ProSource Must ‘Get Past’ PRO Group, HES ‘Legacy Names,’ Workman Says

ProSource has “tried to confuse the hell out of you” with how the group should be identified since the merger more than two years ago, Workman said in his address at the meeting. For now anyway, the PRO and HES names will, at the very least, live on as the names of two of the three divisions of ProSource that have been created at the buying group, he said. Confusion, however, continued even down to the name of this week’s meeting, which had been referred to as the PRO Group spring meeting until the start of Workman’s state of the union, where he instead called it the 2013 ProSource Summit.

ProSource still sees a “value” in holding “three distinct meetings” each year, Workman told us. They include a large HES meeting, a meeting for PRO members and a meeting for what has become the third division of ProSource, which has been labeled its “Power” members, he said.

The names PRO Group and HES were kept in place since the merger to communicate the distinct characteristics of the retailers within each of those entities, Workman said in his address. Among ProSource’s 500 or so members are now 15 PRO members that take in a minimum volume of $10 million a year in CE products, he explained. The typical PRO dealer is a “promotional specialist” that is “bricks and click in their operation,” he said. “Our goal there is, over time, to have about 20 to 25” of that type of dealer, he said. The Power group is now made up of 66 custom integrator dealers with an annual volume of $3 million to $10 million each, and they focus on luxury brands, control systems and commercial business, he said. HES is made up of about 400 dealers who take in about $2 million in annual sales, he said.

"Our expectation is we're going to grow membership this year” in each of the three divisions, said Workman. “Some of it will come from dealers migrating up through the organization and some of it will come from new dealer acquisition.” ProSource wants dealers who want to “grow their audio business,” grow their custom and control business, aren’t “trying to chase profitless volume” and are looking for products and “opportunities that are unique,” he said. “We need one more mattress dealer like we need a hole in the head."

"All of this is intended to be a segue to the future” for the organization, which will be known strictly as ProSource, Workman told us. But “there will always be subsets” within ProSource reflecting the specific characteristics and needs of certain retail members, he said. PRO Group and HES still have separate websites.

ProSource takes in about $3 billion in annual sales across all its members, but sales were “off just a little bit” from last year due to membership loss, said Workman. Its “growth categories” last year were legacy audio, new audio and core car audio, which all did “very good,” he said. TV and camera volumes were down, and ProSource members don’t typically have a big presence in computers or gaming, he said. Focusing on volume categories is “what got so many … retailers in trouble; they were just using it for cash flow when they weren’t making any money,” he said. “We want sustainable businesses” at ProSource, he said.

The group has been through “some pretty tough times” and “can’t be all things to all people,” Workman said in his address. “We're “coming out of a very dynamic period” in the CE industry, where legacy categories have been declining, he said. There were “challenges” for some retailers and “opportunities” created for others by all the changes, he said. “There is as much opportunity as ever before” in the CE business, but it’s a “different opportunity,” he said. “Appliances are a great business,” but the typical ProSource member isn’t an appliance dealer, so “we couldn’t run to that category” when certain CE categories lagged, he said. Some retailers have been “running from CE into furniture, mattresses and other categories, relegating CE as though they're giving up” on that business, he said.

"Transformational” devices including smartphones and tablets have had a major effect on the CE business, said Workman. But “if we sit around waiting for the next home run” technology, “we're going to miss a whole lot of base hits,” he warned. “We see a ton of base hits out there right now. If anything, we're probably more optimistic about the opportunities” available, “but we've got to dig them out,” he said. Those opportunities are especially in the “new audio” category of high-end soundbars, headphones and multi-room wireless audio, he said. All those products offer “exciting prospects for our organization,” he said.

ProSource should focus on four “key” product categories now: Legacy audio, new audio, “step-up” TV and video, and custom, control and commercial business, said Workman. In legacy audio, “we need to grow share in what could be a slightly declining market,” he said. He pointed to “tremendous opportunity” there in products not available elsewhere and wants the help of strong promotions, he said. In new audio, focusing on higher-end soundbars is important, while headphones are a “gateway product” that appeals to a large base of customers, including young consumers, he said. “We want to be there with a catcher’s mitt as those customers” buying headphones “grow up and start building their systems in the future,” which may or may not include receivers, he said. In TV and video, members would be best served by scaling back the number of video vendors they do business with, he said. Across the board, “deeper and fewer partnerships” with vendors “are our future,” he said.

