Somewhere out in the real world, far, far away from the thousands of Powerpoint slides and industry white papers heralding the growth of residential structured wiring, is a market opportunity that's still ripe for many electrical distributors and their customers.
Why? The most important reason of all: end-user demand. Homeowners may not have a clue about what structured wiring is, but they know they want to be able to have Internet connections for several computers, kick back on their Stratoloungers and see a movie on a plasma-screen television, enjoy a kick-ass sound system, and watch their baby sleeping in the nursery over a video monitor while they are in the kitchen making dinner.
Structured wiring is all the stuff behind the walls that lets homeowners do all that. (See “The products that count” sidebar on page 34). The sale of electrical and electronic products and systems for residential voice-data-video applications is big business, and all the signs point in the right direction for more growth. Why? Two big reasons:
The demographics are right
Baby boomers, born 1946 to 1964 and representing the biggest demographic population bulge in the nation, are still buying new homes in near-record numbers. And while economists expect the decade-long joy ride in home building to slow down a bit, it will power down to a level that's still very healthy for everyone associated with the residential construction industry.
Let's talk numbers. More than 2 million new homes (single-family and multi-family) are expected to be built in 2005, according the National Association of Home Builders (NAHB), Washington, D.C. Approximately 58 percent of these homes will have structured wiring systems, according to the 2004 Builder Technology Market survey, sponsored by the Consumer Electronics Association (CEA) and the NAHB Remodelers Council (NAHBRC). Simple math tells us that's an estimated 1.16 million structured wiring systems this year alone. That's a heckuva lot of structured wiring panels, miles of cable, thousands of speakers and related audio components and millions of audio/video/data jacks that we are talking about here.
Now let's toss in the fact that the older boomers are at or near retirement age and are buying vacation homes or houses in maintenance-free senior living developments, and they are loading them up with the same computer networks, security systems and other trappings of the aging-Yuppie lifestyle.
When baby boomers were boogying to the beat of the Fifth Dimension's 1960s rock anthem, “The Age of Aquarius,” and singing about how the moon was in the seventh house and Jupiter would align with Mars, they were talking about a form of convergence. That's what's happening at the service entrances of today's digital homes. High-capacity cabling is carrying data, voice and television signals to the home, and residential structured-wiring systems are carrying those signals to computers, televisions, telephones, security monitors and other electronic appliances.
Not only are low-voltage VDV signals physically converging, they have converged cost-wise and maintenance-wise to produce a marketable technology for homeowners at a reasonable price. Dollar-wise, structured-wiring systems are available at a cost that's palatable for many new home buyers. The most basic structured-wiring systems add less than $1,000 to $3,000 to the cost of a new home, according to various estimates from manufacturers and industry consultants. Technically speaking, the bugs have already been hammered out of the most common structured-wiring systems, and when installed by certified electrical contractors or other tradespeople, they operate dependably.
Homeowners are willing to spend the bucks on these systems to outfit home offices, link computers networks so they can tap into high-speed Web access and utilize the same printers and other computer peripherals, treat themselves to home theaters, use security monitoring systems, and enjoy state-of-the-art lighting control systems. The more adventurous sorts may even dabble in a bit of high-end home automation, where they can, for instance, turn on kitchen appliances, washers, dryers, hot tubs and entertainment systems, and monitor security systems from their cell phones or office. Protecting all of this electronic wizardry from lightning strikes and other electrical surges is a sizeable amount of surge-protection equipment.
Things get much pricier when you talk home theater. Even wiring up a family room with a workmanlike sound system and plasma-screen television can easily top $10,000. According to TecHome Builder magazine, true home theaters with a room dedicated solely to watching movies and high-definition television can hit $100,000 and it's not unheard for celebrities and sports stars to spend $300,000 to $1 million for a show-stopping home theater.
