“How do they do it? How is one manufacturer able to keep its prices so low and its dealer margins high?”
Those are the big questions many in the industry ask when they look at SnapAV
, a manufacturer/distributor that was borne from an integration company. In just five years, the Charlotte-based company is on track to record $50 million in revenues with just 64 employees by providing integrators with an alternative to brand name products in several “low tech” areas including screens (Dragonfly), mounts (Strong), racks (Strong), cable (Binary) and loudspeakers (Episode).
So how do
they do it? In a word: technology. Everything that can possibly be automated at SnapAV is, leaving little room for error and lots of margin for its products. The company’s goal is pretty simple: Provide comparable product at a lower cost than name brands in certain high-margin categories for dealers.
The formula is designed to allow integrators to sell products at similar price points to name brands while boosting their margin. With the recession, the timing was certainly right. But in order to do what it does, SnapAV must be super efficient in everything, and I mean everything.
Photos: How SnapAV Keeps Prices So Low
Vice president of marketing Adam Levy is an admitted data hound. He pores over spreadsheets that give him precise ordering patterns on a lifetime, annual or, most importantly, on a rolling 90-day timeframe. Levy uses SAP software that is incredibly flexible in its ability to create instant reports on purchasing patterns among any of Snap’s product categories.
And that data is paramount because it enables SnapAV to operate as a Just-In-Time manufacturer. The company doesn’t need expansive warehouse space at its Charlotte (50,000 square feet), Dallas (40,000 square feet) and Fresno, Calif. (40,000 square feet) locations because it is able to order product precisely from its 27 factory partners in China. That efficiency also enables SnapAV to have just a two-person purchasing department to handle its 970 SKUs while maintaining 98.9 percent of products in stock when ordered.
“We need that level of efficiency to keep our prices low,” says Levy, noting that each factory partner in China builds and delivers at different speeds. “Without this technology, we would need 10 people to manually handle purchasing.”
Out in the warehouse, products that are purchased most frequently are placed nearest the loading docks. Again, to save time. Workers use a sophisticated bar code scanning system that directs the employee to the proper product bay and to the proper product to fulfill orders with 99.92 percent accuracy. In Charlotte, 450 orders per day are processed with two FedEx pickups daily.
Meanwhile, you won’t find any donuts or coffee at the company’s will-call area. In Charlotte, Levy says about 60 percent of the orders are pickups by integrators with a 2-minute wait time for call-ahead orders. The will-call area is a single set of shelves at the front of the loading dock. Nothing fancy for sure. “If those integrators planned just one day in advance, they wouldn’t need to drive here to pick up product and they would be more efficient,” he adds.
“If we weren’t this efficient, we would not able to provide products at such a low cost,” says Levy, adding that each department in the company is incentivized by efficiency metrics.
70% of Transactions Online
But the efficiency doesn’t end there. Over 70 percent of the dealer transactions with the company are made online and 65 percent are credit card deals, meaning collections is over 98 percent, so cash flow is not an issue at all. Dealers log on to SnapAV’s newly redesigned Web site to place orders All orders made before 5 p.m. are shipped that day.
An efficient Web site is no small feat. Dealers recently voted SnapAV the distributor with the best site in CE Pro's Quest for Quality
"You get all the information with just one touch," says Rick Byars of Houston-based Electronic Dreams. "It tells you if the product is in stock, if not then the date it will ship, tracking numbers, etc. I don't have to have it in inventory."
He adds, "If it says three days, it is there in three days. I know I can plan my jobs around it."
With all the devotion to technology, there is one department in the company that requires more staff: IT. There are three programmers on staff to handle e-commerce, the website and the warehouse and ordering management systems. The company’s software costs are well into seven figures.
What it invests in IT, Snap saves in selling expenses, devoting a big chunk of that budget to dealer incentives. The company has just five inside sales reps whose priority is to pore over the purchasing data and contact integrators. In many cases, the sales team is encouraging dealers who are close to achieving certain thresholds to become part of the SnapAV Partner Program, which offers a tier of benefits including cash rebates and free shipping.
“If we had to have a massive salesforce, we wouldn’t be able to have the pricing we have,” says Levy.
The partner program "sealed the deal" for Electronic Dreams. "I'm all about the bottom line," says Byars, rattling off the rebates and rewards available through the program.
Product Development and Support
Meanwhile, the low-tech nature of its product lines also enables lean-and-mean customer service (five people) and tech support departments (two people, but soon to be three). But the company’s latest venture might change that.
SnapAV is set to roll out a line of analog surveillance equipment to the market in mid July. The development of the line is being overseen by G. Paul Hess, a transplant from Elan with years of engineering experience in the category. The line will consist of eight cameras (four domes and four bullet) and three DVRs.
Hess is one of six category managers at SnapAV; each one is responsible for product development within their respective categories: screens, racks, loudspeakers, cable, surveillance and mounts. A new line of subwoofers will join the line card soon.
“It’s all about getting data from the dealers,” says Craig Craze, COO. “We are not an engineering-driven company. We are driven by dealer demand.”
For everything that has gone right, there have been a few hiccups. SnapAV has suffered a bit from an identity crisis among integrators who don’t know if the company is a distributor or a manufacturer or a dealer.
President Jay Faison created SnapAV alongside his integration company, Zobo, as an alternative to get more profit out of key product categories. The two companies have operated separately for the past four years and were legally separated 2.5 years ago. The installation company offered the added bonuses of being able to conduct R&D in the field on what products are needed and to test installation efficiency. Plus, it allowed them to gauge consumer reaction to pricing. Faison recently sold Zobo to Audio Advice
, so SnapAV now uses a dealer development team for product vetting.
In addition to its own products, SnapAV sells products from two other companies: Arlington Industries (wall plates and other peripherals) and Stuart Tools (tools). Those products account for 5 percent of Snap’s sales revenues.
The identity crisis hasn't seemed to hurt sales. As mentioned, the company has seen revenues of $16 million and $31 million the past two years in the midst of recession. It is tracking to do $50 million this year, according to Levy.