Distributors Expand House Brands to Pump Up Integrator Margins
Distributors invest in house brands and add products from Apple, Bose and others to stem the growing retail/etail buying trend.
According to Helge Fischer, executive director for the Catalyst AV distribution alliance, the house brand trend is “fine” for the industry.
“There is a pricing pressure in the distribution channels, especially in the low-tech end of the market such as cable, wire and entry-level products. Catalyst has for years sold its own line of cables, wire, connectors and video brackets to bring better margin to the distribution,” he says. Fischer adds that these house brands give installers “a great place to make margin. Once you are looking at more sophisticated products, the legacy brands will cover that end of the market.”
Catalyst AV board member Wally Whinna of Allnet Distributing looks at it a bit differently. "We don’t view them as house brands," he says. "We view them as sheltered solutions that offer integrators a product that enhances their profitability while offering the same quality and features as the traditional 'name brands.' We are not interested in cutting corners but rather in creating value."
Whinna says house brands are good for integrators. "More profit is always advantageous when it doesn’t affect the quality or reliability of the installation. Local access to these products enhances cash flow and makes sourcing easy," he notes.
Battling Retail/Etail Buying Options
The best way distributors can stem the retail/etail buying tide among integrators is to broaden their product offerings. That’s what AVAD is doing.
“It’s always so surprising to see that so many integrators are willing to hand over some of their profits to their competition by purchasing products at etail or retail,” comments Sherman. “Integrators have options that provide them with profit margins, without having to purchase products at retail prices. We’re constantly trying to expand our product offerings to provide dealers with all the solutions they need, in the U.S. and Canada, at each of our AVAD branches, without the integrator needing to turn to etail or retail.”
AVAD has recently added Rachio, Ring, Planar, Bose Pro, Sunfire, Peerless Outdoor, Klein Tools, JVC Professional’s commercial projectors, PROconnect Power, Sumiko and Sonus faber to its linecard.
PowerHouse recently started offering Apple products so that integrators do not have to source those products at full retail pricing.
“That is where an alliance like PowerHouse benefits the integrator,” says Holzer. “Buying from etail can be dangerous too, because there may not be the same warranty or technical support available to the integrator or end user. At PowerHouse Alliance, we provide a seamless track between our dealer and the manufacturers we represent. If you buy from an unknown website just because of price, you risk receiving no support from the manufacturer or worse, you may not be able to engage with the provider if a warranty issue arises. If the motivation to buy online is to acquire cheaper products just to increase margin on the install, integrators should be careful that they may in the long term be hurting their own credibility. The quality of an installer’s work and product installed is what their reputation stands on.”
Fischer believes retail/etail and distribution can mutually coexist.
“There is no doubt that the integrators are using the retail/etail channel to procure products, low-margin products, but distributors are still doing a great job by being the local one-stop supply house, credit is available, support, training, etc.,” he says, adding, “There is plenty of room to coexist.”
Billingham at Skywalker says integrators should always try to buy via the channel when possible, noting it doesn’t make good business sense to buy at retail in most cases.
“There are many benefits that integrators who buy via retail are missing out on. For instance, profit opportunities. Buying from true distribution offers very respectable margins that can’t be matched in the retail or etail space. Another big one is better warranties. Oftentimes we can offer better warranties than what retail has to offer. For example, if an integrator purchases Nest thermostats and cameras from Skywalker AV Supply, they’ll get a five-year warranty as opposed to the two-year warranty offered in retail environments.”
Perhaps the most logical answer to the question of whether or not integrators should be buying Nest, Sonos and other name brands via retail vs. via distribution comes from Whinna at Allnet. "We have a majority of these products available for same or next day availability, at lower prices. You also do not pay sales tax," he says.
Education, Training Offerings Are Important
Distributors know they cannot rest on their laurels.
Tri-Ed, an Anixter Company, introduced its U.S.A. Stadium Tour program over the past year and, based on the tremendous success and turnouts at those training and networking events, the company has announced additional stops for this summer and fall. The Stadium Tours provide customers with a day of networking, product demos and trainings, a Supplier Expo, and a night out at the ballgame.
According to Pat Comunale, president, Global Security Solutions at Anixter, interactive residential, IP video and cyber security are very hot categories right now.
“Consumers are demanding interactive services to control their residential systems and video systems. Our IP training classes continue to be in high demand with our customers,” he says. “Tri-Ed has been offering IP technology trainings for several years now, both on the branch level and via our national, Roadshows and Stadium Tours. We continue to offer product and technology trainings across all the product categories — IP video, CCTV, access control, fire, intrusion, sound, communications, network cabling, and home automation — to keep our customers competitive and ahead of the learning curve.”
To help integrators even more, Tri-Ed offers an IP-EZ Programming Service as an extension to the IP trainings. “It is a true plug-n-play solution that simplifies the installation process. IP cameras purchased at Tri-Ed can be preprogrammed to the customer’s specifications and shipped to them directly, ready-to-go,” notes Comunale.
CE Pro 2016 Guide to Distribution
PowerHouse recently added products from Séura, TiniFiber, VIZIO and Apple. The Alliance is also focused on networking and home automation as leading categories. Holzer notes that consumers used to have just one computer in a home. Now, all the devices — laptops, tablets, phones, home automation, security and smart TVs — are connected via the network, which has to support audio, video, lighting, temperature control, and more.
“There is so much incorrect information out there on what you should and shouldn’t do, so our integrators depend on our members’ training to get the facts straight, and continuous education helps them stay sharp and consistently aware of availability on what is both new and upcoming,” he adds.
Sherman says the most popular training offerings from AVAD right now are for Ubiquiti network routers. Meanwhile, application-based, whole-home audio products, such as HEOS and Bose, are gaining more traction. Additionally, IoT product offerings from vendors such as Nest, Ring and Lutron Caséta are providing new and continuous sales opportunities for smaller jobs that have the potential to expand in scale over time.
Skywalker has also added multiple new lines, including Niles Audio, NEAR, Klipsch, Beale Street Audio, Nest, Ring and Ubiquiti. Billingham says outdoor A/V, 70V and commercial A/V have been hot categories all spring, while network training is drawing huge crowds. The distributor also created a new upfront rewards program that offers free shipping for integrators who order online among other elements.
At Allnet, Whinna says there are several hot product categories right now, including "any product that enhances a 4K sale, matrix switchers, extenders and quality bracketing solutions. Video surveillance has been an expanding sub system being installed. We sell both value, Clearview, and the higher end solutions from IC Realtime," he notes.
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Jason Knott is Chief Content Officer for Emerald Expositions Connected Brands. Jason has covered low-voltage electronics as an editor since 1990, serving as editor and publisher of Security Sales & Integration. He joined CE Pro in 2000 and serves as Editor-in-Chief of that brand. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He has been a member of the CEDIA Business Working Group since 2010. Jason graduated from the University of Southern California. Have a suggestion or a topic you want to read more about? Email Jason at email@example.com
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