Residential Systems - The Integration Guide to Buying Groups - December 2023 by Future PLC

A SUPPLEMENT TO

MAGAZINE

THE INTEGRATION GUIDE TO

BUYING GROUPS SPONSORED BY PROSOURCE AND HTSA

The ProSource Summit that took place in Las Vegas in March 2023.

THE BIG RESET Buying groups help their dealer members navigate the post-pandemic custom integration landscape. By Karen Mitchell

he new normal can be the best normal. After three years of pandemic demand highs and supply chain lows, buying group executives set the current scene for us, offering insight into how dealers can remain competitive and successful in the current market as the temperature resets to normal. “As both an industry and a group, we have all experienced some of the most significant ups during the pandemic and comparative flats since those unusual years,” says Jon Robbins, executive director, HTSA. “While it may be easy to look at the upward swings and be concerned we are down in 2023, it can also be misleading. For example, dealer response to supply chain shortages in 2022 likely inflated sales numbers, as many were over ordering to be certain they had product ready for projects, then selling their on-hand inventory. This year, there has been a more moderate growth of 1.1 percent as a group.” At HTSA, the scenario dictates that the group keep in constant communication with members and vendors, remaining relentless in its focus on cross-group financial information sharing, education, and staying ahead of the curve. “Having clear visibility of the broader landscape and anticipating future trends is crucial for success,” says Robbins. “Everyone understands we’re in this together, and our partners have a sense of the next path forward and what’s coming soon. This is our exhale year, and we’re very proud of where we are as a group. We are optimistic and prepared for a rebound when it comes, and it will.” At ProSource, CEO Jim Pearse says supply chain problems have largely been

resolved and supply is healthy. “The pipeline in the CI vertical remains strong, particularly in the upper demographic market,” he says. “The mid-market and production segment of the business is seeing a little softness, but remains positive for the year. Relative to the normalized 2019 business, year to date we remain in positive territory.” “The long and short of it is that we are all competing against the highs,” notes Richard Gilkes, president/COO, Azione Unlimited. “Business was so great that it has been very difficult to deliver growth. The high end of the market is still very vibrant, however, the middle market is very soft. There seems to be a lot of uncertainty between global conflicts, domestic inflations, upcoming election jitters, and uncertain stock market vicissitudes. Our expectation is that by the middle of next year, business will rebound because consumer confidence will return to its normal level. We all know Americans love to spend money.”

HOW TO CATCH UP FAST “We at Azione Unlimited are firm believers in marketing,” Gilkes says. “That piece of advice has never changed, especially in our unique industry. Dealers work primarily on referrals and don’t see the value in outreach. We believe the dealers who are seeing success right now are the ones who planted the marketing seeds in the high tide of the pandemic. It’s never too late, and dealers need to start now. The other suggestion is for dealers to go back to their previous clients. Technologies change, products improve, and solutions evolve. Dealers should cultivate clients with the object of having clients for life.

BUYING GROUPS “It’s also time to focus on the cost of doing business,” he adds. “What I mean by that is asking yourself this: Are you efficient? Are you watching your expenses? Are you focusing your business on fewer, but better vendor partners? Are you marketing your brand? Are you reaching out to existing clients? Are you providing time and resources to educate your staff? Are you working on your business or in your business?” “The ProSource members that have invested in the lighting and shading categories are doing well in total revenue and profitability YTD,” says Pearse. “The business trajectory of these new categories is more related to our members’ execution and commitment in the category than to customer demand. At this point in the growth curve, it seems client demand does not have a defined ceiling. “The pandemic demand overwhelmed our members, and there was not enough time to focus on the operations and training their businesses,” he adds. “As demand begins to normalize, I would suggest allocating time to focus on their culture, training, inventory management, and marketing execution. Happy and productive employees are one of the single best drivers of a successful business. Leverage tools like ProSource University, ProSource Installation Academy, and Project Manager Academy, and include coaching to the new ProSource Custom Integration Sales Playbook.” Pearse’s final suggestion is to be laser focused on margin contribution. “During the Covid bump, ProSource members were forced to buy what was available to complete jobs,” he says. “It is important to now circle back and reevaluate the brands that are being supported with a margin contribution measure and focus. In nearly every case you’ll find that brands that support ProSource members will help to drive a better margin outcome.” For Robbins, it is important to stay proactive. “That’s why we strongly recommend that dealers keep their foot on the gas while maintaining focus on important growth categories, ongoing marketing efforts, and education that expands beyond products alone,” he says. “Remain open-minded to the many new tools available for economies of scale, such as AI. By doing so, dealers can

The HTSA Fall Conference that took place in October 2023.

