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ProSource Sees 10% Growth On New Technologies

San Antonio — Optimism reigned at ProSource’s first meeting  since the BrandSource unit merged its PRO Group and Home Entertainment Source organizations, where expectations are for 10 percent sales growth this year driven by home automation, wireless multiroom audio, legacy audio and Ultra HD TV.

Dave Workman, ProSource’s co-president and COO, and Jim Ristow, co-president and chief business officer, are upbeat about not only potential new business, but also how the new $3 billion organization has been received by suppliers.

One of the items discussed by members is the potential Apple/Beats deal, which Workman said “interrelates with the potential of the wireless multiroom audio category. There are new technologies that are coming into the market, almost where Bluetooth wireless audio was a few years ago. Apple and Beats … high resolution audio… the growth prospects in audio are bigger than ever before. Bigger … yet different.”

It clearly isn’t the home audio category of years ago when the emphasis was on selling individual products, Workman observed. “As the industry has seen over the years, products always become commodities, but solutions don’t.”

Asked about the health of the group, especially after news of the departure of J&R Music World, Workman said, “When the year is finished we will be net positive in terms of membership.” Ristow added that, in effect, “We are net positive now.”

Ristow noted that ProSource’s three types of members, Pro (specialty retailers with e-tail operations), CI Power (large integrators and custom showrooms) and CI (custom integrators) are “both up in sales volume and membership” with the additions of IQ Home Entertainment, Music Direct and Sound Advice, the storied Florida chain and former Tweeter Home Entertainment division.

Workman said the group dynamic has been fine, especially with “the return of Peter Beshouri of Sound Advice giving this a ‘Back to the Future’ feel, but it is still a work in progress and the progress has been positive.”

Ristow said that vendors have “embraced [the new organization] knowing that we can carry their entire line, whether the products are DIY or for retailer/installers, and from specialty to complete custom integration.”

Workman noted, “The hardest thing for any buying group to do is work like a group. Sometimes working with groups is like herding cats, since there are so many entrepreneurs. Vendors love groups that work like groups, which is where we have an advantage.”

Ristow said in the past year a series of meetings for members and vendors and resulting programming gave suppliers “a feeling of being real partners, especially since we have hit [sales] numbers.”

And, Workman added, “We have grown during a tough sales environment.”

Since the group last convened, at BrandSource’s spring meeting in March, business “has been positive,” Workman said, and looks good for the balance of the year.

Ristow said one reason is that “integration has been very strong, so much so it has been tough getting qualified help to meet demand.”

He noted that in home automation the target used to be $800,000 homes but now there is profitable growth “in homes that are $200,000 or $100,000 homes.”

Workman explained that ProSource is seeing “growth at both ends of the market. There will be a DIY segment, but there will be plenty of other homeowners who want to give you a check so you can build a system for them.”

Ristow said that when it comes to technology, “any smartphone is a potential remote” and that is something today’s consumers understand.

Workman said there will be plenty of “custom and high-end system business, but moderately-sized systems are where the explosion will be.”

Ristow said suppliers like URC, Control 4 and Savant are hitting price points and designing products for more moderately-sized home automation systems.

Speaking of products, Ultra HD TV pricing seems to be holding “because most of the products are [unilateral pricing policy] and promos are controlled by vendors,” Workman said.

He added that the volume numbers by the second half “look like a hockey stick by all estimates. Statistics say 73 percent of consumers want it if they see it,” and noted that “70 percent of the demand will be met this third and fourth quarter.”

Ristow stressed, “All vendors have big market share expectations,” which should take care of demand.

OLED TVs, as well as very large-screen products, must be “seen to be appreciated,” Workman said. Ristow added, “The largest screen sizes, 84-, 98-inch sets, are not going to be museum pieces. They will be sold by our members.”

In fact, Ristow said 2014 “will be the first time we will have real growth in the TV business in five years.”

One of the key elements that will help ProSource members overall is housing starts, and Ristow said, “Statistics show that for every new house built there are 10 remodels done. With new housing starts expected to be up 28 percent, that will be very important.”

In a “State of the Union” presentation to members and vendors, Workman said, “The marketplace has become either luxury or commodity goods. The middle has been sucked out. When someone asks, ‘What’s the next home run product?’ we say there isn’t one. What we see is a lot of base hits. If you string along a lot of base hits, you win a lot of games.”

Workman closed his speech by saying that vendors and his members “have a tremendous opportunity to bring new technology … to life. We want you vendors to see us as a strategic partner. …  We may not be the biggest partner you have, but we want to be the best.”