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State of Industry Report 2013

Integrators report 5% increase in revenues and predict 13% growth for 2013. Housing market activity jumps dramatically.

2012 was a continuation of the roller coaster ride for CE pros. Some moments were filled with unbridled highs, while others made their stomachs drop.

Photos & Slideshow

Jason Knott · January 16, 2013

Wheeeee! 2012 was a continuation of the roller coaster ride the custom electronics industry has been on for the past several years. On a roller coaster, some moments are filled with unbridled highs, while other parts of the ride make your stomach drop. That’s the way integrators appear to feel about 2012.

Many reported stronger years in terms of revenues and even more so in profits as they reap the benefit of growth while still maintaining pared-down staffs from the recession. Other dealers who experienced slight comebacks in 2011 were not so fortunate, seeing revenue slip. Overall, data from the latest CE Pro Annual Readership/Custom Electronics Installation Business Profile Studies reported a 5 percent increase in median revenues among integrators to $570,000. That’s up from $541,000 in 2011.

Meanwhile, bullishness abounds for 2013, with CE pros predicting a strong 12.6 percent growth rate next year. In all, more than nine out of every 10 integrators (91 percent) predict higher or flat revenues next year; that figure is up from 83 percent heading into 2012. And that optimism is not unfounded. Data for 2013 from multiple sources predicts increasing numbers of housing starts, rising home equity and strong remodeling activity. All of these factors represent great potential for dealers. In the CE Pro survey, which had 375 usable responses, integrators reported remarkable jumps in their residential activity, from custom and production homes, MDUs and remodels.

For the first time in many years, dealers are predicting a strong jump in the number of installations they expect to perform next year. Integrators predict they will do 38 installations next year, up from 25 in 2012. Meanwhile, the median installation is predicted to rise 17 percent, from $11,700 in 2012 to $13,750 in 2013. Despite all the positive news, integrators are still being cautious in terms of hiring. The median number of employees remains at four.

Among the other identifiable trends from this year’s data include:

Continuing Channel Breakdown. 2011 was the first year in which CE Pro identified signs that the traditional industry channels were losing their grip as dealers reported buying 22 percent of their products from either online retailers or big-box retailers. In 2012, the trend continued. Last year, 25.7 percent of all products purchased by dealers were bought at retail, meaning those products have little to no chance of being marked up to earn equipment margin because they can be “shopped” by consumers.

In all, 10 percent of products were bought in electronics/appliance retail stores, and 15.7 percent were bought from online retailers. The loser in this trend continues to be manufacturers that sell direct. In 2012, dealers reported buying only 29.8 percent of their products factory direct; that’s down from 36.7 percent in 2011. Specialty distributors for the custom channel actually gained ground in 2012, earning 44.5 percent of purchases compared to 41.3 percent last year.

Top 10 Most-Installed Products

1. Speakers/Subwoofers
2. Flat Panel TVs
3. HDMI & A/V Cables
4. Blu-ray Players
5. Remote Controls/Interfaces
6. Multiroom Audio
7. Receivers/Amps/Preamps
8. Home Networks
9. Racks & Mounts
10. Home Automation/Control

Speakers includes freestanding, bookshelf and in-wall/in-ceiling units. Central vacuum systems are listed as the least installed products by only 15 percent of integrators.

Electronic Purchasing on the Rise. As manufacturers and distributors have moved to help dealers become more efficient, many have instituted means to make it easier to order product. For the first time, CE Pro asked integrators “how they buy” and electronic purchasing is the big winner. Overall, 56.9 percent of all product orders are made electronically, either via an online portal (33.5 percent) or via email (23.4 percent).

Speakers Beat Out Flat Panels. For the first time in many years, speakers/subwoofers are the most commonly sold product by integrators vs. flat panels. A small but growing number of CE pros are opting not to carry no-margin flat panel TVs anymore. This tactic eliminates the potentially costly burden of administering the warranty on the video display that the dealer earned no money on to begin with during the initial installation. In all, 93 percent of dealers now install speakers/subs in homes. Flat-panel displays are still sold and installed by 91 percent of integrators.

Integrators Are Still the No. 1 Influencer. There has been a small but growing trend of specifiers and consultants in the custom electronics industry, but apparently that trend is not affecting the influence of residential integrators. Indeed, 91 percent of dealers report their own knowledge and experience is the most important or moderately important in customers’ final product decisions. The homeowner is the second-most influential individual on the job, followed by interior designers, consultant/specifiers, architects and builders.

Housing is Back! There are some very strong signals that housing - both new and existing - is on the comeback for integrators.

The percentage of integrators serving the single-family, custom-built home market grew a whopping 19 percent in 2012 compared to 2011. In all, 92 percent of integrators report they are working for custom builders on new homes; that is compared to just 73 percent in 2011. Likewise, the percentage of dealers working in the residential remodeling market was up 12 percent (from 63 percent to 75 percent). There was also a 15 percent rise in the percentage of CE pros working for production homebuilders in 2012, and a 5 percent increase in those doing installations in the multidwelling-unit market.

Hot Product Categories for 2013. Surveillance cameras are listed by CE pros as the category most likely to see growth in 2013, followed by multiroom audio and home networking. For all three categories, about two out of every three dealers foresees strong growth. On the flip side, the once-hot aging-in-place/digital home health system category is listed as the one product area with the least amount of potential for 2013 – just 1 percent of dealers are bullish.

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  About the Author

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 jason.knott@emeraldexpo.com

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