HES, PRO Group Merge For Buying Clout, But Will Keep Largely Separate
The HES and PRO buying groups have taken their alliance to the next level, formally merging the two organizations to form ProSource, the AV specialty division of BrandSource. The two organizations, which established an alliance in September 2008, said last week they'll merge to boost the power and relevance of the independent retail channel but will remain separate entities. The merger gives the combined group $3.6 billion of buying clout through PRO’s 16 dealer members and 550 HES members, the group said. Total storefronts number 950. The groups plan to maintain independent dealer meetings for PRO and HES and will add combined meetings for the larger organization, according to Jim Ristow, executive vice president of HES.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
Dave Workman, executive director of PRO Group, told Consumer Electronics Daily the move is recognition that the independent channel has “lost some position with vendors,” particularly in channel management and the way technology products come to market. The group hopes that size and buying power will enable the independent channel to “regain its voice in the marketplace,” Workman said.
Ristow told us one of the goals of the merger was to reverse recent troubling trends including leading-edge products being launched through big box stores. Workman added that 3D TV and Internet TV were two categories that didn’t first establish roots in the independent channel before moving on to the mass market and “didn’t receive consideration in the development cycle of product introduction.”
Both cited connected electronics as a category that the organization wants to focus on going forward. “You have to look beyond those products and think about the new connected devices and the evolution of those devices including tablet computing and smartphones,” Ristow said. Neither organization has “as strong a position as we would like with those types of vendors,” Workman added. “The future is built not just on legacy products but with new categories of product,” he said, adding that the group’s hope is that its beefed up buying power will get dealers in front of new categories and vendor partners and “drive additional traffic to stores."
Ristow said the channel is seeing a double-digit resurgence of home audio that will “help shape the new world of audio.” Headphones, wireless multi-room audio and connected products are part of the group’s future vision, he said. The new world audio products are expected to offset devaluation in flat-panel TVs, where ProSource hopes to focus on connected models that can command higher average selling prices. Demonstrating and selling step-up products “are things we do well and can deliver for vendors,” he said.
ProSource will keep the “substructure” of the PRO and HES groups, Workman said, to be able to tailor services to the size of respective dealers, which range from one-store mom-and-pop shops to multi-store regional chains like Sixth Ave. Electronics. Each group will retain its own board of directors and maintain member criteria on volume requirements for membership, he said. HES will remain committed to needs of small and mid-size dealers, Workman said, while PRO caters to larger chains.
Many traditional AV dealers have been caught off guard by shifting consumer attitudes toward audio. ProSource has a strong “forward-thinking” strategy, Workman said. “Sometimes dealers and organizations pine for the industry to be the same that it was 10 years ago,” he said, adding that the CE business is about change and the group is planning to “heavily embrace” wireless multi-room audio going forward. He said both groups have members whose business largely relies on “putting wires in walls,” and while there will always be a market for that kind of service, “the future is in wireless transmission.” To be able to address that market, he said, “We want to be sure we're partnered with the right vendors that represent the future."
When we asked if the group plans to add more buying power with the addition of new members or buying groups, Workman said, “We're definitely out there welcoming any progressive retailer who sees the value in this organization.” We contacted Richard Glikes, executive director of Home Technology Specialists of America, about that group’s interest in joining the new group. Glikes told us HTSA had spoken with PRO and HES two years ago but “felt that we would lose our identity.” He said one benefit PROSource brings to the market is its role as an independent source for specialty dealers. “If that helps vendors understand how they should go to market, then that’s a very good thing,” he said.
Workman said the merger coincides with a shift in CE distribution that he maintains is integral to the health of vendor balance sheets. In many categories, he said, manufacturers have expanded distribution as far as they can. “They're about at the end of that rope,” he said. If vendors want to grow dollar volume,” he said, they're going to have to “look more closely at mix, and nobody can deliver mix better than we can.”