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Guest Commentary: Opportunities for the Custom Install Channel in a Competitive Market (3/12/2007)

By Scott Hix, Planar Systems

With downward pressures on the housing market and the erosion of flat panel prices, Scott Hix still finds plenty of opportunity for the custom install channel.

I've had the opportunity to work within the video display market for more than 15 years, and on a number of levels. In April 2006, I joined Planar Systems as Vice President of Business Development, and have had the opportunity to guide Planar through the realisation and growth of its Home Theater business unit, now as VP and General Manager (Home Theater).

For more than 20 years, Planar flat-panel innovations and technologies earned a deserved reputation for accomplished and dependable flat-panel displays for medical, commercial and consumer applications, among others. Planar offers an extensive line of display solutions for the specialty home theatre market, ranging from our ambient light-rejection Xscreen to video projectors to LCDs. By leveraging Planar's success and engineering, combined with our recent acquisition of the Runco and Vidikron brands - both respected leaders in the luxury market - Planar now offers an even more impressive line of high performance video solutions for the home.

Opportunities for the custom channel

One of the most exciting aspects of the consumer electronics industry is that technology and trends are constantly evolving and dynamically redirecting the market, manufacturers, partners and end users alike. Currently, the stunted growth of the new home market and the erosion of flat panel prices are two trends that are significantly affecting the landscape of the industry, but these seemingly negative trends actually offer the custom channel unique opportunities to differentiate itself.

As big box retailers slash flat-panel prices, the fear of commoditisation is a real one among our dealers. We in the custom channel are tasked with providing more inherent value to our customers via exceptional service to end users, and the manufacture and delivery of high-performance video solutions that provide integrators with a competitive edge, such as larger screen sizes or outdoor solutions. Outdoor luxury is a whole new frontier and a whole new revenue stream for our dealers.

Regarding the slowdown in new home construction (in the US), integrators still have reason to be excited, as new technologies and categories like home automation are embraced and discovered by more consumers, while retrofit/remodel opportunities rise. Integrators who are mining their customer databases and reaching out to qualified existing customers not only can generate new revenue streams but also provide further proof points of the value, service and solutions that only the custom channel can offer the electronics consumer. There are so many problems to solve in the digital home, so many products that need to be talking to each other, so many upgrades and improvements that consumers will want and need. There will always be a need for the custom installer; it's just that the custom channel needs to constantly reinvent itself to be relevant to consumers.

Concerns

The manner in which the custom channel reacts to price erosion concerns me. It reacts to price declines too quickly.

Daily we get news of big box retailers closing their doors and analysis of the drop in flat panel pricing among a slew of other 'indicators' that the consumer electronics industry is deteriorating. The reality is that the custom installation channel, at least, is alive and well, and will continue to grow as long as we protect ourselves and our partners. I can speak firsthand for the high-end video channel as we (Runco, Vidikron, and Planar) experienced record-setting revenues last quarter.

Our business model goes well beyond suggested retail price. It is vitally important that our dealers do not get caught in that mindset. Our dealers sell solutions, not standalone products. If our dealers continue to understand and reinforce the importance of value-added services, complete custom integration solutions, and relationship development, they will subsequently create their own pipelines for success that have little to do with video margins.

In this market there is infinite room to grow for manufacturers and integrators who strive to provide innovative, outside-of-the-box solutions in order to create new sources of revenue in new and existing homes. It is each of our responsibilities to embrace technology and to identify the entire home, even outdoor living spaces, as lifestyle solutions, specifically as these luxury trends trickle downmarket.

The custom advantage

My advice is to know who your customer is and who your customer is not. Know how to market yourself. Continue to look for ways in which you can add value.

Often, we become our own worst enemies by expending valuable resources and time on solutions that do not meet the needs or wants of OUR customers. By investing more, by investigating more deeply the demographics of our respective customers and listening to what they are asking for, we can protect our niche industry from the same fate as the big box retailers by delivering innovative products, solutions and services that can only be found in the custom channel.

Scott Hix is the Vice President and General Manager of Planar Systems, Inc., Home Theater Business Unit.

www.planar.com