Competition for Customers' Discretionary Dollars Looms for CI Dealers

LAS VEGAS -- After two years of frenzied demand for residential technology due to COVID-19-inspired focus on remote work and home entertainment systems, it’s unclear how demand will shift as consumers begin spending again on travel and entertainment as pandemic restrictions ease, dealers told us at the ProSource Summit last week.

Manufacturers said they remain hopeful despite continued product backlogs caused by supply chain disruption. “As we’re coming out of the pandemic, people are absolutely diversifying their spend, and they want to get back on a cruise ship and an airplane,” Kevin Zarow, Sound United's vice president-sales, the Americas, for distribution, AV specialty and custom integration, told us, but the “massive backlog” in the custom channel shows continued strong demand. “I don’t think we’re going to see a lot of change on that side,” he said.

Most dealers said their customers had been exceptionally patient about product delays because “everyone’s in the same boat,” Josh Bobby, Dream Theaters vice president-operations, told us. In addition to electronics, customers are also having trouble getting cars, boats, appliances and a wide range of luxury goods during the supply chain crunch. “As long as we’re upfront with them about it, they’re understanding,” Bobby said.

AJ Leslie, owner of Ergo Audio, Edinborough, Pennsylvania, said the patience level depends on the role of a product in daily life. Motorized shades were delayed for six months for one of Ergo’s clients: “They were shades; you can live without them” for a period of time, he said.

Lead times on lighting products have been extending from two-three weeks to four-six weeks for Eric Grundelman, owner of Eric Grundelman’s Cool AV, Dallas. One customer had planned to move into a new home this month, he said, but "we ordered all of their modules for their lighting control system in December, and I still don’t have an official ship date yet.” The house will be finished “with no lights working,” he said, “so they’re not going to move in" yet, he said.

Grundelman is considering moving to "plan D," using an older version of a lighting control system at the cost of “a lot of labor,” and loaning the customer parts until the new product is available, he said. He changed the order in December to second-day air to be moved up on the vendor's list, saying he needed the system the last week of December. Plan D isn't ideal: It would be expensive for his company, and the customer would have to pay an electrician to put in gear twice, he said.

Ray LeBouf, owner of Dream Theaters, Houston, had a similar issue and put standard switches in because of an eight-month backup on dimming modules. “It’s your own expense then for a couple of days’ labor to have electricians reprogram them.” LeBouf had to switch another customer from a Crestron system to Control4 due to availability. He was fortunate the client “was OK with it.”

As overall shortages ease and shipping times loosen up, a looming issue for dealers is if other categories return to more normal shipping schedules first. “The problem will be if they can start getting other items -- cars, refrigerators … and we’re still way behind,” said LeBouf: Customers will likely remain understanding “as long as we’re in line with everybody else.”

The global scope of shortages -- and widespread coverage -- helped dealers manage through, said Leslie, who doesn’t see the situation easing soon. “I don’t think everyone’s going to be able to flip a switch and go back to what it was like before,” he said. “It’s going to be a slow burn,” not only for inventory but also the mindset that "I can just get something when I want it,’” Leslie said.

LeBouf believes it may take two years for normal inventory levels to return. Dream Theater's projects resumed pretty quickly after the first two-month surge of COVID-19 two years ago, he said. A few still get interrupted by COVID when another contractor -- a builder or electrician -- has to take a leave from a job site for several weeks due to illness, he said. “We were lucky,” said Bobby: The company had its own wave of COVID in December, but “it was during our slow period anyway."