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Debuting A/V

May 1, 2006
With its grand entrance into the audio/visual market last year, Springfield Electric uses A/V products to pull residential customers into its showroom early in the build process.

In a world where the latest in technological gadgetry says “bling” louder than most gems, the guy once known in high school as the A/V geek now exudes “cool dude” vibes. Plasma screens and home theaters are no longer confined to the realm of NBA stars and corporate big shots. With pricing continually coming down, average folks can now enjoy lifestyles once reserved for the rich and famous.

Springfield Electric Supply Co., Springfield, Ill., is marketing that lifestyle to the homeowners, electrical contractors and homebuilders who walk through its new lighting showroom and see the working theater room installed last year when the electrical distributor launched its audio/visual (A/V) product lines.

“There is a ‘wow factor’ when the customer walks into that theater for the first time,” said Rick Thompson, audio/visual specialist for Springfield Electric. “The first ‘wow’ is the way it looks and sounds. The second ‘wow’ is when people hear how affordable they can be.

“The average guy is spending $25,000 or $30,000. People are kind of in awe that they can afford this as they're building.”

Naturally, forward-thinking tech-savvy electrical contractors are wowed by the earning potential of this new profit center.

An Upselling Strategy

Seeking ways to pull customers into its lighting showrooms earlier in the residential building process, the leadership at Springfield Electric recognized A/V products as a package with potential.

“We're always looking for opportunities to bring either the end user, the builder or the residential electrical contractor into our showrooms before projects are so far along that we're not able to upsell products,” said Randy Germeraad, Springfield Electric's senior vice president. Often, people having homes built don't make it to the showroom until just a few weeks before lighting fixtures are to be installed. “At that point, you can help them pick things out, but that's hardly doing good lighting design,” said Germeraad. “And, you don't have an opportunity to sell whole-house dimming systems or control systems. Many end users don't even know some of these products exist. We're trying to inform them earlier in the process.”

During a brainstorming session early last year, management at Springfield Electric recognized the A/V market, with its glitzy home theaters, as a promising beacon for builders, contractors and end users. With the completion of the home-theater room in its showroom last August, Springfield Electric was ready to debut its A/V line and pull in potential audiences. A big part of that debut, though, was Springfield Electric's earlier addition of Rick Thompson, who has more than 25 years of A/V experience both as an installer and former A/V business owner.

“You've got to have the right individuals within your organization that truly understand this business,” said Germeraad. “If Rick had not come along, I'm not sure we would be at this stage.”

The robust response from electrical contractors and end users exceeded the electrical distributor's expectations. The timing was right. “Electrical contractors locally were doing a lot of dabbling in the A/V world and really needed a place to buy the product and to go for proper training,” Thompson said.

As an A/V business owner, over the last several years Thompson's A/V installation business had eroded even though the A/V market as a whole was growing. Much like how electrical contractors cracked open datacom installation during the last decade, electrical contractors are beginning to install A/V products in yet another bid to expand their offerings and stay competitive.

Although Springfield Electric's home theater room piques the interest of homeowners, A/V products open doors to myriad end-user customer segments: background music systems for retail properties such as grocery stores and malls; multiple televisions and TV mounts for restaurants; projection systems, lighting and sound for churches and office meeting rooms; and upgraded A/V equipment for schools.

Springfield Electric displays these products throughout its Springfield branch. Plasma screens at its contractor counter constantly roll with video streams about value-added services or vendor training. “We've got all sorts of touch screens throughout the showroom and throughout our offices,” said Alan Baum, director of marketing.

Currently, about 40 percent of Springfield Electric's A/V sales are to the residential market, with the remaining 60 percent to the commercial, industrial and institutional markets.

A/V Training

As with most electrical-distributor product launches, providing training for electrical contractors has been a key marketing strategy for Springfield Electric's foray into the A/V market. The training program teaches installation skills, provides product knowledge and, perhaps most importantly, arms electricians with selling skills.

