In 2007, CompUSA — a major big box retailer of computers and consumer electronics — went bankrupt and closed almost all brick-and-mortar locations throughout the United States. In 2009, Circuit City — the second largest big box retailer of consumer electronics at the time, after Best Buy — joined CompUSA in total liquidation. Both brands were subsequently bought by Systemax, a Fortune 1000 company that sells computers, accessories, consumer electronics and industrial technology via a stable of mostly online-only brands including TigerDirect and the resurrected CircuitCity.com. In retrospect, these two venerable technology big box retailers were among the earliest casualties in a sea changes that is still impacting technology businesses across the board.
Other victims of this change include Blockbuster (which closed an overwhelming majority of its 4,000 nationwide video rental locations after its 2010 bankruptcy and subsequent 2011 acquisition by Dish Network) and Best Buy, which reported a $2.6 billion loss on March 29 and announced closures of a number of large stores and the opening of smaller, more streamlined retail locations. It seems like the sky is falling! What on earth is going on and how will it affect those of us in the ProAV industry?
The long and short of it is that we are in a transformative era. The very advances in technology that are making our lives easier and providing us with new markets and products to sell are radically changing the way the average person uses technology. Those changes are necessitating a radical shift in our mind sets and our business models to remain viable and profitable in the days and years to come.
First, people are far more likely to use their technology for comparison shopping and bargain hunting. The practice has become so common there is now a word for it — “showrooming” — the act of consumers examining specific merchandise in depth in stores and then actually purchasing the exact same items from competitors’ websites, usually at a lower price and tax-free. Black Friday 2011 saw a proliferation of Black Friday Apps for iPhones and Android phones that allowed bargain hunters to scan barcodes and see similar or better deals on the scanned item, including distance to the other physical store with the deal, or links to the website with the superior discount. Indeed, many of the Black Friday apps have evolved into or spawned non-holiday-specific Apps that do the same thing, year-round.
Next, the rapid growth and adoption of mobile devices, tablets and connected TVs/set-top boxes have changed how the average person consumes her media, which is a massive disruption to several industries. This particular change has been going on in the music industry since the turn of the millennium, when the MP3 player hit the mainstream and music file sharing and streaming took off. Now, the new devices are radically disrupting the movie, television and publishing industries — bringing instant content to the masses, often at lower prices and higher convenience than the traditional media models.
So, what about the ProAV world? What do these changes mean to us and what do we do about them? The first change has already hit our industry. After all, what integrator HASN’T dealt with that customer who shops every item on the equipment list and constantly comes back with, “But I can get that online (or from Competitor B) for a lot less!” Who hasn’t dealt with an equipment list of OFE items — Owner Furnished Equipment, which, back in the day meant legacy equipment but today just as often means “Internet special!” — and been required to quote the project including warranty and service contract, without knowing exactly what we were getting equipment-wise?
Face it, commoditization and showrooming of a sort has been part of our lives for years now. This is where we, as AV professionals, need to seriously look over our businesses and question just where we’re looking to make profits. It is 2012. If you are still hoping to make your money on equipment, or if you use discounting and price-matching to win projects on ever-tighter margins, you might as well pack up your crimpers and dust off your resume. You are in a race towards the bottom, profit-wise, and are likely already in trouble as a company. The thing about discounting in the era of the tech-assisted shopper is that you will NEVER be profitable because there is always someone out there selling at a lower price point. I actually lost a bid one time to a competitor charging $0.00 for the equipment. That’s right. They DONATED the equipment to the schools in question to get the project. I sincerely hope they made some money on the integration and service, because giving away your product for nothing isn’t business… it’s philanthropy!
I know you’ve heard it before from InfoComm and NSCA and countless business experts and coaches, but you need to transition your company to a service-based model. You should be making your profits on install, on service and on training. Doing otherwise may work for a while, but this is a paradigm shift we’re dealing with, not a mere hiccup in our normal mode of business. It will NOT go back to the way it used to be no matter how hard you wish for it, so you’d better Keep Moving Forward, in the words of Cornelius Robinson and Walt Disney!
As for the second change, well, that’s a bit easier. First, be prepared to sell fewer VCRs (Anyone still doing that? *crickets*), DVD players and Blu-ray players. Soon enough, those will be going the way of the dinosaur. But make sure your engineers and techs keep up on the latest developments with media players and streaming devices! Online content delivery is the hot new trend and it isn’t going anywhere. It’s part of what killed Blockbuster and what is revolutionizing television and movies. Be ready for it.
Also, figure out ways to take advantage of this new content-heavy world. In a previous article on competitive advantage, I mentioned that AV companies familiar with video production or broadcast should look at ways to leverage that knowledge for their customers — by teaching “how to shoot your own web video” workshops or providing shoots and equipment for those customers. There are lots of ways out there to make money off of the demand for new, fresh content. Brainstorm in your organization and take advantage of them! Again, it may not fit your mental image of what your company is or does, but we’re dealing with disruptive technology transforming our entire society… and once that change takes hold, it won’t go back. In the words of Oliver Wendell Holmes, “The mind, once expanded to the dimensions of larger ideas, never returns to its original size.” The same is true of our society and its relationship with, and usage of, technology. To paraphrase author Eckhart Tolle, your business “is now faced with a stark choice: Evolve or die.”
Dawn Meade, CTS — also known as AVDawn — is the marketing and media coordinator for Net-AV in Hampstead, Md. She is an industry veteran with experience in integration, AV sales and social media. You can find her on Twitter (@avdawn), on AVNation podcasts, on her AV tech blog, and of course, here at rAVe as a staff writer and as part of the rAVe BlogSquad.