HES: Solving Specialty Retail’s Identity Crisis

Home Entertainment Source (HES) bolsters its Expert Warehouse and other programs to guide members to solutions-based offerings like LEDs and control to ‘survive and profit.’

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“We believe the industry is contracting and will continue to contract,” says HES buying group’s Jim Ristow. “One of the only ways HES can continue to be relevant to the industry is to get larger. So we are going to grow our organization so we can be important to not just our clients but to our vendors.”

By Jason Knott
April 24, 2012
In the changing world of consumer electronics, the specialty retailer is between the proverbial rock and a hard place. On one side, the Internet is driving consumers to avoid walking into brick-and-mortar stores. On the other side, custom integrators are offering fully integrated, personalized installation solutions.

Which direction should a specialty retailer lean?

According to Jim Ristow, executive director of buying group Home Entertainment Source (HES), customized solutions just might be the right direction. Ristow says HES members are experiencing double-digit percentage increases in sales from control manufacturers like URC, Control4 and Savant. Likewise on the audio side.

“There are some real positives out there. The big challenge is how do we get enough customers into our businesses to sell all these things? The demand is there, they just aren’t coming in,” says Ristow. “It’s a marketing and exposure issue. Is the customer just looking for a commoditized piece of consumer electronics? If they are, will they be coming to one of our members’ outlets? On the other hand, if they are looking for more solution-based systems, can our members be relevant enough that they think of us?”

Ristow says one way to get customers in the store and to be relevant is with new solutions. He cited LED lighting, energy and control as key disciplines.

“These are not just buzz words. We have members building complete business models based around [those product categories]. Those are solutions that are not too far afield from what our members normally do,” he says. “LED lighting is by far the most exciting category. We are verbally promoting it and trying to come up with solutions for our members.”

Ristow says integrators are joining HES, which has 525 members and represents $3.6 billion in annual sales (with partnering PRO Group), to get access to the buying group’s financing option so they can offer clients 24- to 36-month financing on LED lighting so the installation pays for itself by the time the customer has fully paid for the new lighting.

imageHES' Expert Warehouse program can deliver products to dealers across 80 percent of the U.S. within two days. "Many of our vendors are augmenting our Expert Warehouse program so that in many cases the price being paid by our members is the same or lower than what they were paying direct,” says Ristow. (Click image to enlarge)
‘Industry is Contracting’
Ristow says for most A/V retailers, it’s not realistic to add household appliances because it would not only likely require a larger showroom, but there are differences in warehousing, delivery and service.

“There is no silver bullet for the A/V integrator, but there are a lot of little singles he can hit. We believe the industry is contracting and will continue to contract. One of the only ways HES can continue to be relevant to the industry is to get larger," says Ristow. "So we are going to grow our organization so we can be important to not just our clients but to our vendors. We are not altering our criteria for membership. Prospective members are out there; it’s just awareness. We just feel that it is in the industry’s interest for specialty retailers to get on this lifeboat. It’s not just survival, but more profitability for everyone.”

An example of how important buying groups have become can be found just by examining the flat-panel TV market.

“The market pendulum always swings to extremes. This year, thevendors are cutting production even more," Ristow notes. "A lot of vendors are taking a wait-and-see approach to OLED. We will see if this is a re-set year for OLED to begin growth again.”

HES’ TV vendors are building to the forecast mechanisms used by the buying group, along with other big-box stores.

“So we are bullish that we will meet our members’ needs because many of our partners are building to our forecasts," Ristow says. "If you are not in a buying group or not a very large company, it is going to be very difficult to be directly fulfilled with TVs this year through a reliable supply chain. Many of our vendors are augmenting our Expert Warehouse program so that in many cases the price being paid by our members is the same or lower than what they were paying direct.”

HES has added new audio vendors such as Paradigm and Definitive Technology to the fold. He says the Expert Warehouse program can deliver to 80 percent of the U.S. within two days. Also, he scoffs at integrators who buy their electronics from their local big-box or warehouse store. “Why buy from someone local at a retail level? That is only bolstering your competition."

HES is advising members to stop providing fully itemized bids. Ristow says beating the Internet is “not about product, it has to be about solutions. Our members have to change their mindset. Traditional bids line list every wire, widget and SKU. The vast majority of clients, other than looking at a TV price, really don’t care. So we have partnered with Salez Toolz. It’s solution-based, not SKU-based. We are promoting to our members that we believe this is software that you can successfully build your business around.”


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