Richard Gilkes, president/COO, Azione Unlimited, at the group’s 2023 Fall Conference.

position themselves for long-term success and stay ahead of the competition. These areas have always been core pillars of HTSA, and we’ve expanded them recently to help ensure our dealers’ success.” A few years back, HTSA put its stake in the ground on lighting as the next category, and it continues to be a leader today. “This category represents one of the strongest across HTSA in sales numbers,” says Robbins. “Many members have expanded from lighting into new areas such as fixtures, natural lighting, lighting design, and including complete ‘Lighting Labs’ within their facilities to demonstrate the many benefits of one of the hottest categories. Some of our integrators are now being contacted on new projects even before other trade partners, which is a major shift. We see this continuing and only getting better. Tom Doherty, our director of technology initiatives, is now in the full throes of the third-annual Lightapalooza, which will be held February 26-29 at the Renaissance Phoenix Glendale Hotel and Spa.” “At Azione, shading has been a constant growth segment only second to lighting fixtures,” Gilkes says. “We see receivers being particularly slow and, ironically, we see wellness as a dormant category. Energy looks to be a promising new business as integrators seem hungry to add a new solution to their repertoire.” “For ProSource, lighting and shades are a growth category,” says Pearse, “because we are new into the business vertical. There are additional opportunities with smart ceiling fans with WAC, power management with Savant, whole home surge protection with SurgeX, and the budding clean air/water category.”

ProSource Continues to Accelerate! It has been a little over a year since I joined the ProSource team, and it has been an amazing experience to this point. As always, the technology in this industry is in constant motion and this year has been no different. The ProSource team has been evolving our strategies in 2023 to help our members to maximize the new business verticals, technologies, vendors relationships and training support. Our strategy is to recognize changes and develop “onramp” training, support, and programs. For example, our we introduced a 3 day in person Project Manager Training class at the ProSource Academy in Virginia to coach teach and train best practices, fiscal responsibility, and leadership strategies. This program was built based on feedback from our members that their product manager leaders are the core of a solid operating business, and they would appreciate advanced classes to help them become the best of the best. We also have worked to strengthen the ProSource executive level vendor relationships. We traveled to the home offices of Samsung, Sony, and Yamaha in Asia. These meetings allowed the ProSource Members to meet with leadership, top engineers and product managers and provide feedback on the needs of the Custom Integration channel. In addition, we visited the Focal factory in France with our members. Visiting our partners in their countries allows ProSource to implement strategies to support new products, brand position and culture resulting in stronger business trends. We are also implementing strategies to stay ahead of potential economic headwinds. ProSource has adjusted our already successful Lighting Training Center curriculum in Dallas to advance our sales, design, proposal, and budgeting focus in this quickly growing business. The lighting, shading and now whole home power categories are incremental businesses that are driving our positive year over year business. Another request from our members was to help them manage the cost efficiencies in their business. Using the group scale, we were able to re-introduce our member health care program that is helping to reduce this growing expense. In addition, we have been leveraging the groups’ success to make sure they are maximizing their operating margins through best of class vendor programs. I am proud of the strong ProSource field and leadership team. We have visited hundreds of dealers through the year to offer advice, listen to their needs and support their teams. We just completed over 20 leadership town halls and field visits to help increase collaboration and teamwork amongst the membership. I am excited to see the increased collaboration and teamwork through the summer and into the fall. I am lucky to work with the best quality members in the industry. Our team is looking forward to seeing you all at our upcoming Custom Integration Summit in March 2024!

