This week we learned that Onkyo and Integra products would now be sold through AVAD, a distributor of custom integration products in the U.S. that is in the middle of changing its business model. Interestingly, this announcement came from AVAD, not from Onkyo/Integra, although Onkyo Vice President of Sales and Business Development Joe Petrillo is quoted in the official release.
But this simple announcement is being viewed as a game changer for many in the industry, who note that with the loss of its more “protected” status, Integra may have lost one of its key selling points.
See how some in the market are reacting to this decision by Integra…
Within minutes of AVAD’s announcement hitting the wires, we began hearing from people in the market who were surprised, angry, sad, or confused by this major change in Onkyo distribution. What caught their attention was related more to the Integra brand, rather than the news about Onkyo.
Why Integra more than Onkyo? The issue centers around market distribution. In the case of Onkyo, distribution has always been broader with more dealers carrying the brand, and more types of dealers selling Onkyo products. However, the Integra brand has had a much more limited or protected market distribution – largely centered on the custom integration community.
Its Original Purpose
At launch, this was the purpose of the more selective Integra brand. It was created to provide the market with a line optimized for the custom installation channel. Onkyo, on the other hand, was geared more towards the larger volume retail channel. [Disclosure: the author of this post worked at Onkyo up to the time of Integra’s launch.]
The company took steps to differentiate the products themselves by, for example, adding in 12-volt triggers, RS-232C ports to the Integra line. So by differentiating products, programs, sales force, management, and distribution, these brands would optimize their support in their respective channels and not turn parasitic – eating away at each other’s markets, which could be disastrous for the company.
Custom Integrators ‘Go-To’ Brand
As part of this process, Integra management has been viewed as cautious in making sure they did not over-distribute their brand. For many integrators, Integra became their go-to brand, as it could be sold with confidence. Not only was the client unlikely to receive a quote from a competing integrator on Integra products in their market…they also had a reasonable expectation of earning solid margins with no nasty surprise pricing from some online, deep discount, blow-out site.
One of the ways that Integra was more protected was that it was not sold by distributors – other than by its own rep/distributors, which are literally their own Integra reps who also distribute products. This gave Integra management more control over how their products were sold…and by whom they were sold.
Support from Top Integrators
Thanks to Integra’s strong CI-centered strategy and careful management, the brand shot to the top of the CEPro 100 Brand Analysis – the list of brands earning the most support from CEPro Magazine’s survey of the top 100 integrators. And Integra has continuously enjoyed outsized support from the top integrators as shown by their staying at or near the top of this chart for years.
What happens when the formula changes remains to be seen. AVAD’s announcement stated specifically that Integra products are “now exclusively available through distribution from AVAD.” [emphasis added] Current Integra rep/distributors are likely asking just what does that statement mean? We spoke to a couple of Integra rep/distributors who told us that – so far – they have no indication of any change in their status as distributors – positively or negatively. But they let us know that they are clearly not happy with this move by the company.
AVAD’s Massive Stable
Onkyo and Integra will now be joining AVAD’s massive stable of brands – their website lists 110 brands carried. This stable includes direct Onkyo/Integra competitors Denon and Marantz, with whom AVAD has had a multi-year relationship. It is unclear what this decision means for any of these competing brands.
“Onkyo and Integra offer renowned high-performance audio and home theater products and adding them to our line card is just one example that the new direction at AVAD is all about adding value for our growing CI dealer base,” said John Zabel, VP of Sales and Vendor Management at AVAD in a prepared statement. “As the structure of the new AVAD continues to evolve, our plan is to purposefully refocus our product offerings for our loyal partners.”
“Onkyo USA is excited to partner with AVAD in the distribution of both the Onkyo and Integra product lines,” said Joe Petrillo, Vice President of Sales & Business Development in AVAD’s in the same statement. “Partnering with AVAD, one of North America’s premier AV solutions providers specializing in residential and commercial integration was a natural evolution for us as our business continues to expand.”
Comments, Colorful and Not
“We are very, very disappointed in this decision by Integra,” said an integrator who sells Integra and who requested anonymity to discuss the matter with us. “I feel terrible that they are deviating from their plan. I think it’s a mistake on their part.”
Others we spoke with used more colorful language. However, we talked to a few who seemed resigned to this decision. One, in particular, noted the long history of previously protected brands deciding to abandon their roots and open up their distribution.
How Will Integra Dealers React?
Integra rep/distributors we spoke with told us the news is just now getting around…and they are nervous of how their dealers will react. One told us his calls from dealers so far, have been “very negative.”
Another told us, in an incredulous, questioning tone, “I don’t know where the vision and where the push is coming from over there [at Onkyo].”
Many told us that they did not see this coming…there was no warning or even foreshadowing by the company’s sales team.
One dealer told us, “Perhaps Onkyo and Integra don’t want to deal with smaller dealers anymore.”
[NOTE: we made multiple requests to interview Onkyo executives about this announcement, but our inquiries were not responded to by the time of this post was published.]
To learn more about AVAD, visit: www.avad.com.
Find more details on Onkyo products at: www.onkyousa.com.
Finally, learn all about Integra at: www.integrahometheater.com.