Join Date: Feb 2007
A New Years Resolution For AV Installers and Specialty Retailers
Since the rise in popularity of the VHS tape, the home theater business hasn’t really known much in the way of down economic times. For decades now, the size of one’s television could be socially equated with the speed of their sports car. Bigger is better. Flatter is better, and High Definition is the ultimate. Back the tape up to five years ago when only the upper middle class and above could afford a plasma TV, dealers were converting their retail businesses from more traditional store front shops to slick, design oriented, custom install firms so that they could install $10,000 plasma HDTVs in houses by the dozen. It was a good living that left room for mid-level dealers like Tweeter, as well as hundreds of regional AV dealers. They could make a healthy living selling flat TVs along with all of the goodies, and they were poised for even more boom times as interest rates hit 50 year lows and the real estate market took off like anycompanysname.com circa 1998. Ah, those were the good old days.
As we time travel back to the present 2007 holiday season, the home theater market finds itself suffering its first real hangover in decades. Even the gutless and unanswered-for attacks of September 11, 2001 didn’t affect the home theater business the way the current U.S. economic malaise has in the past two quarters. Those $10,000 plasma TVs that buoyed the sales of the mid-level retailers and custom installers nationwide wouldn’t fetch $800 at warehouse and mainstream retail stores the likes of Costco, Wal-mart and Sears. Big box AV retailers like Best Buy are thriving this holiday season based on low-end, low-margin electronics like video game systems, digital cameras and cheap computers. Meanwhile competing Circuit City isn’t reporting the same kind of boom times as Santa was on approach to an American city near you. With powerful new players in the marketplace promoting every man’s dream of owning a big, bright, flat HDTV, the specialty retailer sits in his store wondering why his parking lot isn’t as packed as Best Buy or Costco.
In some ways, things are even worse for the custom installer who rode so high during the housing boom of early 2000. When new housing starts were raging in every corner of the country, everyone and their uncle needed new HDTVs and a home theater system complete with whole home distributed audio and beyond. With housing prices in some major cities increasing at a rate of 25 percent or more per year every year, there was always that equity loan you could use to pay for all of your goodies, even if you were mortgaged to the hilt on your home. So, borrow people did, and the party just kept going and going as if the Energizer Bunny was the guest of honor.
Today, analysts suggest it could take as many as 500,000 home sales to start to significantly lower the available “for sale” inventory and to get back to any real growth or even stability in the American real estate market. To get to this level of volume, expect home prices (and the equity that people were spending on that new 55-inch LCD set) to drop, which isn’t good news in the short term for traditional dealers and or installers. Complex and pricey custom installation budgets are likely to be trimmed back to more of the basics like HDTVs, satellite receivers and limited surround systems. Specialty retailers struggle to add value to that HDTV sale as the warehouse stores can beat their best prices by 20 to 30 percent any day of the week.
The time has come for specialty audio video and custom retailers to get back to the basics, as the turbulent real estate market, the weak dollar and an uncertain political situation will not last forever. Today is the day for custom installers to make a truly meaningful New Years resolution to meet with three interior designers or general contractors each week for a year to pitch their services and systems. The days of waiting by the door for FedEx to drop off the blueprints for yet another 6,000 square foot house are over for now. That is just order taking, and when you can get it order taking is nice. In 2008 things are different and today is the day to work on new leads and to diversify the sources for new business in ways that are respectful so that custom home theater installers now work in a more cyclical business, based around market trends in the real estate market.
Specialty retailers can also do better, a lot better, with simple marketing solutions that will sell more gear in 2008. For example, the small number of retailers who have collected email addresses of their clients in the past five years is nothing short of shameful. Thousands of qualified buyers have walked through retail doors without ever yielding the information needed to be contacted in the future, despite their level of interest in higher end home theater and audio in the recent past. Without the cost of a stamp or printing, a retailer can send an email blast about a new technology (think HD DVD, Blu-ray, or 120 Hz Motionflow HDTVs for the Super Bowl), a new system installation at the store, or a new speaker coming into the marketplace and generate new and relatively easy sales. Sales that could be close to the kind of sales that plasma TVs was to these dealers just five years ago. Invite 50 of your best clients to your showroom for a Super Bowl party hosted by the dealer. The $1,000 in pizza, wine and beer that it would cost will be paid for twenty fold by the sales that will be earned later in the year. Cross promote the event with three other luxury retailers such as the local jeweler, a top selling Lexus or Mercedes dealer and the director of development at the best local country club and watch as a dozen qualified clients show up at your event and drop $100,000 (or more) on systems in a down economy.
Tougher economic times call for smarter marketing. Period. Today more than ever consumers want home theater in their lives. Reaching the consumers who want the dramatically powerful technology we all know, love and evangelize will require a little more creativity in 2008, but the demand is there with mainstream consumers as well as the recession-proof, super-rich. 2008 is a time to shelve the intolerable and outdated audiophile arrogance as well as the installer entitlement and in its place return the “specialty” to specialty retail and the “custom” to custom installer. The business is waiting to be had in the higher end markets if the retailers and installers can adapt in a meaningful way around the big box stores.
by: Jerry Del Colliano