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HTSA Members Voice Concerns Over Economy

10/27/2008 02:00:00 AM Eastern

Toronto, Canada — The mood of those attending The Home Theater Specialists of America (HTSA) buying group's 12th annual fall meeting, held here earlier this month, could best be described as “mixed.”

That was the view when it came to addressing the larger economic situation and how it's affecting the businesses of the group's high-end specialty retail and custom-integrator members.

Based on discussions here, it appeared that most members were concerned, but not all claimed to have been affected directly. The most anxiety appeared to stem from the uncertainty people feel about the future, not knowing when the market will turn around and a lack of confidence that it will do so before they get too hurt by it.

Richard Glikes, HTSA's executive director, said he expects the group to end up down about 10 percent for the year based on the general downturn in business the organization's members have begun witnessing as the year end approaches.

Glikes told TWICE the organization hasn't yet been significantly touched by the so-called credit crunch. He said he's concerned vendors may lower members' credit, but that it hasn't happened yet. He added that this time of year is generally a time when vendors increase their credit offerings to help dealers stock enough product for the holidays; however, Glikes said he thinks they may “keep it flat” this year because the usual increases have not happened yet.

Glikes felt the slower traffic in stores shouldn't be solely blamed on the economy. “I think the election has a psychological effect on people,” an effect he expects will subside in a few weeks when the presidential election is finished.

“Americans love to spend — they'll come back,” he said. “If we can just get two weeks of calm [in the stock market] after the election, we'll be okay.”

“In all, I don't know if it's as bad as people think it is,” said Glikes. “Gas is better, food and commodity prices have stabilized, the big guys are talking price cuts. I think it will be six months until we're through it.”

In a panel discussion, Sony's Steve Tate, a senior sales VP, put a positive spin on the current economic malaise, saying it could benefit HTSA's members in the long term. He reasoned that many consumers have recently lost a lot of money in their 401(k) plans or in their home value and said he expects consumers will become more careful about who they trust with their money as a result.

“You guys are positioned well for this,” Tate said to the dealers. “Those who come through this will thrive in about a year or year and a half.”

As for how members themselves are interpreting the situation, results varied.

“It hasn't been that bad, but I'm worried that it could get bad based on everything we're hearing,” Russell Kim, president and CEO of Audio Dimensions, which has locations in Oklahoma, Tennessee, Arkansas and Kansas, told TWICE.

Kim said he isn't specifically worried about the holiday period because his business is “generally not a major holiday destination. The last holiday season we had was in '05.” Kim said he has no plans to ramp up advertising or buy any extra product to prepare for the holidays. Instead, he plans to run his business as he would at any other time of the year.

Tune Street co-owner Cindy Conlin told TWICE that she and her husband John are having “a bit of a stomachache at the moment.” The pain, she said, was induced when they watched traffic slide considerably since Sept. 1 at their Great Barrington, Mass.-based store, this after having a “record high in August.”

In spite of the recent slowdown, Conlin indicated she's not overly worried about holiday sales. “Christmas comes regardless,” she said.

On the flip side, Joseph Akhtarzad, president of Just One Touch Video and Audio Center in Santa Monica, Calif., said he believes “the holidays won't be good” and admitted he's also concerned about next year.

“I'm worried it will get worse,” he said. The Californian likened the current economic situation to an earthquake and warned of the potential for “many aftershocks.”

Akhtarzad is so alarmed, he said, because in the past his wealthy Los Angeles-area clientele have not been significantly affected by economic fluctuations. This time, however, he said his customers are actively holding back on their spending. He said he's even had customers cancel or downgrade jobs that had already been booked, including one $200,000 installation he had sold which the customer later asked him to scale back to $50,000.

Another California-based businessman, Jim Richards, president of Fresno, Calif.-based Future Home Systems and Designs, called the economic upset “unprecedented” and said “we're feeling it on the retail side,” but added “larger custom is still strong – they have a little more buffer.”

Richards felt it will be necessary to plan for a long term downturn and said his company will “go to market differently” by putting more of a focus on its past customers to “remind them of new features that didn't exist when they first purchased their system.”

Geography, it seems, is playing a major role in how business owners are interpreting this period of uncertainty. The level of alarm appeared to vary depending on which area of the country the member catered to. Those located in traditionally wealthier areas seemed to be feeling it the most, or perhaps their wounds are simply the freshest.

Finally, Kris Paulson, general manager of Paulson's Audio and Video, was not nearly as fazed as dealers from other parts of the country. He said his family's business has been flat for about 19 months and “I consider us fortunate to be flat at this point in Detroit.”

Paulson reported that consumer confidence “comes and goes” but that his company notices the majority of these fluctuations on its retail side rather than on its custom side.

He noted that the DTV transition had helped his company maintain its numbers. While HTSA is known for having a wealthier clientele that would be less likely to be affected by the switch, Paulson said that didn't matter much because the switch “gives them an excuse” to upgrade their system even if they don't actually need it for the switch.

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