The custom installation market is on fire and integrators will face continuing challenges finding skilled labor and intrusion from other trades as the market grows, even in the face of the coronavirus pandemic.
That is the gist of the message from the leaders of the four major buying groups in the custom electronics industry, who gathered for the Day 3 keynote at CEDIA Expo Virtual. Hank Alexander, Director, Home Technology Specialist Network/Nationwide Marketing Group; Richard Glikes, president of Azione Unlimited; Jon Robbins, Executive Director, Home Technology Specialists of America (HTSA); and Dave Workman, CEO and President, ProSource, addressed some of the potential threats and opportunities facing dealers today in a one-hour conversation.
All four leaders said their membership’s business has never been stronger than it is now during the pandemic.
“It’s Christmas,” quipped Glikes. “We were down 32% in April, we were down 20% and flat in June. But the clients finally got fed up and said, ‘Come into my home. I wanted done now.’ In July, we were up very nicely. It was our fourth best month ever. Everybody’s very busy. Business is good. Whether it stays good really depends on what happens with the virus.”
He noted that supply shortages were a problem over the summer and, as usual, dealers are desperate for skilled employees.
Robbins said HTSA members were very concerned back in March, but the market swung around quickly.
“Our guys are as busy as they’ve ever been. Obviously, we do have supply chain challenges as, as does everyone. We’re just not able to get enough goods. But we anticipate we’re going to be busy through the end of the year and going into 2021. We have completely full pipelines throughout our membership for the next 120 days at least.”
Workman calls the pandemic the “perfect opportunity” for the market.
“I’d never seen an increase across the board as high as I saw in June, and again in July. There has been clearly an emphasis on the home with the travel industry being largely shut down. Those leisure dollars have been refocused around the house,” he says. Workman noted that the most surprising element to him during the coronavirus crisis has been the continued strength of the housing market, both with new construction and remodeling. He says ProSource members’ job pipelines stretch into 2021 already.
He cautioned that if discretionary income starts reallocating back into other areas beside the home, then it could take away from the custom electronics market a bit, but he believes high-growth categories like lighting and shading will continue to spur solid overall growth.
HTSN membership has a large retail presence, with many members diversified into furniture, appliances and bedding, as well as electronics. Alexander says the members’ sales drops in April and May were flipped around with significant growth in June and July. There were some regional fluctuations among members’ sales based on the degree of the outbreak and whether or not local regulations allowed the retail stores to remain open.
Alexander says for some HTSN members, “it was like … a pandemic what pandemic? We’re so busy.’”
He says Nationwide members expect to maintain strong business throughout 2020 and for the entire year in 2021.
Workman says the big limitation on rapid growth for the custom installation market, as compared to CE retailers, continues to be a massive lack of labor.
“The market is capacity controlled and how on big of an increase it can actually accommodate because labor. It can only can go up so much because it is so heavily tied to the installation,” he adds.
Threats: Encroachment from Other Trades Grows
The biggest threat for the industry continues to be not just finding manpower but Robbins says the problem is more far reaching than that.
“One of the big challenges is that customers hire the wrong guy and they end up having a bad experience because there will be people out there that see an opportunity and they say, ‘I can be in the AV business and they’re out there taking projects and they don’t get done well.’ Our channel becomes kind of a commodity and that’s a threat,” he says.
Robbins also sees encroachment from other industries, and in particular from commercial AV companies that are experiencing a softness in the commercial market.
“I think it’s happening already. I think that there are commercial guys that are eating up some of this crazy business. I think there are probably people out there that are already grabbing up some of this residential business,” he notes.
Workman agrees, noting he is seeing encroachment from commercial AV, electrical and security industries into the residential AV space. Alexander uses the term “resimercial” to describe the blurring that continues to occur between the two types of AV contractors.