Like its dealer members, PARA is changing.
Successful audio-video specialists reinvented themselves in recent years to grow despite new forms of competition, new supplier distribution models and changing customer bases. Similarly, PARA (the Professional Audio Video Retailers Association) changed in recent years to welcome custom-install specialists as members, and this year it retooled the educational agenda and price of its conference in early May to encourage owners to bring their senior management teams.
As it turned out, the association's 23rd annual event was its largest ever. Attendance rose to 500 from last year's 463 and 1999's 475, and the number of participating store owners and managers rose to about 250 from last year's 210.
"This is the first time we welcomed senior management teams" with an agenda intended to help owners "unleash their own staff" and "build a team of advisers" to create profitable growth, said executive director Deborah Smith.
Specialists have proven to be a resilient bunch, she told attendees. "Many vendors" are concerned about consolidation at the retail and supplier levels, she said, and they're asking, 'Where will I get more business?'" She pointed to specialists. Twenty-three years ago, she said, many two- to three-store members doing $1 million in volume "are now the largest dealers in their market."
Seminar topics and dealer comments underscored the need for continued resiliency in the face of multiple challenges, from balancing and managing hybrid retail/custom businesses to coping with competition from nontraditional retailers, including security and lighting installers. Dealers were also warned that cable companies will horn in on their home-network and PVR businesses.
Some PARA specialists believe their challenge is complicated by a changing distribution landscape in which manufacturers have turned increasingly to stocking reps to target the custom market. These reps not only rep a line to larger dealers but two-step the same line to small installers that don't qualify to buy factory-direct. In some cases, suppliers give the reps the authority to determine which installers they distribute to, and in other cases, the reps sell to installers that haven't been factory-authorized, dealers and manufacturers said.
One presenter, Myer-Emco owner Jon Myer, referred to the trend on stage, saying it's "happening fast and furious" and that he's "uncomfortable with it." He outlined legitimate business cases for using the channel, but he said manufacturers should "choose it carefully." It should be used by suppliers "for a product that doesn't need controlled distribution," not for "undermining your own distribution [program]."
Specialists, he said, must also play a role in helping the industry maintain distribution discipline. Retailers "can provide the extra distribution for suppliers, but we have not done it for them."
Presenters also focused on how A/V specialists must revise their systems and practices to more effectively manage their entry into the custom business.
KEF America VP Robert Ain, for example, outlined ways to trim inventory and boost turns to improve cash-flow and profitability. Inventory and cash-flow management are particularly critical for specialists who have diversified into custom installation, which demands more available cash than a retail-only business. "You pay for goods every 30 days, but employees [installers] are paid every two weeks," he explained. In addition, an install business needs extra cash to pay for extra equipment, such as trucks, and for additional training and educational expenses.
"If you get the turns up by one and cut SKUs 20 percent, you have money to build a new store," he added.
One way to improve cash flow in custom, he said, is to "get as much in advance [deposits] as you can and use it to operate the business." Dealers could also contract out more labor and pay the laborer a percentage of billable hours.
Another challenge for specialists is balancing the retail and installation businesses, said Myer. "[Custom installation] leads dry up if you exit retail," he warned. "Retail marketing equals retail traffic equals more [custom] proposals." That leads to more custom jobs, which in turns leads to more referral business. A hybrid dealer must therefore maintain a promotional ad schedule to drive retail traffic.
Balance is required in advertising and store display, he added. A custom message, for example, belongs more in Architectural Digest than it does in a tab insert. And stores must be merchandised so that "the customer understands you offer a selection of merchandise that he can walk out with and not make it hard for simple purchases."
One way to successfully cope with industry changes, said consultant Marcus Buckingham, is to build a "strengths-based organization" that leverages employees' natural talents to deliver "sustainable growth." In the U.S., he said, eight of 10 employees say they're "not in a job where they're using their best talents."
Knowledge consists of facts and experience, and skills are techniques, he continued. All can be learned, but a person's talents are formed by 16 years of age and are unteachable. Skill and knowledge, he pointed out, "won't cover for a lack of talent."
"If someone's struggling, find out if it's the talent or skill or knowledge," he said. If a good person is in the wrong job, "move them to a job that uses their talent more effectively.
Strength is based on a combination of talent, skill, and knowledge, and successful companies help employees build on their strengths. "Make your strengths better?to make your weaknesses irrelevant," he advised. "You can't win?if you focus on remedial work."
Strengths-based organizations "find ways to encourage people to strive in the job they're in," not promote them outside their sphere of competence, he continued. There's nothing wrong with salespeople earning more than the people to whom they report, he advised.
Changing demographics will play a growing role in determining who is successful, said consultant Fred Harmon. By 2010, retailers should plan for 70% more people in the 60-65-year age group and 10 million more single- and two-person households. The latter means more opportunities for work in condos, and the former means demand for larger homes because the kids are out of college, and baby boomers are inheriting money at a later point in life than their parents.
A looming shortage of 35-45-year-olds, he noted, requires "innovative strategies to determine where senior managers will come from." That means holding onto older employees by allowing them to work shorter hours as part of their "phased retirement."