2009 State of the Industry: Survival of the Fittest

According to the survey, one-third of dealers now report that $1 million+ homes are their primary area of concentration. That supports some of the anecdotal information received by CE Pro that suggests the ultra-high-end of the market has remained somewhat steady.

This could change if the stock market continues to erode. Dealers report that many high-end homeowners sell equities to pay for lavish installations. That, combined with the difficulty of obtaining home-equity loans, could start affecting the high-end.

Likewise, there was a decrease in the percentage of dealers working in lower-priced homes.

Although A/V and entry-level control technologies (such as structured wiring) are reaching price points that make them more attractive to first-time homebuyers, it is likely an indication that production builders are shifting these technologies from standards to options right now.

Employment Rolls Drop; Control to Rise

One of the most interesting pieces of data gathered shows that the average number of employees (including the owner) on the payrolls of integration companies dropped this year from seven to five.

It suggests, for the first time, that the industry may have seen a decrease in overall employment as dealers prudently "right-size" their companies during the slowdown.

In terms of product purchases for 2009, home controls appear to be the lone bright spot. Dealers anticipate spending 10 percent more on buying whole-house and lighting control equipment this year.

On the flip side, they plan to drop purchases in every other category, including A/V, security and networking.

What Are Dealers Saying?

"We are following the money," says James Love, president of American Audio Video in San Diego. In the past year, the company has made hotels and the military key parts of its repertoire.

"We had never done anything but residential before."

How did American Audio Video get the jobs? Networking and reputation primarily.

Love, who participated in a panel discussion at EHX Fall, entitled "Conquering California," says he advertised his company in the local Construction Blue Book to get a big job at the famous Hotel del Coronado.

Meanwhile, he has been able to get jobs at nearby Camp Pendleton, a large Marine base in the area. "You'd be surprised at how many things there are to do on the base. It's like a mini-city."

Meanwhile, another panelist, Morgan Harman of The Tech Source in Simi Valley, Calif., is an anomaly -- his business is up 50 percent in 2008.

Several factors have contributed to this:

• First, Harman never stops marketing -- he always wears his trademark jumpsuit everywhere (it's emblazoned with his logo)
• Second, his company just reached its sixth year in business and is starting to earn some solid referrals
• Third, and most important, the company touts itself as IT specialists. While many integrators have chosen to not delve into the area of maintaining their clients' computer systems, The Tech Source thrives in that market

In another case, Steve Hartfelder, president of Diamond Case Designs in Anaheim, Calif., is among the many integrators who have invested in a showroom space to jumpstart business.

Of course, the return on investment has not yet covered the costs of building the showroom. Still, Hartfelder says it has already reaped rewards, nearly doubling its average ticket price.

One integrator in the Southwest, who did not want to be named, summed up his situation with a story about a recent call he had from a homebuilder that owes him $8,000.

The builder's office manager called saying they had a check for him. The integrator decided to jump in his truck and drive across town to pick up the check.

When he opened the builder's envelope, the $8,000 check was instead for a paltry $30. The builder said that was all it could afford to pay right now.