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Signs of New Life

After struggling through another frigid winter in the northeast United States, it was a great relief to notice the first flowers of spring blooming in parks and planters around New York City. I love the refreshing quality of spring, because it quickly reminds us that even during the bleakest days of winter, theres always vibrant flowers, young trees and the start of the baseball season, right around the corner.

Like with the changing seasons of nature, the custom installation industry finally has begun to thaw from what has been especially prolonged and harsh winter. The obvious reasons for this industrys struggles have been discussed at length, but let me remind you about a few things.

While most businesses struggled after September 11, 2001, this industry seemed to bounce back with a new trend, called “nesting,” and a surge in home refinancing due to attractive interest rates. Real struggles began late last winter, however, when the invasion of Iraq sent business into a deep freeze. First, we experienced a CES that was much quieter than usual. Next, CEDIA was forced to cancel its Management Conference due to low attendance expectations. Throughout our industrys metaphorical extended winter, manufacturers were tightening their marketing budgets by reducing advertising expenditures and cutting back on travel.

Just like this springs tulip and daffodil bulbs that were actually planted last fall, I think that the seeds of our industrys turnaround were planted last fall at CEDIA EXPO 2003. Unlike the relatively subdued EXPO 02, conversations at last years conference were peppered with optimistic projections and high expectations for the future.

Manufacturers at EXPO seemed to be planting bulbs for spring, by introducing new product lines and technology enhancements focused specifically on the custom installation channel. Dealers, more than willing to help cultivate these seedlings, began doing their part again by selling to customers who had resisted electronics purchases, but were suddenly reinvigorated by HDTV, digital music products and home networking technology. Next came an overwhelming CES event in January 04, where many of the same manufacturers showed their wares to a broader audience. CES then was followed by strong CEDIA Management and PARA conferences in March and April.

In recent weeks, as if the fog of suspended travel and marketing budgets had finally lifted, manufacturers began filling the calendars of industry magazine editors and reporters with new product introductions and technology demonstrations in New York. Also, special invitations started going out for dealers and reporters to attend training and product launches at manufacturers headquarters and production facilities around the globe.

Dependable performance data is hard to find in our industry, but the Consumer Electronics Association is reporting that manufacturer-to-dealer sales of digital television products reached new heights during the first quarter of 2004 with unit sales totaling 1.39 million and dollar revenues of more than $2.1billion. While this is but one product sales indicator, the data confirms that customers are again spending money on expensive CE products. Its up to our industry, however, to make sure that your customers are spending this money on systems, and not just individual products at retail.

This industrys winter of discontent has claimed the lives of many well-known dealerships. Most of us realize that even as sales improve, its not business as usual anymore. Margins are eroding, and competition from the Internet and “double-consonant retailers” will continue to force the independent custom installer and specialty retailer to reinvent his or her business to survive.

Just remember what your strengths are and play to them. Learn what your competition brings to the table and offer something different and better than they do. Realize that your value to the customer is in the services that you provide, not just the products that you sell. Find ways to charge for your services and stop depending on the profits of high-margin products.

Simply put, its time to tend your garden.