By now you can see why the sales potential of this market gets so many people in the electrical industry very excited. But this isn't exactly virgin territory — some electrical distributors have been cultivating this field of opportunity for years. For instance, Rexel USA's Branch Group in the Baltimore-Washington metropolitan area was an early pioneer in this market and has been buddy-buddy with builders that install these systems for years. The voice-data-video market accounts for approximately 40 percent of total sales for Graybar Electric Co., St. Louis, and one would have to think that a sizeable piece of that action is in residential structured wiring. Voice-data specialists accounted for 22 percent of the company's $4 billion in 2004 sales.
Smaller independent electrical distributors jumped on this opportunity early, too. In at least two cases, electrical distributors were featured on home improvement television shows that taught homeowners about structured wiring. The efforts of Dickman Supply Inc., Sidney, Ohio, were recognized recently on PBS television. Doug Borchers, vice president, appeared on “The American Home Shop” and guided viewers through the components needed to establish a fully-connected automated home. Shelly Rohr, Dickman's residential consultant, also taught viewers about the importance of using the right recessed cans in the “rough-in” stage to enable proper lighting effects when the home is completed.
On the lighting side of the digital home, A-C Electric Supply, Smithtown, N.Y., recently supplied Leviton's Decora wiring devices and IllumaTech dimmers for a new home featured on “Extreme Makeover: Home Edition” on ABC television.
But there's still room for more electrical distributors in this market. If you are either new to this market or are a structured-wiring veteran who wants to hone your marketing strategies so they generate more sales, the following tips and action items will come in handy.
Set the boundaries for what you can realistically accomplish in this market
You can't be all things to all people in the residential structured-wiring market. It's best to start out by focusing on providing electrical contractors with the basics, such as a media-center panel; jacks; basic telephone, video and networking modules and routers; cabling; and related accessories. Providing training on the installation of these products is every bit as important as selling the products themselves, so work with your manufacturers to set up training sessions for customer personnel.
The structured-wiring market is a unique business in that many different niche players have distinct interests in the technology and the applications it supports. On a job site, don't be surprised if you run into not only electrical contractors, but also — depending on the sophistication of the home systems — installers of security/alarm systems, home theaters, and high-end home automation systems. These folks already have established sources of supply in their particular product niches, but it doesn't hurt to ask if they need delivery of some basic job-site replenishables, such as cable ties, staples, extension cords and hand tools. You never know where it may lead if you prove yourself as a dependable source of supply to these other players.
In the next 30 days, assemble a task force within your company that has representatives from sales, marketing, inventory, credit and other key functions to discuss possible expansion in this market, and how it would affect each of these areas.
Use manufacturers of structured wiring products as a resource in your market research
Vendors such as Hubbell Premise Wiring, Stonington, Conn.; Leviton Manufacturing Co. Inc., Little Neck, N.Y.; and Pass & Seymour, Syracuse, N.Y., have focused on the residential structured-wiring market for years, and their factory salespeople and independent manufacturers' reps can be some of your best resources in this endeavor. Two other well-known players in this market are now part of Legrand. Earlier this year, Legrand purchased OnQ Technologies Inc., Harrisburg, Pa., and in 2001 bought Greyfox Home Systems, Pittsburgh. These companies, as well as Pass & Seymour Home Systems, are now part of the On-Q Home line, based in Middletown, Pa. Most of the manufacturers and master distributors of wire and cable offer bundled composite cables for these applications that contain Category 5e networking wire, coaxial cable and, in some cases, fiber-optic cable.
Lutron Electronics Inc., Coopersburg, Pa., which has built a large presence in automated residential dimming systems, is another big player in this business segment and actively markets its systems to builders.
In the next 60 days, meet with the local factory salespeople or independent manufacturers' reps for the key manufacturers of structured-wiring equipment to see what they expect of distributors for these products. Also meet with manufacturers of composite cabling for residential applications, structured wiring media panels and related components, and advanced lighting control systems.
Buddy up with local builders
Developing alliances with high-production and custom home builders is absolutely critical; veterans in the structured wiring market have been doing this for years. To get a feel for how builders market residential structured wiring and home-automation systems, check out some online resources such as the Web sites for TecHome Builder magazine at www.techomebuilder.com, Builder magazine at www.builderonline.com and Professional Builder at www.housingzone.com.
