04.03.2009 — The next 12 to 18 months will be Darwinian in the electronics industry, according to buying group Home Entertainment Source (HES) executive vice president Jim Ristow.

Those dealers that survive will be stronger for it and well-positioned for success, Ristow adds. Of course, he expects his 500-plus member buying group, a division of Brand Source, to be among the survivors.

The Darwinism is already playing out, according to Ristow. "Tweeter and Circuit City are gone. At the opposite end of the spectrum, many of the smaller trunkslammer businesses are going away."

The "pendulum is swinging" toward a model that includes strong service and both physical store and Web site presences, he says.

Best Buy and Wal-Mart are sure to benefit from the changing electronics retail atmosphere, Ristow acknowledges. However, he calls HES's 500-plus dealer network "the only national alternative for specialty A/V brands."

Web Becomes Battlefield

In order to go head-to-head with big-box competition, HES strongly recommending that companies improve their Web sites. Ristow says that consumers now judge companies based on the quality of their Web experiences.

HES told CE Pro in October 2008 about its plan to roll out a multi-million-dollar Web site to its dealers. The plan is for it to offer a user-experience on par with national stores' sites while allowing member dealers to customize with their own skins.

In March, at the HES annual spring summit in Dallas, member dealers saw a beta version of the site. Ristow says the official launch will take place in a few weeks and it's currently signing up dealers for the service.

Best Buy Evolves to Fend Off Wal-Mart

Ristow expects an elevated Web experience, combined with an ability to provide a relatively high level of service, to help HES dealers compete with Best Buy.

However, he acknowledges that Best Buy is also evolving and will likely try to shift toward more of a product demonstration model to avoid a price battle with Wal-Mart.

It would be "a positive thing if Best Buy goes that route," Ristow says.

"First of all, I think they have to because they can't compete on sheer price with Wal-Mart. With that said, if Best Buy can step into the mid- to upper-space, that will keep our space viable. If it's just a small sub-section promoting [specialty audio/video], vendors will stop making those sorts of products."

How Agility Will Help Dealers Survive

At the summit and subsequently speaking to CE Pro, Ristow emphasized that the electronics retail landscape will look very different in the next year and a half. His advice to dealers: Be agile.

The biggest reason he expects HES dealers survive this natural selection phase, is that they have demonstrated an "ability to adapt, morph and change quickly in virtually every aspect of their business."

Don't sit back, Ristow advices non-HES dealers. "Usually, the companies that don't adapt, don't do it because they don't know what to change. Now is a good time to seek business counseling anywhere you can get it."

HES dealers seem to get that. At a time when trade show attendance is suffering, attendance was up 20 percent at the HES summit in March.