ProSource Riding Home Automation Wave – Twice
ProSource, the $4.5 billion CE specialty division of the BrandSource buying group, reported solid prospects for the year following a strong 2015.
ProSource president/CEO Dave Workman, during a state of the union presentation this morning at the groups’ Spring Summit at the Marriott World Center in Orlando, outlined how the division is competing in this ever-changing marketplace, and its efforts to improve overall performance and growth.
In general, luxury sales and control and automation will remain strong in early 2016, Workman said, quoting National Association of Home Builders (NAHB) statistics showing that housing starts will be up for this year and next.
But Workman cautioned, “Growth will be there, but we will have to work hard to find it.”
For instance, wireless multi-room audio sales will decline year-on-year for the first time, and the introduction of Google and other less expensive wireless audio platforms will cause declines. Workman noted that wireless multi-room is part of “a larger ecosystem [that] has never been more important to stemming losses in the category.”
Audio components are a traditional strength of ProSource and its members, and he predicts “modest growth” for that business with stable pricing and new categories like 4K switching, Dolby Atmos and even turntables helping the group to “outpace the market and grow share” this year.
In TV, while “growth can’t be assumed” for ProSource’s channels, Workman reminded members that they center on the $2,500-plus-priced market, which may grow from 366,000 units last year to 500,000 units in 2016.
The “keys to success” for ProSource members in TV will be in 75-inch and above LED and OLED panels with demonstrations of HDR and 4K Blu-ray decks, which should make this year “an exciting time for us to be in TV.”
Growth in headphones and Bluetooth audio is clear for this year, he said, with stable average selling prices (ASPs) “allowing unit increases to translate into dollar gains.” ProSource members “play in the higher end” of each category, he noted, which will be a major benefit.
Another clear winner should be home automation, networking and control, which should enjoy 15-20 percent growth this year. “Our order books are strong and we have had a good start this year,” Workman stated.
He warned members that “we must evolve” with these categories, including the Internet of Things (IoT), “so we don’t get locked out” of the majority of growth expected into the future. Current bright spots are lighting control and security, among a broad spectrum of products. Long term prospects for growth in these categories look very strong but he warned that down the road the business “should not be expected … [to] look like it does today.”
Workman said ProSource is developing an IoT strategy for the emerging technology that will focus on “assisted products and not do-it-yourself.” He added bluntly, “We do not want to partner with brands that will eventually sell to Kmart or Home Depot tomorrow.”
The emergence of IoT and changes within existing categories has made Workman challenge the ProSource team “to get better with education and best practices” this year. To that end, the group will make investments and gather feedback on this “to become best in class” by the end of 2016.
In reviewing ProSource’s 2015 performance, custom installation (CI) sales were up over 20 percent for the year after a slow start in Q1 due to weather issues.
While 4K TV “moved more mainstream,” Workman said that along with greater consumer acceptance overall TV sales for the industry were hurt by a 27-percent pricing decline year-over-year. He added that Black Friday sales “took real customers” out of the market.
While industrywide holiday sales were a disappointment at retail, and the battle between online and brick-and-mortar sales intensified, he said the strength in ProSource continues to be “solution services” that said websites and many brick-and-mortar retailers can’t provide.
Workman added that its recently launched five-district-manager system to focus on member needs is working, and that district managers should be members’ “first point of contact” with the group.
He noted that the strength of the group — its size — is also a weakness, and that the district managers “help direct the focus of our group with growth in key brands,” among other goals.
Improving communications within ProSource is a new member portal that is now live and provides information such as vendor programs, promos and rebates, as well as group news, marketing services and other features.