“Everybody talks about the size that ProSource has become, but … size, in and of itself, really doesn’t matter,” said Dave Workman, president and CEO of the custom integration industry’s largest buying group.
As Workman kicked off the ProSource Spring Summit this past Sunday in Nashville’s Opryland Hotel, he went on to explain that the size of the group—560 member companies and growing—doesn’t necessarily mean anything when the “entities” that the group is competing against are much larger. “You have the ADTs of the world, the Dish Networks, and Best Buy’s Geek Squad,” he pointed out. “Also, size alone is no insurance policy for success. In many ways it can be a liability, depending on what you’re trying to do.”
Workman said that ProSource is simply “an aggregation of the individual merchant” or “individual entrepreneur” and the creativity and flexibility of every one of the businesses that it represents. “As you work on your business, we do that same thing here at ProSource,” he said. “You have been growing, and so have we. You built your businesses from the ground up, and so have we. We are simply a reflection in the mirror of everyone in this room and what you do.”
In 2017, Workman noted, ProSource members earned a record 25 percent more in vendor rebate program dollars than the previous year. And although the group continues to grow—with 44 new members in 2017 and a goal of 40 more in 2018— Workman said that the group closely vets every new member that comes to the organization. “We know that there are still quality dealers out there,” he said. “We find them every day. But, what we’re doing today is being more selective than any time in the history of the organization about those members we allow to join.”
The group also has a “grow-from-within” philosophy to help its member companies get bigger and more successful. With that, Workman said, ProSource elevated five dealers to its Power level, increasing the size of that elite group to 60-plus members. The Power group, consisting of firms generating a minimum of $4 million in annual sales, will gather during its own Summit in San Antonio next month.
Once dealers join ProSource, they then work directly with a specific district manager assigned to their region of the country. Those districts now include a new one that was added last year on the West Coast, where the group had been largely underrepresented. District managers are tasked with scheduling individual one-on-one business reviews with each member within their district, trying to explain how ProSource programs work, what member benefits are available within the group, and how each company can support group brands with greater quantity or focus than they might have in the past.
With this hands-on approach, and due to the quality of its member companies, Workman said ProSource has experienced record increases in all of its product categories. The group’s overall TV business was up about 14 percent overall, and 30 percent in the premium TV category ($1,500 or more) over 2016.
Audio, including components like AV receivers and amplifiers, was up 20 percent and home speakers up 12 percent over the prior year. The aggregated custom install category (control, lighting/shades, etc.) was up for the group by 13 percent in 2017.
Last year, the group added 15 new vendors to the organization, as well. Each of these companies was chosen to fill niches in the group’s offerings, Workman said. “We’re always looking toward what are we missing,” he noted. “We’re not necessarily looking to add a lot of vendors in existing categories. Where we find ourselves missing a particular category, don’t have the depth or strength of relationships that we would like for you, then we obviously go looking for those vendors.”
The Year Ahead
Forecasting the rest of 2018, Workman noted the U.S. economy is in “amazingly good shape” and that consumer confidence is at a very high level. “We feel like the consumer is ready to spend,” he said. “The stock market is still doing well. Unemployment is still very low and home prices are steadily rising, which puts more equity in and the mindset that people have about their wealth. And all of these indicators tell us that 2018 should be another very good year for the consumer and for your businesses.”
Based on that outlook, ProSource is anticipating “another great year” in the TV category. “We believe that we will see overall growth in TV of about 15 percent, and at the premium level about 25 percent. Big panels are critical to our position,” Workman said. “According to our vendor partners, there is a very large slate of big panel televisions at the premium segment, and that’s where you live.”
Bigger TV sizes are especially appealing to ProSource members, Workman explained, because it’s not a “self-serve” product. “A 75-inch TV is too large of a set for someone to put into the back of their F-150 and try to truck it home and then maneuver it into place,” he noted. And, despite the perceived threat from Amazon, the television category has one of the lowest shares (9 percent) in any category that they participate in, according to Workman. “Likewise, mass market doesn’t perform as well in large panels,” he added. “So we know where we’re going to play. We know what part of the business will best cater to your business as well.”
ProSource also expects to see continued growth in the audio category, as it acquires more market share. Within audio, the group is neck in neck with Best Buy, but Workman’s goal is to be number one in all of the key audio categories. “We maintain a focus in this category that is unlike any other group of dealers or single entity out there,” he said. “We do believe that we’ll continue to grow our share in this category, and we believe that we will see a slight acceleration in our custom install categories, and we’re very conservatively targeting a 15-percent growth rate and could well exceed that if a couple of initiatives that we have for the membership take off."
The group is also hoping for more participation in the lighting and shading categories, through Coastal Source, ColorBeam, QMotion, Screen Innovations, and Vantage, as well as managed services, which its views as a game-changing opportunity through its partnerships with Parasol (and SnapAV) and OneVision Resources.
On the managed services side, ProSource had originally hoped to roll out its own department, but found that it would take too long to develop. Instead, it is now the only buying group with partnerships with two providers.
“While recurring revenue is nice, the ultimate objective is reducing truck rolls,” Workman said. He pointed out that integrators need to figure out how to charge less for service calls as the price of the technology that they sell continues to come down. “We don’t want you to get forced out of business when the economics no longer work anymore. We have to be willing to embrace that change.”
Member Engagement Goals
In addition to its one-on-one business reviews through district managers, ProSource also has established its first Working Group, where they take dealers in non-competitive markets, assemble them together into a group of 10 or 12 (in conjunction with Bravas) to share everything—even P&Ls—to establish better business benchmarks. Once the first group is well established, another one will be added, and so on.
The group is also increasing its number of town hall dinners to a total of 30 markets, as well as participating in 11 Business & Technology Summits around the country. “We will piggyback on regional events as a way to have smaller group meetings,” Workman said. “And, we’ll make sure our district managers are out in the field more. Our engagement with [our members] has to be on [their] terms.
Wrapping up, Workman noted that we are in one of the most dynamic periods for technology and that it’s up to ProSource members to be trusted resources for their clients. “We live with [technology] every day, and it’s confusing,” he said. “Think about it from the consumer’s viewpoint. The role we play is to demystify the complex… to take what people want in concept but don’t have a clue how to get there. We do it one customer at a time. That’s our strength. That strength will never be matched by any large entity.”