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PRO Group, HES Realign Under ProSource Banner

5/19/2013 08:00:00 PM Eastern

SAN ANTONIO — The Progressive Retailers Organization (PRO Group) and its sister buying collective Home Entertainment Source (HES) have begun a reorganization under the ProSource name and will focus on four key product categories going forward.

The new game plan was outlined last week by ProSource president/CEO Dave Workman and HES executive VP Jim Ristow at PRO’s annual spring meeting here at the Westin La Cantera Hill Country Resort and Spa.

Existing PRO and HES members will be organized by size and expertise around four core product categories — step-up TV, legacy audio, “new” audio, and home and commercial control and automation

Under the plan, ProSource, the three-year-old, $3 billion umbrella organization for the two BrandSource buying divisions, will become the forward-facing franchise for the sister groups. Workman, who also serves as president/COO of PRO Group, acknowledged to vendors during a state-of-the-union address that “we confused the hell out of you” with the mix of names and acronyms, and that “ProSource is the entity, Pro- Source is the future.”

In the interim, the PRO and HES affiliations will continue, at least internally, as the parent group re-sorts its membership. PRO members were reclassified as ProSource’s brick-and-click promotional dealers with annual sales volume of $10 million or more, while the 400 dealers in the $2 million-plus range will fall, for the time being, under the HES heading. Workman said he plans to expand PRO’s membership ranks from its current 14 dealers to between 20 and 25, which would be culled from HES or recruited from outside the organization.

In addition, a third ProSource designation has been added for 66 “power dealers,” which are large custom installers and system integrators with annual sales of $3 million to $10 million.

Grouping the members by size and business model will help ProSource better develop tailored strategic programs with manufacturers that include exclusive runs, product launches and promotional sets, Ristow said.

“We’re working with vendors at a deeper level because having programs without a strategy is a losing proposition,” Workman noted.

ProSource has also identified four key product platforms — step-up TV, legacy audio, “new” audio, and home and commercial control and automation — that it hopes will provide growth and help differentiate its dealers in the marketplace.

The group will limit its video exposure to new stepup TV models and technologies where its assisted sales floors have more sway, while growing its share in a steadily shrinking market for home loudspeakers and receivers. At the same time, ProSource will focus on the new generation of audio products, including soundbars, wireless speakers and multi-room systems, digital content devices, and fashion headphones, which Workman described as a “gateway product” for a new generation of customers.

Ristow said control and automation may offer the greatest opportunities, both at the boutique and entry levels, as a coming “tidal wave” of products prepares to sweep the mass market.

Workman described the strategic shifts as “creative destruction,” and said they were prompted by margin erosion in legacy categories and recent vendor pricing policies. While the UPP and MAP strictures have helped stabilize pricing, he said they’ve also hamstrung members that sell through third-party online marketplaces, and that he would prefer instead to see more product exclusivity for the assisted sales channel.

Workman added that unlike some retailers that are “running away from CE” by adding majaps and mattresses to their mix, ProSource is digging out new opportunities in electronics and remains committed to the category. In the process, it is adding new vendors in niche and emerging categories — some of which exhibited here in PRO’s first-ever vendor fair — while culling its TV roster and strengthening its core partnerships.

“Fewer and deeper vendor partnerships are our future,” he said.

Members and vendors lauded the initiatives, and also described an improving sales environment. Bjorn’s founder Bjorn Dybdahl said April sales were close to target, while Bob Cole, owner of World Wide Stereo, said he is enjoying his most profitable year ever despite a slight decline in volume. Bill Pollock, who heads Nortek’s Core Brands group, credited a resurgence in new home construction and home remodels for renewed CE demand. “When you do a major remodel you want to get all the toys that go along with it,” he observed.

Anticipating a recovery, other dealers are expanding their operations. Starpower president/CEO David Pidgeon, a ProSource steering committee member, is preparing for a soft summer opening and September grand debut of his company’s remodeled flagship store in North Dallas, which will feature a four-story tower, elaborate home-theater rooms, super-premium majaps and cooking demos. Elsewhere in Texas Modia’s Mihir Mody has acquired two new locations, while Huppin’s principal Murray Huppin has revamped his company’s namesake website. Separate and apart from his OneCall online business, Huppins.com supports the brick-and-mortar operation and will eventually be upgraded with transactional capabilities.