Q&A: Richard Gilkes, Executive Director, HTSA

To meet demand over the past few years, many manufacturers have broadened their sales channels wider than ever before.

One key outlet for many has been buying groups, like the Home Theater Specialists of America (HTSA). With 62 members and 43 associate vendor members, the group has a combined buying power of more than $500 million.

It offers members advice on sales, installation techniques and marketing tactics. Richard Gilkes, executive director, spoke with CE Pro Retailing about buying groups, HTSA and the future of the market.

How did HTSA get started?

It started 11 years ago, when 11 members found themselves going to AVB [an appliance buying group] meetings just so they could earn a 1 percent rebate with a particular video manufacturer.

The AVB dues were $2,500, so they had to do $250,000 with this vendor to make it worth it. They realized that there needed to be a buying group for mid-sized retailers.

What is required to be an HTSA member?

You must be in business for five years. You cannot sell appliances. You must sell $5 million a year or be the largest home theater company in your market.

You must do 60 percent of your video business with HTSA associate member video manufacturers. Every HTSA member has to establish individual credit with the vendors.

What are the benefits of joining HTSA?

The number one benefit from HTSA is idea and information sharing. No one individual or company has all the answers.

HTSA is a group of problem solvers that can seek counsel from each other. That is a tremendous value.

Another primary benefit is dealing with the changing vendor landscape. You have to be careful with whom you partner, and you have to stay true to them. HTSA has been consistent in its vendor relationships.

It's like a marriage -- you have good and bad days. Other buying groups have deals with every vendor, and others hop around from vendor to vendor. We don't do either. We are loyal to our vendors.

Lastly, buying groups return money to the bottom line that is necessary to survive. Margins have never been worse and there has never been more competition.

At the retail level, specialty retailers are competing with warehouse clubs now. Two years ago, those clubs were selling CRTs while our members were selling flat panels.

Today, warehouse stores have a market share of more than 20 percent. At the installation level, there is a lot of competition from small integration companies. These companies are buying from distribution.

What is the outlook for the industry?

The short-term outlook is tough, but the long-term outlook is great. In the short-term, the market is due for a shakeout of retailers, custom installers and manufacturers.

I think we are going to see a lot of combinations, like the JVC-Kenwood one that was [recently] announced. Manufacturers will need to do this to survive.