APRIL 08 BEACONTime to Drop Video?
Silly or savvy? Integrator Considers Dropping Low-Profit Category!
<Stratecon-April 2, 208>Recently, I had an interesting discussion with a fairly well known integrator who has been designing and installing sophisticated home theater and distributed audio systems for many years. He made a comment that echoes a sentiment that I’ve heard expressed many times before...
“I’m dropping video. If the customer wants it, he can go to Best Buy and buy it and pay me to install it!”
Not an original thought, as I’ve heard this sentiment many times. Generally, it is the result of frustration over the ridiculously low profit margins realizable from the video category. This negative feeling is especially acute if the integrator’s background was primarily audio-centric.
Us old audio guys got very used to 30%-50% gross margins (or more!) that various audio categories offered us. Those teens and twenties aren’t just a difficult age in which to deal with your children…they are a cold slap in the face when they represent the highest margin that you can squeeze out of your video lines.
This feeling of frustration is not…by the way…unique to installers or integrators. I have had more than a few retailers and value-added distributors tell me the same thing! So what is this all about? Why does everyone hate video?
The frustration is clear…video is a hassle to buy, ship, inventory, install, and support. There is more than ample opportunity for something to go wrong. And if the video doesn’t work…the client doesn’t pay! And even if everything goes smoothly and there are no surprises…you are rewarded with a gross margin that barely covers your costs!
The conversation about video with my friend this time, however, was different. The strength of commitment residing in his voice told me that this was not idle chatter, or simply letting off steam. No, this time it was serious. He was seriously considering dropping the category. I suspect that he was “trying out” his idea to see my reaction.
So should we all just drop video? After all, it’s a headache and there’s no money in it! We could focus our energies on more profitable endeavors…sell more sophisticated systems…add in more programming…maybe get the customers to invest in better (that is to say, more profitable) speakers! That would be better…right?
Better for whom???
Well, the short answer is…sure, go ahead…drop all of your video lines. Tell your customers you can’t help them with their video needs. After all, it’s only the single most important element in the whole system as far as your customers are concerned.
Go ahead…send your customers to Best Buy. Maybe…if you’re really, really lucky…your customers won’t see that Magnolia specialty store-within-a-store there. Gee, there is a lot of really good looking equipment there…quality brands of electronics like Yamaha, Pioneer Elite, and Denon audio. And look at all those top line Mitsubishi, LG, Panasonic, Pioneer Elite, Sharp Aquos, Sony Bravia XBR, and Samsung flat panel TVs! Not only do they have a lot of nice looking product, they are all being shown in a very attractive display area, tuned to the same channel so I can easily choose the one that looks best to me.
Maybe those customers you sent to Best Buy won’t learn about their Geek Squad, who would be happy to arrange the whole installation for them! Maybe they won’t see the Blu-Ray high definition DVD display with a full assortment of software to choose from.
Maybe they won’t talk to that bright young guy in the computer department who is giving a pretty darn good demonstration of Windows Media Center Edition…wow, let’s hope your customer doesn’t see all the amazing things it can do on his system!
And by the way, don’t those employees at Best Buy know that you do a much better job of installing than their Geek Squad? Maybe, those Best Buy employees will sell customers the hardware and then send them back to you for installation…right?!? Hey…wait a minute…is that Geek Squad agent scheduling an appointment at your customer’s house with a system designer!
Yeah…go ahead…send your customer to Best Buy. I’m sure that Best Buy employees will have your best interest at heart as they take care of your customer and sell them the most important part of their system!