Azione Private-Label Program Would Give Margin Boost on ‘Velocity’ Products
LAS VEGAS -- Azione Unlimited plans to have a private-label program in place in the second half of 2014, President Richard Glikes told us last week at the buying group’s spring conference. Products targeted for the program have to be the “velocity type or it wouldn’t make sense,” Glikes said.
Surge protection company SurgeX will likely be the first vendor on board, Glikes said. “They're ready when I'm ready,” Glikes said, adding the product and price points are fairly certain but dealers now have to commit before the program can launch. “I thought they would make what they need and a month later make some more,” Glikes said of SurgeX, “but they want to make a batch and sit on it. They'll make it for us once rather than every six months” and keep product in inventory, he said. That puts pressure on Azione’s purchasing committee to “make sure we listen properly and get all the right input,” he said. “You don’t want to make a mistake since they're going to make a model just for us,” he said.
Other categories that can fit into the private-label model are in-wall speakers and brackets, Glikes said. Products will carry the manufacturer name but with a designation that’s specific to the Azione group, he said. Private-label products “have to have a feature differential and they have to have additional profit margin,” he said.
Azione Unlimited is pressing its dealers to narrow brand and product rosters to boost their relationships with vendor members. “We're all about focus,” Glikes said. “There’s very little discipline from most integrators when it comes to product mixes. They're only thinking about solutions,” he said. But dealers should be thinking about the financial ramifications of consolidating business because “a loyal dealer gets taken care of,” he said. “If you give a vendor more share, they're much more responsive.” A vendor like Samsung “would like to have 70 percent of your TV business and if you give it to them they can do things for you that they wouldn’t do for somebody that gives you 10 or 20 percent,” he said. Azione’s lone TV vendor member is Sharp.
Glikes is trying to steer dealers toward thinking about product mix, not a natural inclination for integrators who are generally “too worried about whether they'll get a project done on time or how to schedule things,” he said. Azione is trying to create the “perfect mix” and Glikes believes the group needs two or so more vendor members to get there. “If we do it right, our 36 vendors are the right 36 vendors for all of our dealers,” he said. “A happy vendor makes for a strong buying group; it’s a circle,” Glikes said, and Azione is trying to make them happier by encouraging dealers to consolidate their vendor and product rosters to member companies.
Integrators -- accustomed to customized solutions for a given job -- saw some validity in the plan but pushed back on some points. In a roundtable session on the benefits of consolidating business to a select group of vendors, dealers noted that by the nature of their custom business a vendor program isn’t likely to match the needs of every integrator. One group gave the example of a home theater project requiring a projector with very short throw distance but not having one available from approved vendors.
Over-distribution was an issue for some dealers who said a product might be over-distributed in some areas of the country and not in others. A dealer wants the choice of carrying or dropping products based on his competitive situation or on a philosophy of choosing “best of breed” that may not jibe with products selected by Azione, a member said. A consolidated program might require some dealers to drop a brand they are comfortable with to pick up another, he said.
Working groups also came up with some benefits of consolidating vendors including the ability to improve product knowledge and become “experts” in specific products. By learning a product intimately, dealers can learn how to work around shortcomings or installation issues and reduce the need for service calls, one group said. Another group said that narrowing a dealer’s number of product lines in a category to two or three would convey expertise and help establish trust with a client base that expects expertise.
The most obvious benefit of limiting vendors is improved profit margin based on increased buying power that pushes dealers as a group into a higher tier of discounts, several groups noted. Another benefit could be the ability to influence vendor product development and dealer support, one member said. An additional benefit to having Azione members focus on the same vendors is the ability to “share information and lean on each other” for product training and to create forums around issues that arise in the field, it said.
The discussion also covered the possibility of vendors working together to consolidate the order entry process for dealers, to combine freight dollars and to create a common warehouse mechanism to simplify ordering of related products. Vendors are already collaborating on event-based marketing, noted George Walter, vice president-home cinema at Digital Projection. That company combined with others to sponsor a successful invitation-only consumer event at an airport in Boca Raton, Fla., Walter said.
Azione Spring Conference Notebook
Azione’s Glikes reined in his ambitious goal to have 250 dealers on the member roster of the custom installation-based buying group. The group, which held its first meeting in August 2012, is currently at 86 members. “Dealer acquisition is not as easy as I thought it would be,” said Glikes, who had headed up the Home Technology Specialists of America group before starting Azione. He said competition with other dealer groups and lack of awareness are keeping the member count in check. Glikes would be “happy” if the group reached his new target of 140 dealer members by year-end, but “that’s going to take some work.”