Online Versus Storefront: How the HOW Market Was Won

Guitar Center in Emeryville, California

A Guitar Center in Emeryville, California

In several recent columns, I have pointed out the enormous and consistently expanding size of the online sales channel servicing the demand for pro audio, production, management information and numerous other categories of AV gear that the 230,000+ small houses of worship are generating.

The best available estimates of the overall sales for the three most prominent players in that channel are Sweetwater, Full Compass Systems and the Guitar Center family of companies and affiliates. All three showcase a revenue stream of at least $1.3 billion to $1.4 billion across all those market segments. If we could actually get reliable numbers for the several hundred smaller, regional and country-specific businesses, the predictive calculation produces potential revenue of $2.3 billion to 2.5 billion (at a minimum).

Not all of those estimated dollars are purely pro-audio, and there are substantial contributions to those numbers from non-AV equipment. Nevertheless, all of those dollars are NOT contributing to the bottom line of the integrator, consultant and conventional AV sales/distribution companies.

Who’s Responsible

Nearly 1 billion dollars (annually) walk out of our collective global front doors and across the street into the lobbies of the online suppliers. Who let them go? We did! In fact, we drove these customers out the door with a lack of support, inability to understand their requirements and preferred method of business. Couple that with a strongly supported (by either action or inaction) belief within the HOW community that the integration community does not want the house of worship business.

Success by Default

With just a few thousand employees and staff, the three aforementioned online entities have managed to acquire a substantial portion of the HOW market. These companies have done this because they made a commitment, even if unintentionally, at first, to do the things necessary to establish trust and a strong commitment to customer service across the board.

These companies had to compete with initially quite large brick-and-mortar footprint retailers. They also had to ensure their millions of followers that they could be relied upon to deliver the brand name goods, at a highly competitive price point, with comprehensive insurance on quality, and 110% response rates on any problems.

When the 230,000 North American HOW customers started turning up in droves at their virtual door, they were ready, willing and able to meet the customers’ needs. This is because the companies had implemented the infrastructure for their own purposes, and the two sets of requirements meshed precisely and effectively. What the HOW buyers wanted was what the mega-online sellers already had in place. Like a Reese’s cup, it was a relationship between peanut butter and chocolate destined to succeed.

Now the largest customers of some of our industry’s most significant manufacturers are not the established AV supply chain; it’s two or three e-commerce businesses. One major microphone manufacturer privately indicated that the “big three” now represented nearly 40% of their annual sales volume. (FYI — 10 years ago, that number was 5-10% and just five years ago it was under 30%.)

All the critical elements of a successful relationship that we, as an industry used to pride ourselves on doing, have been incorporated into the day-to-day operational models used by the big online vendors. They offer extended support, advice, information, comparison databases, design and installation services, consultation access and third-party support for specialized needs. You name the service or hot-button, and they have it covered — and folks, the AV industry as a whole, does not! Therefore, we have, I am afraid to say, abrogated our responsibility and handed this opportunity to the online folks on a golden platter.

Is It Too Late?

Okay, so a big chunk of change has left the building — for the moment. Can we recover? Maybe.

We need to recognize that the demands, requests and business practices we have not delivered to the HOW community will not change or adapt to any of our current flavors of business model. We have to accept the fact that the ability to get mainly all of what customers wanted from a business relationship from the online purveyors, has made it a requirement that those functional elements be met across the board (and met with a higher level of support and service quality.)

To win this business back and return the long-lost sales to the integrator-driven channels within the AV industry, we have to do more, better, faster and more efficiently than ever before and do it at competitive prices. Most importantly: We need to perform all of the above with ZERO arrogance or condescension.

Not every existing AV integrator, consultant or manufacturer can or will be able to make this adjustment, but not everyone has to. Just enough of us have to adapt and change to meet the current and future needs of this vast customer base and show them that we bring substantial value-added to the equation without adding high cost to the bottom line.

Do you want to join the party? Email me and tell me how you plan to do it, and let’s see if we can, as an industry, pull those customers back into the fold.

Image via Mike Linksvayer