To learn more about ProSource, visit us at www.prosourceinfo.com

At ProSource, we are proud to represent our custom integrator and specialty retailer members. With 550+ members and over $6 billion in collective sales, our sheer purchasing power is just one of the many beneﬁts of a membership with the organization named “Best Buying Group” for 11 years. Why Join ProSource? • Industry-Leading Vendor Programs • World Class Peer-to-Peer Interaction • ProSource University • Exclusive ProSource Lighting Training • ProSource Academy • HR Playbook • ProSource Marketing • Expert Warehouse • Dedicated Field Support

Want more information on joining ProSource? Contact Sherry Dantonio, VP Recruitment and Member Education, at sherry.dantonio@prosource info.com or (562)-810-1706

www.prosourceinfo.com

ADVERTORIAL

There is strength in unity By Jon Robbins, Executive Director, HTSA

ith the current pace of the world in which we play, and our observations of the industry at large, HTSA goals in 2023 have been to continue our laser focus on Member education, emerging technology opportunities, financial support, and holistic support for marketing that is personalized for our Members. However, we recognize that many of these things can benefit Integrators and Vendors both inside HTSA – and beyond HTSA, so that our entire industry can prosper in these ever-changing times.

OPPORTUNITY IS KNOCKING Beyond the great technology we all offer, there is perhaps a bigger opportunity at hand. And that is to unite. Sure, we each must maintain forward-progress and growth for our own individual businesses and buying groups. But it’s also an ideal time to consider how we are viewed in the public eye. I liken our condition to the California wine industry which was once fragmented and highly competitive. When those individual wineries chose to come together and create a more positive perception of all wines from the region, they raised the bar and became solidified and “branded” in the minds of consumers. We have a chance to collaborate and do a similar thing together. Regardless of what products your company sells or what buying group you’re in, your business will be further elevated as our collective community creates a more clear, exciting and unified presence in the minds of our customers.

LEVERAGE ALL THE RESOURCES AVAILABLE TO YOU Over recent years, HTSA has invested heavily in education, from our unique relationship science and project management courses to the latest marketing programs. One hot spot we’ve discovered is that effective project management is one of the most critical areas that make or break many Dealers. When

effectively managed, it’s fundamental to long term success. We have also advanced our bi-annual Conference format to address the hottest topics in our Members minds. At HTSA, we’ve also gone beyond our group with specific initiatives such as Lightapalooza, an industry-wide event that focuses solely on lighting and related opportunities. This event brings together several of the buying groups as well as Integrators and Vendors from across the industry. It’s education, it’s opportunity, it’s growth and above all – it’s a way to unite and perform better for our end customers. No matter the opportunities you explore or what group you’re in, we encourage you to leverage the many resources available that will help you stay connected with your peers and the broader community.

EXCITING THINGS ON THE HORIZON According to many experts, the economy and inflation should weaken next year, causing lower interest rates at some point. It may not come as fast as we hope, but many expect it to be by the end of 2024. Looking ahead, stay closely in touch with economic shifts and your peers and trade partners to keep an updated view of where mortgage and interest rates might be heading. Speaking of trades such as Architects, Builders and Designers, HTSA also envisions greater opportunities with these partners. We have embarked upon another exciting program that’s in its infancy. This is expected to fully launch in later 2024 and will add to positive views of the solutions we can bring to homeowners and everyone on a project. No matter what’s ahead, in 2024, it will not be a time to pull back on learning, connecting and marketing your business. It will be another year to press forward – and this year, let’s do it together.

UNITED WE THRIVE. WITHIN OUR GROUP. BEYOND OUR GROUP.

At HTSA, unity and collaboration make things happen. Within our membership and across the industry. It’s time to unite and celebrate what we do publicly. People will look to us as we champion professionalism, trust and newly inspired ways to work together.

Whether through cross-industry events such as Lightapalooza, advancing education, thought leadership, or leading the charge on new technologies and marketing programs, our eye is on the greater good. Competition comes not from each other but from other luxury goods choices. When our tides rise together, we win. It’s time to unite and thrive. That’s our mission at HTSA.

htsa.com