Custom consumed a major portion of the agenda at the HTSA spring conference, which included a roundtable discussion and a separate panel during which members and suppliers outlined the challenges in taking custom to the next level.
HTSA members "need to be way past the simple stuff," said panel moderator Ford Montgomery of Chelsea Audio/Video. Comparing custom home installation to custom car audio installation, he warned members that "it's not a head-and-two business."
Reinforcing that advice, HTSA president Jon Robbins pointed out that $5,000 installs are money-losers, once follow-up and other factors are included. For independents, the opportunities lie in more expensive installs. "The Tweeters, Ultimates and Sound Advices will never do this business well because it's a hands-on business," he said.
One of the keys to tackling this business, he said, is hiring a job coordinator who has experience in one of the building trades. "He does the estimating of labor, scheduling of installers, and interfaces with builders and architects who relate to someone who has been in the trades," said Robbins, who is COO of Hifi House Home Theater Centers. "Our job coordinator knows how to talk to these people."
Another key is hiring engineers who act as problem-solvers after the install and help customers learn how to operate their system. Well-paid installers are also needed. "Our finish installers make more than electricians in our market," Robbins said.
Compensation for key personnel must include monthly incentives, he added. "Get them into net-net-net so they watch costs and efficiencies."
Unlike many electronics buyers, he noted, custom customers "are not predisposed to buying a particular brand." In fact, "these people buy what you tell them."
Niles sales VP Frank Sterns agreed and said, "It's more important to a customer to trust someone's installation ability than it is to buy a particular product." At retail, he said, "you sell a product to a consumer who is somewhat aware of a product and responds to an ad." In contrast, in custom, "you're selling design and installation, and product is secondary to delivering a lifestyle."
Further underscoring the difference between the custom and traditional CE business, Listen Up senior VP Steven Weiner claimed retail stores can't tackle custom unless they hire a separate custom-dedicated management team. "It's virtually impossible to have a retail store and go out to a customer's house to deal with issues," he said.
Weiner also suggested that dealers align themselves with suppliers able to provide plenty of installation support. "It shocked us early on [that] no products were built to work the way they were supposed to." This "almost guarantees that things won't go right the first time," he said, so installers need vendors who can help troubleshoot systems.
In raising a similar theme, Niles' Sterns urged dealers to "look to custom installation vendors as a one-stop shop for products, training and a broad selection of products" instead of "hunting for the preamp of the month or doing multiple training programs with multiple vendors." The point, he said is to "manage for the lowest cost, not the lowest price."
Sonance sales VP Mark Weisenberg advised dealers to concentrate on upselling. "It takes as much time to cut a hole for a less expensive speaker as it does for a more expensive speaker," he pointed out. Building a trade-in program into a bid will also help deliver more step-up sales, as will a profit-sharing plan, he said. "Show them [employees] how much they can make if you meet your profit plan."
During a question-and-answer period, panelists mentioned that labor accounts for 15% to 20% of their gross profit dollars on installs priced at least $10,000 to $15,000. And Robbins pointed out that he primarily bids on projects rather than bill for time and materials because "customers say 'your guys weren't here as much as you say.' "
The time-and-materials methods, one audience member said, works best with retrofit installs.
In a separate roundtable discussion open to all attendees, dealers and suppliers outlined custom's inventory challenges. These challenges, participants said, go beyond forecasting when a particular product will be needed during a house's construction and whether a manufacturer can deliver on a just-in-time basis.
Other challenges include products that are discontinued or modified by a manufacturer after a dealer has specified them into a job. Even changes in product dimensions can be troublesome if the chassis no longer fits in a cabinet already specified for the job, one dealer said. And when a front-projection system is discontinued before a job is completed, specs have to be changed because the recommended viewing distance of the device has already been factored into a job's design.
For vendors, just-in-time inventory shipments are costly, and as retailers trim their product displays to focus more on custom, brands get less exposure, suppliers said.