The Custom Electronic Design and Installation Association (CEDIA) released new preliminary market data at their Expo held earlier this month – in a decidedly more optimistic presentation than in past years. Erica Shonkwiler, CEDIA’s Market Research Manager, was obviously pleased with the data she was to share with the media – and she conveyed an optimism that appears to be due to the new data showing an upturn in CEDIA members’ business results.
Not only was there a business upturn, it was the second year of positive results…
Shonkwiler beamed as she began the presentation, seemingly anxious to get to the good stuff. She methodically explained the foundation of survey leading up to this presentation – noting that the study had just closed days before the Expo. Therefore, the data that was shared with the press at Expo – and that we’ll share in this post – should be considered very preliminary…but the data told an interesting tale.
First and foremost, Shonkwiler sought to remind us that this particular study, known as the Size & Scope of the Residential Electronic Systems Market, is not to be confused with their other significant survey, the Annual Benchmarking Study. The Benchmarking Study is a “deep dive” into participating members operating results with much more detail – whereas the Size & Scope Study is an overall market analysis.
More participants in the survey…
Perhaps because business has a little better (encouraging dealers to participate) or because this is the fourth year in a row the association has conducted this study – Shonkwiler noted that they had 723 members respond to this year’s survey. This was 25% more than the previous year…and more data generally means more accuracy, the CEDIA executive noted.
To be a “qualified” respondent, the survey must come from a member that has “to be installing a product that we define as in our realm of industry products,” Shonkwiler said. “Essentially, installers are having a good year.”
Total gross revenues…
Total gross revenues, on average, was just under $1.5 million in 2013 and are expected to grow to over $1.7 million in 2014. Perhaps more accurately (at least many statisticians would say) is to look at medians rather than averages – as one or two large companies can skew the “average” result. But the median defines the exact half-point between the highest and lowest number.
Total gross revenues as far as the median came in at $540,000 in 2013 and is expected to grow 19.6% to $646,000 in 2014. Total revenues include equipment, labor and service sales.
Number of projects…
Two of the charts that Shonkwiler showed the press showed remarkable stability: the percent of revenue from residential customers (as opposed to commercial customers) has stayed relatively stable, coming in at 73% for 2014. And the percentage of revenue from equipment sales came in at 54% or only about 1% better than 2013.
However, back into the brighter spots: installers saw a fairly impressive jump in the number of projects they expect to complete in 2014 – up to a total of 58 projects. This is well above the 51 they reported completing last year…and substantially more than the 45 they reported in 2012. More projects help members better leverage their overhead – and generally drives greater profits.
New construction vs. retrofit…
Another interesting trend that the CEDIA Market Research Manager shared was the percentage of residential revenue by housing type. Since the housing construction industry crash in 2007 (and overall economic crash), most home builders dramatically scaled back on building new homes. This forced most installers to remake their companies to focus on existing home installations…commonly referred to as retrofit.
But the CEDIA data clearly shows a swing back to new construction with a two-year downward trend in revenues from installations in “existing home[s]”…coupled with a two-year increase in revenues from installations in “new home[s].” While the existing homes revenues are still larger, it has dropped 7% from 65% in 2012 to 58% in 2014. Revenues attributable to installations in new homes are expected to be 36% of total revenues, up 5% over the 31% in 2012.
“This is one area that I was really, really pleased to see the data,” Shonkwiler told reporters enthusiastically. “If you go back to 2007, the breakdown between new and existing was about 50/50. Hopefully we’ll get back to that 50/50 position again.”
Specific technology trends…
The association also asked survey respondents to comment on certain specific issues that correlate to emerging industry technology trends in an effort to gauge the impact on the custom integration industry. Questions on the “Impact of Cloud Based Content Management,” “Flat Panel Sales,” “App Based Control Solutions,” as well as others on Internet-connected wireless systems, and more were all included – although many seemed to specific to be truly meaningful.
A couple of these side analyses struck us as interesting. First, far and away the breakout that showed the fastest sales growth was the “Internet Connected Wireless Audio System.” This category refers to Sonos and similar types of systems.
Sonos helps installers audio sales?…
In the two-year period from 2012 to 2014, installers reported sales of these systems as a percentage of their overall distributed audio sales grew 10% from 16% in 2012 to 26% in 2014. We should note that the number of survey takers who responded to this question – in the 500s on most of them – was only 282 members on this question.
Still, given the reputation of these types of systems as being unprofitable, we were somewhat surprised to see this result. However, a second slide, in which respondents were asked to agree or disagree with certain statements, may show why this was the case.
The result that showed the biggest increase in those agreeing with (and decrease in those disagreeing with) was to this statement about Internet connected wireless audio systems: “They HELP my audio business – many consumers want them, can afford them, but aren’t comfortable installing them.”
Don’t go high-end…go “ultra”…
Lastly, we noticed a question about high-end audio and high-end video sales…and ultra-high-end audio and ultra-high-end video sales. Installers were asked to report the percentage of their home theater/media room installations that included either high-end or ultra-high-end audio or video systems.
There were no 2014 forecasts for these – so the slide compared 2013 actual results with 2011 actual results. Interestingly, there was almost no change in the high-end systems sales. But the ultra-high-end system sales showed more movement with ultra-high-end audio up 3% and ultra-high-end video up 2%.
Overall, the biggest news is that installers have now two consecutive years of positive business increases. Even if some of those increases were modest – it shows the industry moving in the right direction. And it shows that the growth experienced last year was not just a spurious fluke – but the beginning of a positive trend.
You can learn more about CEDIA and its programs by visiting: www.cedia.net.