With the custom installation market promising continued growth, an increasing number of retail chains are stepping up their efforts when it comes to delivering residential entertainment systems.
Good Guys Inc., with 72 store locations, has offered custom installation services to its customers for four years. “We wanted to appeal to the higher end customer,” explained Bill Graham, general manager of custom installation at the Alameda, California-based retailer. “Most of our higher end customers want to have the installation done for them, and they also want the service where they have someone explain to them how to operate the equipment after it has been installed into their home.”
Ultimate Electronics, a 46-location chain headquartered in Thornton, Colorado, has offered the sale, delivery, set-up and installation of systems to its mid-level to upscale clientele for a decade. Recently, the company announced the creation of a building and contractor business division, which will focus on addressing middle to large builders in major metropolitan markets. It will offer packages that include residential structured wiring, home theater systems and multi-room audio and security systems for homes that are approximately 5,000 square feet or less. At the same time, the company will continue to service consumers through its retail outlets.
“One of our biggest challenges is having trained, qualified professionals to put in front of our customers,” admitted Gerry Demple, vice president of installation at Ultimate Electronics. “In the interest of making systems easier for the customer, the technician has got to be better. We have a comprehensive training program that brings people from start to finish through different levels.”
Jerry Calder, Ultimate Electronics’ manager of builder and contractor sales, added, “We also want to make sure that when the set-up is complete, the system is as user friendly as possible. We want our customers to experience and enjoy what they have purchased. A lot of companies can go out and install the gear and hook it up. Not a lot of companies can go and set the equipment up and make it operate the way it should.”
Providing hands-on service isn’t easy for companies with multiple locations. Tweeter–which aside from 111 Tweeter stores across the U.S, owns 14 Hi Fi Buys outlets in Georgia, 24 Sound Advice locations in Florida, six Bang & Olufsen stores divided between Florida and Arizona, two Florida-based Electronic Interiors outlets, three Showcase Home Entertainment locations in Arizona and two Hillcrest High Fidelity stores in Texas–has grown its custom installation business by acquiring smaller custom installation firms over the past 10 years. The company delved into providing custom installation services “wholeheartedly,” about two years ago, according to Michael Meares, custom buyer at the Tweeter headquarters in Canton, Massachusetts.
“There was and is a constant culture change that we are incorporating, right from when a customer walks into a store and encounters a salesperson. We have to get that salesperson thinking about installation before they initiate a conversation with that customer,” he said. “We are now marketing ourselves as a custom installation company. We’re a retailer that does installation, but how we buy products, what products we buy, and how we market and display them is a real sea change.”
Randy Stearns, president of Engineered Environments, a custom installation firm operating out of Oakland, California, observed that “retailers have been attempting to seize custom installation opportunities for many years. The fact that more retailers are succeeding at it now is simply a reflection of the fact that, after years of trial and error, many of them are figuring out how to successfully approach the custom installation market.
“Specifically,” Stearns added, “retailers have concluded that performing custom installation requires more than outsourcing a few technicians. Rather, there is an entirely new and different business model that must be developed and implemented. Some retailers have concluded that building the requisite infrastructure to support custom installation is a worthwhile business venture, while others have withdrawn and chosen to focus on what has made them successful in the past.”
Meares explained that certain processes must be followed for a large retailer like Tweeter–and even smaller organizations with fewer locations–to provide hands-on, custom-oriented services.
“Everyone I speak to, regardless of their size, sees the need for ‘templating’ systems as much as possible,” Meares said. “Or, as I like to say, taking the ‘custom’ out of custom so that you know walking into a job, regardless of what situations you encounter with the house, at least you’ve got a system design that you know works and integrates, and is repeatable and profitable,” he said. “We will establish a template for a system and start at that point, and then customize it in the customer’s living room to suit their needs. It’s a starting point to get everyone instantly up to speed so that they can, from the sales floor, confidently sell a system without having to reinvent the wheel every time.”
Tweeter’s decision to move into custom installation was based on a combination of consumer demand and the need to combat decreasing margins. “The complexity of the products that we are selling is constantly increasing,” Meares noted. “In the past, you could sell a couple of components to a customer and send them on their way after drawing a basic diagram for them; building a bicycle was more difficult. Now, you will end up with customers that aren’t really getting the experience that they got in the store unless someone goes out and installs the system, and teaches them how to use it.
“Above and beyond the fact that we’re always looking for any additional ways that we can differentiate ourselves from the competition, offering custom installation also provided us with what we thought was a logical hedge against the lower margin video products that are now driving the market. Control systems, programming and labor offer high margins, which is what we are chasing.”
The influx of large retail chains into custom installation demonstrates a growth spurt in the industry as a whole, according to Jeff Hoover, CEDIA president, and president of the West Palm Beach, Florida-based custom installation firm Audio Advisors. “The simple fact that they are paying attention to this marketplace means that it has really grown up,” Hoover said. “It reconstructs the fact that it is a business that brings great value to consumers and will continue to grow. The opportunity for growth of custom and home theater at a higher level is so great that it couldn’t possibly be served by small, individual custom companies. As the market continues to grow, it will take companies like that getting involved to continue to excite people about what the potential is. By them getting into this market and stirring it up with the kind of quantity and volume and marketing they can do, it will actually generate more business for high-end independent CEDIA dealers.”
While a number of chains hold CEDIA membership, several, such as Tweeter, Sound Advice and Good Guys, have discontinued their participation in the organization. Several companies have said that their decisions were based on CEDIA’s pay structure. Sound Advice has actually sought out membership with the National Systems Contractors’ Association (NSCA)–the organization representing the commercial arm of the installation business, according to David Neves, the retailer’s vice president of training and recruitment.
“That’s the group that we think can offer us something in terms of training,” Neves said. “A lot of the commercial installation technique has filtered in to consumer electronics and touch panel controls. It’s probably similar to Formula One racing, where they design really high-tech products for the races and for expensive cars, and that technology filters down to cars that are regularly purchased by average people.”
Alan Burroughs, president of Hi Fi Buys Nashville, a retailer/custom installer, argues that chains operated on a national basis aren’t able to deliver the same services that a one-location custom installation firm is capable of. “You can’t run a company nationwide like you can one location,” he said. “Everyone has to know what is going on with that customer until the customer is finished so you don’t duplicate services or cause waste. You have to be very efficient in the custom installation business or you will go broke.”
A tight labor market can also impede a custom installation business’ success. “This business does not grow like a retail business or any other kind of business,” Burroughs said. “It doesn’t grow to the point where you can get bigger and bigger and build on your success. Instead, [your] people go out on their own the minute they see how much money they think you are making. The business does not expand like it should, and without really good people who are conscientious about what the customer wants and can remember all of the details, it is almost impossible to expand.”
Franklin C. Karp, president of the Lyndhurst, New Jersey-based Harvey Electronics Inc., which operates seven Harvey stores and two licensed Bang & Olufsen locations throughout New York, New Jersey and Connecticut, likens the client-custom installer relationship to marriage. “When you do a custom install in someone’s home–whether it is hanging a plasma TV or doing distributed audio–it’s like getting married. You have to work hard and do job right the first time, and have really skilled, concerned, caring people out there in the field who are representing your company. It’s not easy to build that,” he said. “It’s easy to say that you want to go into the custom installation business. You just don’t all of a sudden flip a switch and you are in the custom installation business. The level of commitment to the end user is without parallel in normal retail.”
Carolyn Heinze ([email protected]) is based in Vancouver, Canada.