ProSource Reports Major CE Gains, Optimistic About 2015

Base hits, not home runs, providing growth for dealers
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Frank Sterns, Sony Electronics

Orlando, Fla. — ProSource, the specialty CE and custom-installer division of the BrandSource buying organization, opened the groups’ 2015 Summit here Monday morning by celebrating $4.58 billion in annual sales, a nearly 49 percent increase year over year.

At the morning conference, Dave Workman, CEO/president of ProSource, said that in the past year — since the group was formed from the merger of the old HES and PRO Group organizations — ProSource is “without peer the largest CE buying group in the industry.”

He cited the partnership between ProSource and BrandSource as one of the reasons for the significant growth during the year, as well as other market and economic factors. The executive noted: “We have become the national alternative” for manufacturers that want to sell upscale CE products and systems.

Workman reported that the second half was strong for specialty retailers and custom installers, and that the economy, while improving, was not up across the board. “All boats are not rising,” but things have improved for ProSource’s customer base, he said.

He added, “Since 2009 the growth in CE has been from smartphones and tablets, categories few of our members play in.” Retailers that have tried to be “all things to all people” have had problems, he said, citing the demise of RadioShack, continued problems at Sears, and market share losses at hhgregg.

Workman said the CE market has not had a home run since last year, but several base hits have provided significant growth: 4K TVs, especially in the second half of 2014; automation and control; and soundbars and wireless multiroom audio. He added that momentum has continued to build in 2015 and that sales in these areas should continue to grow throughout the year as customer confidence increases.

The ProSource CEO expects major growth in the 4K TV market, with unit sales of 4.5 million sets this year, and he cited a study indicating that 73 percent of those consumers who have heard of 4K OLED TVs are interested in them. “4K comes in at a time when the replacement cycle [for TVs] is high, along with an improved economy,” he noted.

In home automation and control, there should be a “tremendous opportunity to capitalize” on both, Workman said, based on ProSource’s installation expertise and the emerging Internet of Things product wave.

Jim Ristow, who previously headed HES and co-lead ProSource with Workman, addressed the Summit for the first time as CEO of BrandSource, having replaced the retiring Bob Lawrence late last year. He said that ProSource is “the gold standard for luxury CE and installation” due to the development of “deeper programming and building better relationships” with its suppliers.

Ristow added that he will be taking that same gold standard approach with BrandSource and that group’s independent appliance and furniture dealers.

In thanking the assembled members for being selected CEO of BrandSource, Ristow choked up and received an immediate and warm-hearted standing ovation from the audience. Workman came back on stage and quipped, “As the saying goes, ‘Good things happen to good people.’”

Workman returned to introduce a couple of key suppliers, the first being Frank Sterns, custom-install channel VP of Sony Electronics. Sterns immediately dealt with, as he put it, “the elephant in the room,” namely recent news that Sony was spinning off its TV/home entertainment businesses.

Quoting Sony Electronics president Mike Fasulo, Sterns said the businesses “remain wholly owned subsidiaries of the Sony Group,” and that in fiscal year 2014, Sony’s U.S. electronics business “had the strongest year in a decade.”

“This was not by accident,” he continued. “It was by design as we took serious steps to revitalize our U.S. electronics business with a clear focus on premium products, premium channels and premium partners.”

Sterns said Sony has gone “back to its roots” to develop cutting-edge TV and entertainment products with a focus on an expanded definition of the custom-installation business, which includes “not only large custom installers, but smaller ones too, and A/V specialty retailers.”

Kevin Zarrow, D&M Holdings

The 30-year, custom-install market veteran explained that he has picked top reps across the country to sell the Sony brand, and the results so far have been positive: a 202-percent gain in 4K TV sales; projector sales up 124 percent; and ES receivers up 47 percent.

He said that momentum will continue with the shipment of the X900C-series 4K TV, the “world's thinnest”; the Z-series ES AVRs that are built for the custom-installation channel; the VW350ES 4K projector, priced at less than $10,000; and the VPLGTZ1 4K Ultra short-throw projector, which can provide a 147-inch picture.

D&M Holdings was next up, with CEO Jim Caudill noting that ProSource is the only buying group that his company of top home audio brands works with. He added that the key to current and future growth for D&M is the “transition ... to maintain our market share while expanding our internal capabilities” to provide products that fit the latest technology.

D&M has to become the leader in “integrated sound solutions” for consumers who now want “sound ... anytime and anywhere.” Caudill cited the Heos by Denon wireless system as part of that new approach D&M is highlighting, and said the entire company has to provide “intelligent whole home audio solutions.”

Kevin Zarrow, VP/general manager Americas of D&M, emphasized the partnership between his company and the buying group. “We have developed key programs and strategies with Dave [Workman] and Jim [Ristow]. This is much more than just a partnership.”

The effort has resulted in key programs across the entire D&M line, regardless of brand; ensuring that profitability is a priority; having product available either direct from D&M or BrandSource’s Expert Warehouse distribution system, with ProSource receiving “priority” status on product in times of shortages; and support from D&M from Zarrow personally and his entire team.

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