2018 closed as a booming year for the AV industry. Adoption for smart home, networking, security, and entertainment systems continued to grow, and many dealers profited and expanded their businesses.
Now mid-way through 2019, our industry continues to be strong, but there are some upcoming challenges that dealers must be prepared to face. The industry must brace for the impact of the recently-introduced tariffs (25 percent import taxes) that the current U.S. administration has put into place with China and the potential for new tariffs on Mexico if they don’t continue to cooperate and comply with U.S. demands. Inevitably, these factors are contributing to price increases, and some say, reduced consumer confidence that could lead us into a possible recession or slow the increased pace we have been on.
The tariffs are a recent reality and the effects on manufacturers have long started, which will in turn affect the costs of goods of our industry. This will be new territory for dealers to manage in their businesses as well as with their customers. To stay profitable amidst these changes will be a new challenge, so dealers should prepare their businesses with the following best practices:
Adjusted Business Model with Project Variety
To prevent a slow-down in business, whether from consumers holding on purchases or decreasing product lists to handle price increases, dealers can diversify their business model with a larger variety of projects. For dealers whose business model is focused on larger projects, adding smaller projects into their mix could keep their schedule full despite purchase trepidation. Dealers can expand their focus to a larger variety of experiences to capture new business opportunities, offering homeowners water leak detection, a networking upgrade, a smart doorbell system and security cameras, etc.
A new study from Houzz shows that millennials are more likely to purchase smart technology during a renovation than Baby Boomers, ranking it as a high priority, for devices such as “lighting fixtures (17 percent), smart thermostats (15 percent) and smart alarms or detectors (13 percent),” in addition to home assistants. These renovations and new technology availability offer a new pool of customers for dealers to tap for repeat business. New construction projects targeting millennials may also seek these features and are another way for dealers to keep business going. Instead of solely seeking new leads, dealers can also tap into older installations to re-engage former customers with an upgrade or new technologies to add to their existing system.
Making Knowledge Actionable
To support a more diverse range of projects, dealers will need a robust product lineup. Staying knowledgeable about the price changes and when products will be affected can help them make smart selections for the time being, but variety also provides a backup option in case a popular product becomes unavailable for a short period or becomes too expensive for a customer. Being trained on and having access to a wide variety of product across tiers for luxury, medium, and single-room projects can help dealers in diversifying their business to stay profitable among these changes.
Consider Time Limits on Estimates
After reviewing an estimate, customers often take one day, to weeks, or even months to review and move forward with a project. In a time of incoming price fluctuations, dealers need to navigate the changes and impacts from the tariffs with their customers. In addition to being communicative about the effects, dealers can also impart a time limit on estimates. With a 30-day expiration, for example, dealers can ensure that customers move projects forward and have the most updated information. Providing a clear expiration date with estimates means that customers who take six weeks to even six months to commit to a proposal understand that they will receive an updated copy with possible price revisions before the project starts and product is ordered, thus protecting the dealer from decreased margins. Being clear about the cost with customers up front will support a good rapport to make the process as smooth as possible and prevent frustration or loss of trust.
A successful dealer is one who stays on top of the latest technologies, continuously takes on new lines, and selects the best product(s) with possible alternative for the size, budget, and needs of each customer and installation. As the tariff effects become imminent in our industry, PowerHouse Alliance is a prepared partner for dealers, bringing the trainings and line diversity necessary to make it easier for dealers to stock what they need and stay profitable.
We hope that consumer purchasing habit impact will be light, but dealers can prepare themselves with these methods in order to handle changing consumer purchasing habits as smoothly as possible. With a diverse range of offerings, expertise, and a few new business practices, dealers can keep their schedules busy even if purchasing dips later this year.
Dennis Holzer, Executive Director, PowerHouse Alliance
Since joining the PowerHouse Alliance in 2009 as executive director, Dennis leads its 12 distributor members in dealer communication and industry outreach. He represents an overseeing eye of the residential and commercial AV, security, IT, home entertainment and consumer electronics industries. With over 30 years of experience, Dennis has done everything from road warrior salesman, to spending over 15 years as president and owner of Hamburg Brothers, an independent wholesale electronics/white goods distributor. With an extensive background in the consumer electronics industry, Dennis brings a wealth of knowledge to the PowerHouse brand and its member companies. Dennis supports initiatives for dealer training, new technology adoption, and recognizes the importance of distribution for providing dealers with expertise, better service and cost efficiency.