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The Integration Guide to Buying Groups: Group Mentality

Better margins are just one reason to join a buying group.

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The showroom of Nationwide member H+H Lifestyles.

Henry Clifford, president, Livewire, first heard about buying groups about ten years ago. “What I heard was the concept at its most fundamental level, as a way to ‘buy better,’ to leverage costs and make better margins,” he says. “A competitor in our market, someone I respected, talked about it as a great experience; that was the initial hook.”

Clifford signed up, joining ProSource in hopes of being able to make better margins and to be seen as an important player to those vendors Livewire already had, and some who previously didn’t give his company the time of day.

What he ascertained at his first ProSource Summit event was that saving on products was only scratching the surface of membership. “There were also intangibles, community aspects,” he says. “I got to know folks who do what I do and I met some industry movers and shakers, and I was welcomed. Membership has created a small circle of others to turn to, reciprocally, for problem solving. A couple of years after joining, our revenue reached the Power Tier level, making the ProSource universe more intimate. I sit on the CI committee as well. It’s familial; I never would have had this otherwise.”

ABE Networks joined Azione Unlimited after membership in another buying group failed to serve ABE’s specific needs, says company vice president, Claudio Franchini. “Someone I trusted, who worked for a manufacturer, told me about Azione starting up and I reached out to Richard [Glikes, Azione president]. It seemed like a simple genesis; a couple of manufacturers I did business with were also on the plan.”

From a budgetary standpoint, assessing annual dues and residuals, it took Franchini a millisecond to decide to join, he adds. “The money drew me in. Based on my initial numbers I saw that we would get back four times what I put in the first year. But they do so much more, they’ve become something that helps to grow our business.”

One of the newest Azione dealers is located north of the border, part of Azione’s expansion into Canada. “Richard attended a small vendor conference in Canada and set up a meeting with a few dealers to go through the pros and cons of membership,” says Glenn Amell, systems design manager, Design Electronics, Niagara Falls, Ontario. “The biggest value for us is networking with fellow integrators to share ideas.”

Design Electronics, which devotes about 30 percent of its projects to the residential market, belongs to other buying groups for its commercial side. “Trying to get closer to others in the residential market, even though they are competitors, was important, Amell explains. “I’d rather lose a contract to a reputable competitor than to a smaller, fly-by-night, integrator. We saw the value of joining, working, and succeeding together.”

Azione’s expansion into Canada, currently with nine members, represents the first “true” buying group on the CI side, he notes. “Canada is about one-tenth of the U.S. market size, making it difficult for vendors and reps to service dealers, so this is an opportunity to meet reps and vendors/partners directly. We wouldn’t typically have this number of contacts without our membership.

“As an example, I was on a plane heading to an Azione conference in Seattle, and a big competitor who also joined Azione was on the flight,” Amell says. “We talked at the gate about various issues and how to bring new products to the marketplace, and we ended up having meetings after the conference as well. Those interactions have far more value than money saved.”

Bringing Joy
Georgia Home Theater’s Eric Joy, general manager and chief experience officer, understands the buying group experience from both the manufacturer and dealer perspectives. “We create and sell our clientele wonderful experiences and we’ve been a member of the HTSA [Home Technology Specialists of America] buying group for close to two decades. I’ve worked here for many years and took a hiatus that gave me the ability to travel the country and see the best and worst CI retailers.”

As Georgia Home Theater transitioned into lighting control and other emerging categories, the ability to share best practices for networking with other HTSA members became even more valuable. “In today’s world, the home network is the most critical foundation of a system. I learned this from another group member in Chicago. They taught me how to introduce it to a client because a great wireless infrastructure is as critical as plumbing and electrical. And we appreciate HTSA’s training initiatives, such as dedicated project manager meetings where our managers can meet with peers, networking about all the bits and pieces of what they do.”

H&H Lifestyles was one of the original members of SEBA, which later became Nationwide Marketing Group, and H&H has continued in that relationship as Nationwide continues to grow with offerings that fit within its model and what they do, says Trey Brunson, president, and third-generation owner of the company, which evolved from his grandfather’s gas station. “The Nationwide/dealer relationship has become symbiotic; they know us and we know them,” he says. “There’s a kind of humility and self-discovery that comes from belonging to the group. You believe you’re good at what you do, and when you engage other dealer/members about best practices you may realize you’re on the right path and sharpen your knives, or you may learn about something that could be improved upon.”

Because there are so many rabbit holes to go down, you have to pick the best offerings at buying group meetings or learning academy events, Brunson advises. “Nationwide also does special summits where dealers are grouped with others with similar business models. Even after 25 years in business, I sometimes need to consider how we do things in a different light, and all these events help in that respect. And because of their scale, I can email Hank [Alexander, Nationwide’s director of HTSN] who can throw out my question to hundreds of other dealers and I can get good information back quickly, without any sense of competition.”

CEDIA’s Place
“My CEDIA membership is complementary to our ProSource membership,” Clifford says. “CEDIA is a university and the buying group is a college within that. The relationships formed as a result of ProSource membership are important. As sister companies, we refer employees to each other and I’ve hired employees from other members. We also refer business; we’ve passed millions in revenue back and forth. Three of us have started a 24/7 support company, and that came out of the buying group.”

What you discover from the relationships with other members is that everyone has the same problems, Franchini notes. “Azione has conferences, dealer rountables, and webinars, so in the grand scheme, what began as a monetary decision became so much more. The industry changes constantly and there is no five-year plan. You have to be able to adjust accordingly. You need flexibility within the marketplace and to be able to test and embrace new technology without having to be solely reliant on one item. That’s why we do the Azione conferences where there are multiple vendors. These interactions allow us to see the big picture. And Azione caters to CI dealers and picks products in line with what we look for.”

The ability to make more money is an easy lure, but being part of a buying group is so much more, Joy concurs. “Making a higher margin is not the only important thing to do in business; it’s the tips and tricks on how to make business more streamlined and more efficient. The HTSA buying group is at 89 members. There’s a level of comfort at a buying group meeting, but my biggest takeaway is the one-on-one networking with a dealer like me and a dealer in Denver or Chicago, etc. We are all effectively trying to accomplish the same goals.”

As tech advances, who knows where it will stop? Joy says. “We touch more categories than any other contractor on the job. We’ve stopped calling HTSA a buying group; it’s a member-owned trade consortium. If you’re looking for a buying group, find the right match tailored to your volume and specific needs and even geography. It’s always easier when you have people to rely on and learn from. This is a complicated industry with parts and pieces, and there’s no shame in not knowing the right answer, only in giving the wrong one.”

Brunson agrees that you need to join a group with eyes wide open. “Every market is different, and several manufacturers are not members of a buying group. If you’re small, the worst thing you can do is to have too many brand assortments. Here in St. Simons, GA, we’re north of Florida and south of Atlanta, so we create strategic alliances with fewer vendors. But I still have the power of Nationwide and I can ring a bell I would otherwise not be able to ring.”

And in the era of wireless and IoT, where everything seems to be easy, it’s becoming ever more important to keep edges sharp, Clifford concludes. “The relevance of the buying group is amplified. To paraphrase Guy Kawasaki, ‘Our industry is full of aisles of crap. It’s our job to sort, to define, and refine to become better and better.’ There’s an inflection point where there’s a transition into lighting and biophilia, managed services, and possibly a convergence into commercial from residential. There’s the question of how to diversify. Can you do all this alone? Yes, but not well, hell no.”