“You've got guys in muddy boots and jeans becoming salespeople,” said Thompson. “A lot of electricians in the field don't consider themselves to be salespeople, but they're right there alongside the end user, so they are salespeople. They're having a good time with it.”

About 40 electricians have nearly completed the 26-week training program, for which their electrical contractor employers shelled out $2,500 per person. Another 40 will soon begin the next round of training. Although Springfield Electric credits $100 to an electrical contractor's account every time a student attends a class, the up-front fee helped weed out small contractors that didn't have the resources to do this kind of work and spotlighted the strong commitment of those contractor customers willing to pay for training.

For electrical contractors with electricians in the training program, Springfield Electric provides A/V product discounts. The initial course fee, subsequent $100 credits and price discounts are strong incentives for completing the program to become SESCO-certified (Springfield Electric Supply Co.). In turn, certification gives electrical contractors credibility with their customers and the manufacturers of the products they install.

Market Challenges

Overwhelmingly, reviews have been more than positive to Springfield Electric's new A/V offerings, but entering the market hasn't come without some challenges.

“The A/V market is a little more fragmented than what we're used to,” said Germeraad. “Many of these manufacturers just have not dealt with electrical distributors in the past. So not only are we trying to sell their products, but we're also trying to educate them on how this channel works.”

Germeraad and Thompson say many manufacturers of A/V products tend go to market through stocking dealers rather than through distributors. Some A/V manufacturers were willing to award Springfield Electric distributor status right out of the gate, but others expect their dealers to earn distributor status with certain levels of inventory. Product pricing for distributors is more favorable than for dealers.

“Acting as a dealer has proven to have some additional challenges when we're trying to figure out how to achieve the right kind of return on investment,” said Baum. For those vendors with which Springfield Electric functions as a dealer, Springfield Electric doesn't make as much margin.

Keeping A/V inventory lean has meant lower margins because Springfield Electric doesn't yet purchase the volume to achieve preferred pricing from some manufacturers, but it has paid off when it comes to dead stock in the form of obsolescent products.

“In this arena, obsolescence occurs very rapidly,” said Germeraad. “The models change supposedly every year, but we've already seen twice a year on some products. It's different. When you put a circuit breaker on the shelf, you really don't worry about it becoming obsolete in a very short period.”

Currently, the electrical distributor carries about 450 A/V SKUs at its Springfield distribution center — an investment of about $225,000 in inventory. For now, the Springfield showroom is the only location among the distributor's 11 Illinois branches carrying A/V products. The plan is to rollout A/V at its Bloomington and Champaign showrooms after fine-tuning at the Springfield showroom.

“For electrical distributors that would be casually interested in testing this market, I would say keep your eyes wide open,” said Germeraad. “I think you could really get in trouble if you didn't know what pitfalls to look for.”

Baum agrees. “You have to have a specialist that's running the show. Any progressive electrical distributor has customers doing this. You either get in, or they're going to buy it from somebody else.”

Audio/Visual Product Menu

Here's a sampling of some of the audio/visual products an electrical distributor might carry.

  • Home theater packages
  • Lighting controls
  • Intercoms
  • Projection systems
  • Specialty cables and connectors
  • Plasma displays
  • LCD displays
  • TV mounts
  • Motorized blinds/drapes
  • Video screens
  • Theater seating
  • In-wall speakers
  • Installation tools
  • Audio/video components
  • Popcorn machines

Springfield Electric by the Numbers

  • Springfield Electric ranks No. 64 on Electrical Wholesaling's most recent list of the Top 200 largest electrical distributors.
  • Total sales exceeded $105 million in 2005.
  • 11 stocking locations in Illinois.
  • 234 employees.
  • Three lighting showrooms; one with A/V products.
  • $12 million in total inventory; $225,000 in A/V inventory.
  • 21,000 total SKUs; 450 A/V SKUs.
  • Customer segments' percent of sales:
    Commercial electrical contractors — 30 percent
    Residential electrical contractors — 20 percent
    Industrial/OEM/MRO — 30 percent
    Datacom/low voltage — 10 percent
    Lighting showroom — 5 percent

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