Battling Big Box Retailers - ResidentialSystems.com

Battling Big Box Retailers

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Most custom AV installation companies are pretty small. Even those generating a few million in annual sales generally operate with a handful of talented guys in a modest office. Smaller install companies work out of home offices with no showrooms. Their inventory is little more than a few piles of boxes in a big garage and a truck or two equipped with wire and tools.

Put that up against giant audio/video retailers like Circuit City and Best Buy who dominate the national AV market and have the attention of the buyers, the suppliers, and the media. Just the thought of competing against giant electronics retailers could scare you away from getting into this business. They have more AV gear at this moment in one store than your company might ever sell if you work for 30 years. What do they need you for? The prices they put on flat screens are often less than your cost from your suppliers. Their deep discounts threaten to destroy your chances of a reasonable markup.

How do you convince your new salesperson that your little company can compete against your local Best Buy and win? What argument can he use on his sales calls to beat out giant companies like that?

First of all, the custom install business is a great place to be. The grass is not greener on the big box side of the fence. Most big AV retailers are struggling with markups that are too thin to support their huge infrastructures. I have heard that the only profits one AV megastore made were from on the add-on maintenance agreements they sold with their TVs and appliances. Can you imagine the incredible effort of investing billions of dollars in commercial real estate, construction, national advertising, hiring and training a huge staff and shipping truckloads of inventory all year long to a nationwide network of stores? Then, your only profits were found to be the add-on maintenance agreements! I would not want to own a business like that.

I used to purchase some gear from the giant retailer SoundTrack/Ultimate Electronics. Their distribution warehouse in Denver was awesome and seemed to stretch half a mile with five or six semis unloading day and night. I could hardly find an open loading dock to pull up to with my little van. They had 65 stores across a bunch of states and I always respected them as the best AV retailers in the business. What a shock it was when they declared bankruptcy and had to reorganize with new officers and more than $100 million of debt. That big box grass was not greener.

Ok, so you could never start a large-scale company like that anyway, but thats the point. No, you will never have that much volume and you will never have that kind of showroom and display.

The way to compete against Best Buy and win is to not compete against them at all. Yes, you sell gear, but the similarity ends there. Dollar per dollar, a small custom install business can be much more profitable than a huge retailer. Here are the top 10 advantages you have over them:

You can provide higher quality gear and a wider selection of quality AV gear they cant match
You can offer your customers a complete design and install solution where everything is customized for them and planned to work together as a system
You are part of the construction trades and you coordinate your job with architects, decorators, cabinet makers, and other trades
You provide comprehensive prewire and installation for building or remodeling that may last a year or more
Continued personal onsite service during all phases and for years to come from the same talented personnel
Control systems and smart remote controls that store salespeople dont even know about
Integrate with telephone systems, security systems, lighting systems, and every kind of low-voltage system within the home
Run your business lean and mean with virtually no overhead for advertising, rent, and inventory
By selling the equipment together with install, you can achieve excellent markup on all the products that arent in the newspaper ads
Customer satisfaction. Everyone working on your team can provide a higher level of experience, personal service, and customer satisfaction.

Turn the tables. Dont envy them, dont copy them, dont be intimidated by them. Sell yourself, your excellent reputation, and your personal services to your customers and you will come out on top.

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