"A lot of the challenges remain the same” for ProSource dealers in 2013, said Workman. “We're seeing the emergence of new technologies and new product categories that are starting to get some real traction in the marketplace,” said Huppin’s/OneCall President Murray Huppin. But “it’s always a challenge to pick the right partners, pick the right products, pick the right selling channels,” he said. ProSource members are “highly engaged” in these categories, including high-end soundbars and new audio products in general, he said. However, the soundbar category is one that ProSource has to “watch real carefully” because it “could expand the audio category to a whole group of consumers or it could act to cannibalize it and literally become of one these ‘good enough’ products,” said Workman. If the soundbar category becomes defined as $199 or under products that just add sound to a TV, “then we lose,” he said. But the category has so far been “vibrant” for ProSource members, which focus on higher-end models, he said.

Fifty dollars and above is the “sweet spot” on headphones for ProSource members and $100 and up “even more so,” said Workman. Whole home control systems have reached “the masses” due to developments that include new app-based systems, said ProSource Executive Vice President Jim Ristow. The category has become a “huge” opportunity for ProSource members, he said. But they will continue to “dominate” in more traditional, “legacy” control systems also, he predicted.

There are six or seven PRO Group members that have eBay storefronts, including Huppin’s/OneCall, Workman told us. That’s about the same number as a year ago (CED May 11/12 p3). “A very important part of what we do” at ProSource is “looking at “alternative marketplaces out there as avenues” for dealers to “expose their storefronts,” said Workman. “The beauty of the eBay relationship, of course, is that we're not in competition with the host,” he said. EBay is a “pure third-party market in that they don’t try to sell products themselves,” unlike Amazon, he said.

"EBay is a growing market for us,” said Huppin. Huppin’s/OneCall has been “selling on eBay for many, many years,” but the relationship was formalized through PRO Group more recently, he said. Not all PRO members, however, would qualify for the eBay relationship because some dealers “aren’t focused on being on the Web,” he said. Bjorn’s doesn’t have an e-commerce business yet, but President Bjorn Dybdahl told us Tuesday he’s planning to meet with eBay soon.

ProSource is still working to create vendor programs to develop channel-specific strategies with independent dealers (CED Feb 21 p2), said Workman. It’s been working on the initiative “easily since 2011,” he said. ProSource wants to have clearly-defined strategies with its “closest partners,” he said. He didn’t identify who those vendors will be, and he told us the programs may or may not end up being labeled “Signature” programs.

PRO Group Meeting Notebook

Unlike most of the companies exhibiting at the first PRO Group Vendor Fair Tuesday, iBiquity wasn’t there to find additional retail accounts, but mainly to “remind” the group’s retail members about the HD Radio category, said Bernie Sapienza, vice president-retail business development. IBiquity developed an exclusive program for Best Buy about three to four years ago and it’s trying to figure out a similar type of program for PRO members that will include Audiovox products, he said. The Best Buy program included a line of low-cost HD Radio products costing $50-$100, he said. “We don’t expect all of them” to take part in the program, he said of the PRO members, conceding that some of the retailers only focus on high-end electronics. IBiquity also used the Vendor Fair to tout Garmin GPS navigation systems that feature HD Radio. The “biggest misnomer” about HD Radio is that products featuring it transmit radio, he said. The initial Garmin device was the first non-audio device that provided HD Radio service, he said. The company is hoping to get HD Radio incorporated into smartphones also, he said. IBiquity is hopeful that recent deals between Sprint and broadcasters to deliver analog radio to cellphones represents a step in “the right direction” to bring HD Radio to smartphones also, he said. Many tablets that are sold don’t feature 3G service and that prevents many of them from receiving radio services when people are away from a Wi-Fi connection, so iBiquity is in talks with tablet makers to try and get HD Radio added to those devices, he said.

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Peachtree Audio exhibited at the Vendor Fair mainly because its PRO dealers wanted to see its new $399 deepblue speaker, said David Solomon, one of the company’s three owners. It’s the company’s lowest-priced product to date “by a long shot,” he said. The speaker features “the most powerful built-in amplifier” in its product class, said Peachtree. PRO dealers that sell Peachtree products are Bjorn’s, Chelsea Audio Video, Crutchfield, Huppin’s, ListenUp, Ovation and World Wide Stereo so far, said Solomon. Peachtree is hoping to get more PRO dealers to carry its line, he said. The company designs its products and they're manufactured by an unspecified company in China, he said.

