a dozen hours of different trainings that are repeated on different technologies, different products, different solutions so you actually can come here and actually get brass tax type training, so as soon as you go back to your business you can leverage it to help grow your business.
Is that one of the elements of the show that stands out to you, or is it something else that makes this a must attend event for for your customers?
I think that's the differentiator. I think the customized trainings that we offer, plus the one-on-ones—I'll tell you, that's the other thing. So wherever we have our shows—we have a show in Chicago or Los Angeles, we fly the entire inside sales team out to meet with the customers because we are so relationship-driven, and the average tenure of our inside sales team is over a decade. The industry average is less than a year. So these people, our teams are not just selling products. They know the business, they know the owner's name, they know their spouses name, they know their clientele, and it's our job to recommend things that will be successful for them. So what I probably get the most positive feelings of is when I see the relationships between the customers and our team.
You mentioned that in this being the 100th year, you guys have expanded the amount of shows you held. Is that something you planned just for the 100th year, or moving forward will that be something you continue to do?
We think that's going to only expand. We’ll continue to do our larger shows, but I think the next tactic is doing a lot more smaller shows, city dinners where we go and get 20 or 30 customers together, we do a beers and cheers event where we'll train them on whatever technology that we've identified for that city, and people will opt into it. And it basically is a three hour thing, they come from 5p.m. to 8p.m., and it's very little travel, and we basically bring it to the customer and make it simple for them. So I think last year we did a dozen and it's definitely going to expand in the future.
Back to this show—as you look around the show floor here you know we mentioned obviously gaming and how the emphasis has kind of grown on that. Are there other tech trends that that stand out to you or that D&H is trying to place emphasis on for your customers?
I think the Internet of Things continues to grow with obviously the point products being things like the Fitbit or the Amazon Echo. We're looking at the whole home solutions and how you can turn it into something that a retailer can sell a solution versus a point product where they could be shopped. So that's one of the big focuses we have today. We see audio as a big growth opportunity because it ties into that solution, and then we continue to focus on the core. At the end of the day the video is not going away. The Pro AV opportunities continue to expand. But we're trying to layer in advanced new products and new features, again, to differentiate our customers. Our customers have to compete day-in and day-out with very very large retail entities. It's our job to figure out how we can help them differentiate themselves.
Mentioning the connected home stuff is kind of an interesting segue again into my next question, which is about tariffs. Connected home, as I’m sure you know, is one of the most impacted categories because of these Chinese tariffs that have been implemented or are being proposed. So, I'm wondering what's your tariff strategy right now? Have you been thinking about them? How are you helping your customers prepare for what's coming?
We are thinking about it, and it is top of mind. I was talking with someone earlier this week and they asked whether I think the December 31st, the 25 percent tariffs will occur. And my response was, 'You should be planning for it. You should assume that they're occurring, and if not, so be it, but you should plan for the worst.' It's been challenging because many of our manufacturers are handling it differently. Some of them are trying to digest it. Some are passing it on in price. Some of them are using it as a chance to increase pricing because maybe some of their components went up 10 percent but not all of it, but the finished product may go up. So everyone is treating it differently.
Our job is to proactively communicate with all of our customers. And one of the things we have to be aware of is that when you buy the product if all of a sudden the tariff goes away that means your inventory is worth that much less. So we're very cognizant of not just the price increase in the products but also the potential price decrease. So we monitor it on a regular basis, we work closely with our manufacturers, and we're doing our best to really be proactive and communicate with our customers.
In talking with manufacturers and retailers about it I've been able to get the take on what manufacturers think about them and what retailers are thinking about them. A distributor is kind of in a unique position because you're you're almost like a mediator between the two sides. What's that kind of role like for you as you balance between talking with your manufacturers, your vendors, and your customers?
Our job is to really fight on behalf of retailers, to be honest with you. So, if there's a tariff increase we have to negotiate with our manufacturers, and if the price drops then we have to have the price protections to make sure ourselves or our retailers and the products on the shelves aren't losing money. So that's really important to us. So we're really trying to insulate, as much as possible, our customers. So we really aggregate on behalf of many of our smaller and midsize retailers, and then try and drive that messaging to the vendors of the impact so that they may take them into account.
Do you have any sort of personal gut feeling as to how this situation plays out? Do you think we've seen the worst of it? Is it going to get worse?
This is just me and my own personal opinion, but my sense is that the administration is not showing any interest in backing down; they're willing to play chicken. So again I think we should assume it's going to occur. Who knows how long it lasts, who knows how it evolves. But I think this is something that we should get used to for a while, because you're going to have macroeconomic changes that were not planned before, whether it's supply chain issues, import issues, taxation or legal issues that may impact pricing in programs. So I think what's important to all of us is to be very transparent and be very nimble to respond accordingly.
I want to leave you with one more question. We’ve already talked about how you’re preparing for the next 100 years, but what’s the message to your customers in looking back on the past 100 years?
Very simple and straightforward: Thank you. We're lucky to have such great partners. We've enjoyed tremendous growth. We grew from a couple hundred million-dollar company to, this year we'll be over $4 billion in revenue. We're almost in the Top 100 of the Forbes private companies in the United States. And we're awed by that. And we're lucky to have such incredible co-owners that deliver that but we couldn't have done it without our customers. So, to our customers and manufacturers: Thank you for all your support.