Gather contact data for the five largest builders in your market that offer structured wiring in their new homes, and set up appointments to meet with each of them in the next 90 days. Use these meetings to gauge their interest and success in this market, learn how they promote the systems, and what it would take to become their local supply source for this equipment. You should also get feedback from the builders that decided to steer clear of structured wiring, and incorporate it in your evaluation.
Estimate your local market potential
One quick-and-easy method of gauging the potential for residential structured wiring in new home construction is to gather data on new building permits or new home starts in a market and then multiply that number by 58 percent. That's the percentage of new homes equipped with structured wiring systems, according to the CEA/NAHB study mentioned earlier. It's just a rough estimate — you will learn much more about the popularity of wired homes in your particular market by talking with local builders, realtors, electrical contractors, electrical inspectors and vendors.
Cross-check your estimate with local builders during your meetings with them.
Find out what services home automation integrators provide
Home-automation specialists get involved in some pretty sophisticated custom projects, such as remote and centralized operation of appliances, lighting, security and audio/visual systems. No two projects are exactly alike. These installers tend to have their own specialties, too. Although most electrical distributors aren't going to supply the more sophisticated electronic controls or software that these systems require, it's worth contacting a few of these companies to see if you can be of service for delivery of job-site supplies.
To find home automation specialists in your market, visit the Custom Electronic Design and Installation Association (CEDIA) Web site at www.cedia.org, and click on “Find a Designer.” You will probably be quite surprised at the sophistication of home-automation systems they install. Another great resource in this end of the market is CE Pro magazine. On its Web site at www.ce-pro.com, you can find the 100 largest installers of home-automation systems. CE Pro is part of the EH Publishing stable of home automation magazines. All of these publications do a great job covering the home-networking market.
Assign this goal to one of the managers on your task force. Ask them to use the resources discussed in this article to find two or three home automation specialists in your market, and to nail down appointments with them. He or she should report back to the task force at your next meeting.
Call on security-system installers to see if your company can be a source of supply for this market
While most security system/burglar alarm installers beat a path to their local ADI branch location or other dealer of security products, you will be surprised at the similarities in the some of the products that security dealers and electrical distributors stock. Common products include low-voltage wiring for security or alarm applications, security lighting, tools and other job-site supplies.
This is another assignment for a task-force member. He or she should find out where security system installers are buying their products, and, if possible, “go undercover” and call or visit these dealers to evaluate their product offerings and operations.
Check out how realtors sell home networks
Realtors and sales personnel at new housing developments also play a big role selling residential structured wiring. The best ones aren't necessarily technical wizards, but they know how to explain what structured wiring systems add to a home in the way of computer networking, security and entertainment features. Learn from them. In an article posted recently on www.nahb.org, Paul Trudeau, owner of Hilltop Development Inc., a large West Coast builder, summarized a strategy that has helped him build and sell award-winning custom homes loaded with home-automation equipment. He said, “Don't baffle them (home buyers) by telling them how it works. They don't want to know how it works. They just want it to work when they push the button.”
This is another fact-finding mission for someone on the task force. They should contact the five largest realtors in your local market and ask sales personnel about the popularity of structured wiring/home networking in new and existing homes. They should also visit at least three new housing developments that offer these systems, and report back on how this technology is marketed, the product knowledge of the on-site sales personnel in the model homes, and the strategies they use to sell the systems and related add-on features.
After completing these action items, you will have a good feel for the potential of structured wiring. If you decide to move forward, the real hard work begins: developing and carrying out the strategies that will make your company the premier source of supply for structured wiring in your market.
The Products that Count
You will see these products most often in structured wiring systems:
- Enclosures and covers
- Structured media panel
- Category 5e unshielded twisted-pair wire
- RG6 coaxial cable (often bundled with Cat. 5e)
- Video amplifier
- Network hub
- AC power module
- Wall plates
- Plates and jacks for telephones
- Category 5 jacks for voice applications
- Category 5 network data jacks
- Video jacks
- Category 5 patch cords
- Indoor and outdoor cameras
- CD power modules
- Room speakers
- Volume controls for speakers
- Speaker wire
- Modulators for security cameras