From Best Buy to CompUSA to local consumer electronics retailers, builders are forming closer partnerships with larger brand-recognized storefront operations to better sell home tech.
Doug Erpelding has long embraced the value of having lots of home-tech options in the homes his company sells. But he's in the business, and has access to information on home technology every day. Convincing a homebuyer to share his appreciation is a bit more difficult. After all, most consumers know little about home tech, and probably think it's something beyond their means.
That is exactly why Erpelding welcomed the idea of inviting home-tech providers into the showroom, to present a united front to inquisitive homebuyers. Starting in 2004, Lennar Corporation's U.S. Homes' Colorado operations began providing showroom space for its technology partner, Ultimate Electronics.
"We were averaging $1,300 to $1,500 in technology options per home before. Now we are at $2,600," says Erpelding, Lennar's regional vice president of purchasing. "During one month, homes in the state of Colorado accounted for $230,000 in technology options."
Results like that don't just appear out of nowhere. Lennar's Colorado operations have partnered with Ultimate Electronics since 1995. Due to their long-standing relationship, the companies were able to work even closer together and establish the right combination of showroom presence, technology education, co-branded marketing and trust that has resulted in increased option sales.
Other builders and retailers are searching for that winning combination to help address mutual goals. Builders want to increase technology sales without burdening staff with a never-ending new-product learning curve. And retailers want to build long-term relationships with affluent home buyers. The opportunity for a lucrative win-win situation is too great to ignore. Major players are embracing builder partnerships as well, from Best Buy in the consumer electronics front, to CompUSA in the home networking arena.
CompUSA's Steve Ellison, senior director for technology services, says, "Our rule of thumb is that .05 percent to 1.5 percent of a home's value can be spent on technology option upgrades if presented properly." CompUSA has been offering sales, installation and service to homebuilders such as Ryland Homes, Capital Pacific, Technical Olympic USA and others for more than two years.
In-store Presentation Is Key To Success
Getting the presentation right is the rub. Best Buy is completing a new prototype store in Atlanta that will include a special area to work with homebuyers. Best Buy, which works with builders D.R. Horton, Lennar Corporation and others, will have dedicated desks near its appliance section in the new store, but buyers will be free to search through the store to review the technology options offered by builders.
While access to in-store viewing of products is a good way for builders to start a relationship with technology retailers, experience points to having the retailer represented at the builder's showroom for yielding the best results.
"When a builder realizes that we need to be meeting with the home buyer at the same time they are, we can be very successful," say Ellison.
"In our ideal scheme, we want one-stop shopping for our homebuyers," says Brian Hutt, national director of design studios for Lennar. "We don't want homebuyers going to lighting studios, carpet showrooms and a multitude of places. We want to put them in our studios and solve their problems. It is easier for them to schedule one appointment where they can talk with everyone they need."
Having the expertise of Ultimate Electronics in showrooms has allowed U.S. Homes to increase the amount of technology options available. "We can offer audio-visual equipment that we stayed away from before. We offer more structured wiring options, and now we are offering central vacuum systems," says Mick Riney, design studio manager for U.S. Homes' four Colorado showrooms. The increased selection simply derives from having someone around who knows how to explain and sell the diverse systems. "Technology is always the most difficult option to keep track of and by the time you learn it, it changes," says Riney. "Having an expert in the showroom has taken a lot of issues away from my designers."
That sentiment is echoed by Gerry Dimple, senior vice president of installation for Ultimate Electronics in Denver. "Many builders are working with technology partners with five or six staff members, while we have 87 people under our director of builder operations." Ultimate Electronics works with 19 different builder clients and recently expanded its builder service offerings to the Tucson, Phoenix and Las Vegas areas. All Ultimate Electronics installers are employees of the company. This is a positive factor, according to Erpelding.
In addition to having an expert on hand at the point of sale, the retailers' internal control of installers is a key factor in customer relations and sales success.
Village Homes of Colorado tried to partner with a technology retailer, but was disappointed by the inconsistency of the outsourced installation and service crews, according to Bob Micho, Tech Touch division manager for the Littleton, Colo.-based company.
"We were getting more and more calls about dissatisfaction with performance of the installers, and they could not find enough trained installers to get the job done every day," says Micho, who was charged to bring the tech option selection, installation and service in-house because Village Homes was so put off by the experience.
Micho has since built tech option sales for Village Homes to a range of $4,500 to $4,900 for homes in the $350,000 to $500,000 price range, which reflects favorably to Ellison's rule of thumb.
What builders who handle technology option sales in-house miss out on is the brand association with nationally or regional known companies, such as CompUSA and Best Buy.
Ellison notes that a majority of CompUSA's installers are company employees traveling in company vans. In remote markets and in other situations, the company has to use out-source services.
"A handful of builders realize that there is a significant differentiation when among all the billboards advertising new homes. One of them has a CompUSA logo on it," says Ellison, pointing to the recognition of a billion-dollar technology leader. "People know that a multi-billion-dollar technology company is going to be there supporting the customer." In addition to getting the brand recognition built on years of advertising, builders benefit from the stability of partnering with a strong technology retailer.
"Sometimes product is not delivered [for] six to 12 months after a contract is signed, sometimes longer," says Chris Mauzy, director of builder operations for Ultimate Electronics. In the technology world, items quickly are discontinued and are not always available when needed. "It takes a stable company with experience to address the fluctuating demands of builders." What makes some builders hesitant to work with technology retailers is an uncertainty about the impact of technology on overall option sales. "We meet with home buyers at the showrooms, some people are afraid that we will take money away from the other areas of the showroom," says Mauzy. "But if we don't help them increase the overall options sales, then we are not doing our jobs."
CompUSA's Ellison says it is understandable to be concerned. "Builders know what their margins are on all of the other options they offer and realize that we will be taking a percentage of their margin on technology sales." But the odd cycle demands of builders diminish the retailers' margins, which is not even the end-game. "It is not about making much of the first transaction. We want to build CompUSA customers for life," says Ellison, indicating his company's ultimate market strategy.
"Today, a clear technology plan can be the differentiator that helps increase total home sales. If a builder is willing to make a little less margin on technology options, they may be able to increase their total number of home sales," says Ellison.
The ultimate home end-game.
Michael Bordenaro is a freelance writer based in Chicago.