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HES Is Gaining Support As It Nears $1 Billion In Sales

A new co-branding program proposed by Home Entertainment Source (HES) received an enthusiastic endorsement from member dealers — as did the group itself — during its annual summit and buy fair, held here last month at the Wyndham Anatole Hotel.

Underscoring the point was dealer attendance, up 40 percent over last year’s inaugural event in Atlanta, and the increased support of suppliers, who occupied twice as much exhibition space on the show floor.

“We’re bigger than Tweeter,” general manager Jim Ristow declared to a cheering crowd. “We’re a force in the industry.”

Indeed, the nine-year-old specialty A/V group, which now numbers 400 dealers (up from 300 last year) and 550 stores, enjoyed a 25 percent spike in net sales to $800 million in 2004, while comparable-store sales were up double-digits.

Ristow expects volume to build further in 2005, when the organization is projected to pull in close to $1 billion in collective revenue.

“We outpaced the channel and the industry,” he told dealers, thanks to HES’ trio of regional warehouses, which allow for vendor-direct buys, and the group’s in-house financing and extended warranty programs. “We function more like a national account than a buying group,” he said, citing “nationals-type deals” with vendors like Samsung, and group programs with narrowly distributed lines like Pioneer Elite.

Moreover, HES enjoys a “unique relationship” with suppliers that allows it to “extract as much or more than other groups” in concessions, while maintaining a “win-win situation,” Ristow said. “It’s a two-way street.”

Bob Cole, principal of Bob and Ron’s World Wide Stereo and incoming HES president, agreed. “We’re stupidly loyal [to our vendors],” he told the audience, even though the group imposes no quotas, sales restrictions or requirements on members’ purchases. “We offer volume and have more integrity, by and large. After this week,” he said, “there’ll be a lot more vendors knocking on our door.”

Cole, who succeeds outgoing HES president Chuck Barger of Audio Visionaries, also implored fellow HES dealers to charge more for their products. He argued that customers will be more than willing to take out their wallets in exchange for the greater trust, communication and knowledge that HES dealers offer.

Ristow added that HES is now represented in almost every state, and that management will work to “fill in the blanks” in the Florida and Southern California markets.

“Nine years ago no one thought we’d be where we are today,” he continued. “We survived mail order, trunk slammers and the Internet by evolving the business, moving up-market and developing new proficiencies.”

But despite its successes, Ristow said the group still “is acting like 500 scattered entities” and has yet to leverage its national footprint. Now, he said, “We’re ready to move to the next level” — that being a cohesive, national group marketing program under the HES banner that can be layered atop owners’ store names.

The optional program, akin to the Brand Source and Ace Hardware umbrellas, would provide dealers with uniform store signage, displays, downloadable price tags, truck sides and advertising.

The latter would also include vendor print ads that will also carry the HES logo. Samsung is the first manufacturer to offer the cobranded ads, Ristow noted, effective immediately.

Also in the offing is an HES consumer Web site with a dealer locator, four-color mailers, and a possible database of 500 custom installations that dealers can access for themselves and their customers.

“You can build on your local name, drive more business under a national umbrella, and provide vendors with a viable alternative to the big box stores,” Ristow said.

HES also presented a panel on the competitive marketplace featuring Pioneer’s strategic marketing director Rick Hackett and industry consultants Noah Herschman and Robert Ain. Hackett suggested that HES tap into the builders’ channel; Ain implored dealers to keep their stores in “fabulous shape;” and Herschman discussed Best Buy’s stepped-up expansion of its Magnolia Audio Video in-store shops. All agreed that wireless, media server-based content delivery will be the wave of the future, and that dealers had better bone up on the technology.