Staying in Control

AV install professionals like to see themselves as completely different from the mass-market consumer electronics retailers. Exterior details may vary from upscale retail storefront, or by-appointment-only showrooms and they take pains to present an impeccable image of expertise and professionalism that sets them apart from the look and feel of a big box store.

The inconvenient truth that AV pros have to wrangle with is that the AV install business is affected, sometimes negatively, but many of the same market forces that retailers struggle with.

Let’s review, for a moment, Porter’s Five Forces Theory:

  1. Threat of new entrants
  2. Threat of substitutes
  3. Bargaining power of customers
  4. Bargaining power of suppliers
  5. Industry rivalry

On my mind today (and many other days, actually) is the second one: threat of substitutes.

At the rate at which technologies evolve and mature, the race to stay on top of industry developments never ends. A frequent conversation that I have with my own dealers involves reflecting on product categories that were big margin bread and butter five or ten years ago (or even two years ago, in some cases) are now either low-margin, low-demand or completely extinct. What was hot is now not.

When it first opened, the AV install company I used to work for sold and installed C-band satellite systems. As you might imagine, that business dried up over a period of years and the dealer principal evolved his business through big-screen rear projection and Hi-Fi sales, surround sound, to ever more ambitious home cinema and audio distribution systems. Eventually, he grew a company capable of executing enormously sophisticated whole home installations.

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All of that evolution, thirty years’ worth, required getting in front of new technologies.

It’s depressing to contemplate how many technologies that used to be profit centers are now cheap commodities. Not only can customers buy a flat-panel television at the drug store, but the drug store will probably offer to install it too.

Multi-zone audio faces its own threat of threat of substitution in the widening popularity of wireless music solutions like Sonos.

At least so far, control systems have defied commoditization.

Specifying, designing, installing and programming a control system has necessitated a consultative, professional approach and a close client/vendor relationship that helped to protect the domain of the AV pro.

AV pros have been fortunate so far that price compression and competition from big box has been nominal. While the retail consumer electronics channel continues its race to zero by conditioning shoppers to expect steep discounts, AV pros have been able to keep control profitable with the level of service, design skill and competent project execution the category requires.

It certainly doesn’t hurt that the hardware itself is un-glamorous, utilitarian and not shiny. Featureless black boxes don’t sell themselves: finished and functional installations sell them.

Of course, AV companies that offer control systems also face challenges from both the threat of substitution and the other four forces. I’ll talk more about that next time.

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Lee Distad

About Lee Distad

Lee Distad is a rAVe columnist and freelance writer covering topics from CE to global business and finance in both print and online. Reach him at lee@ravepubs.com