PRO, HES Ready Joint Core Vendor Programs

LAS VEGAS -- The newly aligned PRO Buying Group and Home Entertainment Source (HES) will focus joint group programs around a half-dozen core AV vendors to strengthen the buying power of their independent dealers, PRO Group Executive Director David Workman said. The groups formally created ProSource, an AV specialty division of BrandSource, late last year (CED Jan 3 p1).

The Signature programs, some of which may be implemented this year, will be aimed at attracting three audio and three video vendors willing to develop channel-specific strategies to aid independent retailers in their battle with national chains, Workman said. As individual PRO Group and HES group vendor agreements expire, new pacts will be negotiated with the combined organization, said Jim Ristow, executive vice president of HES.

The groups, whose new alliance caps two years of working together, will continue to maintain services catering to the varying sizes of their retailers. PRO and HES will pool resources to gain the leverage that can be accorded groups with $3.6 billion in combined annual sales, retailers said. PRO currently has group programs with D&M Holdings, Panasonic, Toshiba and Yamaha. HES members’ buying position will be strengthened with the addition of lager PRO retailers, who benefit from HES’ infrastructure, including four warehouses.

"We will align around a certain vendors and there will be winners and there will certain guys who don’t come along with the party,” Workman said. “We are going to respect the vendors that are willing to work us and bring some of things we have been asking for. It’s not just about a program, but rather what that vendor is willing to do for that channel."

To take advantage of the added buying heft, PRO and HES will form joint committees to target products like tablet PCs, security, smartphones and other products not typically available in large quantities to the groups, Ristow said. There also will be a new joint committee focusing on connected products, he said. PRO previously considered entering new categories alone including PCs and videogames, although some of its members -- Vann’s is one -- already carry the products. “These are things that, were either us to get into alone, it would be difficult,” Ristow said. “But with our the combination of the two groups we have the mass necessary to do the volume in those categories."

The combined groups also will likely strengthen PRO’s move to vendors to “redefine” distribution lines (CED Feb 12 p1) and better differentiate product lines carried by independent dealers from those sold by national chains. HES and PRO also will issue joint purchase orders with a goal of securing better terms and access to vendor promotions, Ristow said. “All we're asking for is levels of differentiation, including things that used to be second nature in terms of introducing new technology, channel strategy and product differentiation,” Workman said. “It just can’t be everybody has everything and go slug it out. If that’s the mindset of the vendors, we all lose."

The groups also will jointly recruit new members and then, depending on the size of the dealers, assign them to either PRO of HES, Workman said. The combined group has 950 store fronts, but PRO has suffered in recent years with demise of Flanners, Ken Crane’s, MyerEmco and Tweeter, and Abt Electronics’ move to return to NATM. While vendors questioned whether the groups will keep separate management and boards, the organizations will continue their respective annual meetings and boards with Ristow and Workman jointly overseeing the combined organization. “We are dead serious about bringing these groups into alignment and providing a voice for the independent channel,” Workman said. “Neither group had to do this and both groups were fine. But the independent channel needs a unified voice back to the vendors and we plan to be that voice."

PRO Group members, many of whom were skeptical of the initial alliance two years ago, now appear to embrace the change. Some dealers noted the need to enhance their group buying position in light of the departure of some members. In addition to having access to warehouses, there also will be some “tie-ins” between the groups in certain categories such as custom installation, said Bjorn Dybdahl, president of Bjorn’s Audio Video. “It will certainly strengthen” the hands of both groups in negotiations with vendors especially with specialty CE chains coming off “a rough couple of years,” Listen Up Senior Vice President Steve Weiner said.

Many vendor executives said they were still trying to sort out how negotiations with the combined group will play out. “I think it has to morph into one organization eventually, because otherwise why are they doing it?” said James Arnold, Control4’s senior vice president of sales. Others said they were awaiting meetings with the group before making judgments. “I need a better understanding of what the strategy is behind it and how it’s going to affect the different level of dealers,” said Rick Calacci, vice president for regional accounts and distribution at LG Electronics. “I have to sit and map it out with them.”

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Control4 is selling its products through 310 of Best Buy’s 380 Magnolia Home Theater store-within-a-store format locations. The sales represent a significant widening of distribution at Best Buy for Control4, which started selling its gear at 13 MHT locations in Atlanta, Houston, and Raleigh-Durham, N.C., Arnold said. Meanwhile, Control4 began shipping last year to energy companies the EC-100 energy controller that combines a wireless thermostat with a 5-inch LCD linked to a gateway device for communicating with a smart meter, he said. The device shipped in November, behind the most recent shipment target of mid-summer, company officials said. The controller will be offered free through electric utilities, which subsidize the cost of the device. Bluebonnet Electric Cooperative signed on in 2009 to carry the product in the Austin and Houston markets and Control4 has secured deals with other utilities, Arnold said. He said Control4 also is readying a 2.1 version of operating system software that improves, among other things, the ability to control lighting.