ProSource Dealers Banking on Home Automation for Expansion

Google’s $3.2 billion purchase of Nest and its home automation products, which have since received broad promotion on billboards at Grand Central Station in New York, points to Google’s broad ambitions for providing whole-home systems tying together CE, appliances, lighting and other products, said Frank Anderson, operations manager at AVD Electronic Architecture, Mission Viejo, Calif. And while Savant’s Smart Series starts at $1,599 -- a major departure for a company where the entry-level was previously around $4,700 -- installation and additional equipment will likely increase the final bill, Anderson said. The Smart Series includes a $799 host along with a Wi-Fi remote and controller ($400 each) and installing the system in multiple rooms could get the per-room cost down to $1,000, Savant has said.

"Home automation is certainly getting a higher profile and becoming a system that will be available to a wider audience, but there will always be a need for installation,” Anderson said. Installations in turn could create an even broader market for ProSource dealers, many of whom have contracts with residential developments, said Anderson, whose company sells Crestron and Savant products. ProSource executives urged dealers to adopt installing some lower-end systems, including those marketed by Universal Remote Control, Savant and others, with a goal of gradually expanding them to generate additional revenue.

"Don’t abandon the high end, since many of us are high-end boutique integrators, but address a broader customer base and get in the door for $1,000,” ProSource co-President James Ristow said. “We're going to add more jobs that are scalable, simplify installation and ride the housing boom.” Ristow senses there’s a “tidal wave” coming, and “we are going to ride it,” he said.

Yet some dealers that are more focused on the high end equate a $1,500 product to a single installation, and that’s “not our business model,” said Michael Beam, president of SES Design Group, which handles Control4 systems. “It’s difficult to quote and propose something to a customer for that price,” he said. Lower-priced systems tend not to be viable options for some custom installers since margins may be too slim to cover the costs, said Ron Funkhouser, president of RF Designs, Eatonton, Ga., whose company also handles Control4.

While ProSource dealers are seeing increased competition from Lowe’s, AT&T, Comcast and ADT in pitching home automation, most members we polled were confident they could withstand the onslaught using a combination of better service and staking out niche areas that might not appeal to larger companies. “We're not seeing much competition yet from them,” said Funkhouser, whose firm serves many customers in locales near Augusta, Ga., who own second homes along golf courses.

ProSource estimates home automation within five years will jump to 30 percent of the group’s purchase volume from about 5 percent today, co-President David Workman said. Among ProSource custom installers, 90 percent of the business is home automation, dominated by “complete solutions” tied together with video and audio, Ristow said.

Workman sees home automation as relatively immune from the severe price erosion that has doomed many CE products, he said. “There will be a bifurcation where there will be Nest-type products, but that will create more awareness of the solution-based systems that we do,” Workman said. “So the market won’t eat its young the way it has with TVs and we think home automation has a long tail even as it expands and awareness increases. Products typically become commodities and solutions don’t."

BrandSource Conference Notebook

ProSource postponed plans for Signature vendor programs (CED Feb 21/13 p1) to create channel-specific strategies as the merged group works to bolster marketing and communications with members, Workman said. ProSource will further expand industry-specific, vendor and product webinars while launching in-store events to highlight technologies as it finds footing as a separate BrandSource Division, Ristow said. ProSource hasn’t abandoned the Signature strategy that involved tapping vendors in audio, video, control and automation, but is “still trying to figure out what the best approach for growth is,” Workman said, saying that program isn’t likely to be in place until 2015. “It isn’t one-size-fits-all and there is a product that has to match capability,” Workman said. “What isn’t working is moving boxes and nobody can figure out how to make a profit doing that. At the same time we are solutions-based and it has been very difficult to scale that and for vendors to find partners that can provide it. All of a sudden you have this huge potential for volume with the capability of selling solutions, and we can deliver that.” ProSource expects to form a commercial AV buying committee in the fall, joining those that have been created for audio, video, marketing and custom installation, Ristow said. ProSource dealers already sell into the commercial market and creating a committee will formalize that business, Ristow said. While ProSource will now have its own profit and loss statement, it will remain tightly tied to BrandSource, acting as “stewards” for the group’s electronics business that stretches across rent-to-own and TV/Appliance dealers in addition to custom installers and CE retailers, Workman said. ProSource also benefits from BrandSource’s infrastructure, including finance programs, IT and other programs in addition to a warehouse network, Ristow said. ProSource has no plans for entering the smartphone or tablet businesses despite both products being central to home automation, Ristow said. Samsung has made tablets available to ProSource dealers as part of a “whole ecosystem, but will that be the backbone of a sale? No,” Ristow said. “Could we complete an ecosystem? Yes. Our push is not to provide that hardware, but how do you show that client the system works.” More than 90 percent of ProSource customers control their home automation systems with a smartphone, versus less than 1 percent in the broader market, Ristow said.

--

Advanced Sales & Marketing has shipped its HD cabinet projector -- a combination 120-watt audio system and front projector in a single enclosure -- to the Countryside Rentals and National Rent-to-Own chains, President Jerry Mingus said. Countryside has 32 stores and National, 36. It also has orders from another chain, Rent One, he said. The system consists of a Optoma 3D front projector with a single 0.65-inch DLP chip with 1,280x800 resolution, 3,500 lumens, 15,000:1 contrast ratio and 16:10 aspect ratio fitted inside a 25.75 x 31 x 20-inch cabinet with two 2.5-inch drivers and a 6.5-inch subwoofer. Its cabinet ships fully assembled from a contract manufacturer in China with a built-in six-outlet power strip, projector mount, cable management system and HDMI, VGA, composite video, RS-232C, RJ-45 and mini-USB connectors. Mingus, a former Mitsubishi executive, said Mitsubishi initially showed some interest in fielding the system before dropping CE products.