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Beacon Audio is looking to widen distribution of its products to more PRO Group members and other dealers, Dan Beggs, vice president-sales, told Consumer Electronics Daily at the Vendor Fair. Bjorn’s, Crutchfield, Huppin’s, ListenUp and World Wide Stereo agreed to carry Beacon products so far among the PRO members, he said. It also does business with Car Toys, another PRO member, but only to supply wireless kiosks, he said. Beacon isn’t speaking to other buying groups at this time, but has had conversations with unspecified national retailers, he said. Urban Outfitters already started selling Beacon’s $99.99 Phoenix portable Bluetooth speaker, he said. Beacon will ship the Phoenix 2 at $79.99 in August or September featuring “some slightly enhanced electronics” including more “user-friendly” volume and track advance buttons and a microphone, he said. A Blazar wireless speaker will follow in October at $149.99 that he said will feature near field communication, an aluminum chassis and 50mm drivers -- upgrades over the plastic chassis and 40mm drivers of the Phoenix speakers, he said. The company also fields headphones and earbuds, but will continue to focus on Bluetooth speakers this year, he said. It will expand the product line in 2014, but he declined to elaborate. “A lot of stuff is being looked at right now,” but the headphone space has become “so crowded,” he said.

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Audio company Jabra signed on with the PRO Group about 6-8 weeks ago, said Jeff Duchesne, marketing manager-mobile channel. The company was hoping to sign on additional PRO dealers after meeting with them at the Vendor Fair, he said. The company is looking to expand its “footprint” in the portable music device category, he said. Apple started selling Jabra’s Revo wireless headphones just under two weeks ago and Best Buy started selling the Solemate portable Bluetooth speaker in late 2012 and hhgregg is also selling that device, said Mike O'Keefe, sales director-North America. RadioShack will also sell the Solemate, he said. Fry’s and Dell.com also sell its products, he said. Best Buy is promoting the Solemate in its ad circular this week, bundled with a 16-GB Kindle Fire HD tablet at $349.99 -- a savings of $69.99, the retailer said.

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DEI Holdings’s Boom brand is seeing strong demand for the $149.99 Urchin water resistant Bluetooth speaker that shipped last month, said Steve Jain, director-sales. Retailers carrying that product include PRO member Crutchfield, he said. Other PRO members carrying Boom products include Huppin’s, Stereo Advantage and World Wide Stereo, he said. Other retailers selling Boom products include Fry’s, BrandsMart USA, Apple stores and Urban Outfitters, he said. The brand started about two years ago, but launched in the CE channel this year, he said. Before that, its focus was on the college market, he said. Its products are now being sold at about 600 college bookstores including 200 Barnes & Noble College locations, he said.

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Huppin’s was the first PRO dealer to agree to carry X-mini portable speakers, said Jeff Runyon, director-regional business development. It’s talking to other PRO dealers also, he said, calling the U.S. the “final frontier” for the Singapore-based company. Other U.S. dealers that agreed to sell its speakers include Office Depot, and its devices have been sold at Microsoft stores for almost a year and at Bloomingdale’s since late 2012, he said. It’s fielding three models now: the Kai Bluetooth model that shipped at $69.99 in July and the $39.99 Uno mono speaker and $59.99 Max stereo speaker that both shipped in January, he said. The company will probably expand into home theater-type speakers with more enhanced sound quality next year and is planning to announce a new wireless technology at CES, he said. It’s “thinking about” the soundbar category also, he said.

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Libratone’s wireless AirPlay speakers for iOS devices are being sold by Apple stores, as well as PRO members J&R Music World and World Wide Stereo, said Gregg Stein, vice president-sales and marketing in North America. It’s fielding Zipp speakers at $399.95 in single colors and as part of a $449.95 bundle that includes two additional color sleeves for the speaker, he said. It’s also selling the $549.95 Live and $1,299.95 Lounge speakers with ceramic drivers, he said. More products are “in the pipeline” by the Danish company, but details weren’t provided.

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Audio company Nyne wants to “grow our presence” at PRO dealers after getting picked up by Huppin’s, said Frank Cantele, director-national accounts. BrandsMart USA is also carrying its products, he said.

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SunBriteTV is looking for more PRO members to sell its line of all-weather outdoor TVs, said Paul Rother, a local product rep for the manufacturer. Current PRO dealers selling its products include Bjorn’s, he said.