ADI President: Combat Margin Squeeze With Home Automation

Aarnes discusses the company’s strategic initiatives as well as efforts to help the ADI dealer base prosper in a fast-changing marketplace.

How can dealers combat margin erosion and product commoditization?

Everybody is dealing with that, even the distributors. It goes all the way down the line. It is only going to continue. That is why I think the whole home automation piece is such a great opportunity because it brings more technology into the home.

That said, to help combat some of this we have our project registration program. This is designed to help our dealers secure the best pricing and competitively bid on large installations, which is where the money is. We have a very strong and expansive network of manufacturing partners. Between us and our supplier relationships we can offer the best assistance for our dealers to help win over some of our competitors that don’t have programs in terms of being able to work directly with suppliers.

What do you consider ADI’s main differentiators that provide your dealers with growth opportunities?

Looking at that customer service, end-to-end experience is what I would call our primary differentiator. And then of course to go along with that we will focus on other core competencies and other key differentiators that make our customers actually aware of and want to come back and continue to grow with us.

Some of those big differentiators are we carry about 500+ name brands. We have the most robust product assortment in the industry combined with very strong inventory levels. We have very broad geographic coverage with 103 fully stocked branch locations and nine distribution centers – seven in the U.S. and two in Canada. 

We offer an IP programming service that is based out of our Louisville [KY] hub. It allows our dealers to save a lot of time and money on IP installations as we pre-program cameras for them prior to installation. 

Project staging and kitting service helps dealers streamline installation, be more profitable. We actually work with the dealer to determine the products needed for each installation and then set up a time and schedule for delivery. We actually package all the shipment’s products, reach out to each job site and ask when exactly they need it. The dealer saves on shipping, storage costs and it ultimately helps them be more productive, more profitable.

Training is another service advantage we provide. We coordinate more than 1,500 specific dealer training opportunities per year. We will have 46 ADI expos this year, including branch training, vendor-driven courses for our dealers, Webinars. We hit about 12,000 dealers per year in terms of being able to continue their education, help them find ways to grow their business.

A great differentiator for us is our systems sales and support team. We call them our systems group. They are a group of about 25 individuals and they field more than a 1,000 per day. They assist in everything from technical expertise to product selection and system design, which is very technical. These guys have a ton of knowledge.

Will you continue opening new branches?

We are continuously looking to expand. We opened four new branches last year. Two of those branches were our new format locations, our smaller ADI Express footprint branches. They give us a little more flexibility to penetrate smaller metropolitan markets. They are about half the square footage. In the past we only had one model, and that prohibited us from getting into some smaller markets where we knew there was a concentrated dealer base. So now we have that ability and we want to continue to expand geographically in the years to come.

What do you view as the most significant challenges that wholesale security distributors are currently facing?

You can talk to us, you can talk to our chief competitors. Everybody down the line is trying to find a way to protect and preserve more margin. The most important thing for us is that we really do our part in
staying up to date with the latest technologies and products that become available. As products and technologies become more commoditized there are always newer technologies that are coming in right behind that. It’s about being able to manage what we call our NPI – New Product Introduction process – which is very rigorous across all of our product categories to make sure we have the latest and greatest stuff on the shelf and made available to our dealer base. It’s making sure we have the right products, we’re staying up to speed on the latest technologies, but then what do we do about it.

We still have to be able to explain the features, functions and benefits to our dealer base, which is why we made such a huge investment in our ADI University online training program. It is our internal online training program that we use to educate our sales staff on the latest technology. Every member of our sales team is required to participate in weekly training courses across a wide variety of product categories.

The commodity stuff is going to continue to move but what is that new technology that ultimately is going to have more margin built into an install base? The ADI University program allows us to stay abreast of the latest technologies, which then allows our dealers to be more educated, which builds confidence in their buying patterns, which will ultimately help them sell some of that newer technology and improve their margins.

Because this has been so successful we are now taking the ADI University and delivering that capability to select customers. We are calling it ADI Academy. The same great courses that are available to our inside sales staff are now going to be available to select customers. They will have two primary weapons. They will be able to learn from our inside sales staff but they will be able to take courses from ADI Academy. [At press time, ADI Academy was expected to be launched in April].

Are the dynamics of the business changing in terms of inventory, order processing and delivery?

The short answer is yes. They are changing monthly. I’ll reference back to our NPI – New Product Introduction process. On a monthly basis we are introducing somewhere in the neighborhood of 75 to 100 new products a month. Some months it might be 50. But on average it is a lot more than you’d think. It is testament to how fast the business is growing, it is a testament to how much emphasis we place on having the latest and greatest technology. We don’t swap out vendors; that’s not what we do. We pick the right selection of suppliers that we know are committed to evolving their technologies and being able to support our dealer base.

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About the Author

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Although Bosch’s name is quite familiar to those in the security industry, his previous experience has been in daily newspaper journalism. Prior to joining SECURITY SALES & INTEGRATION in 2006, he spent 15 years with the Los Angeles Times, where he performed a wide assortment of editorial responsibilities, including feature and metro department assignments as well as content producing for latimes.com. Bosch is a graduate of California State University, Fresno with a degree in Mass Communication & Journalism. In 2007, he successfully completed the National Burglar and Fire Alarm Association’s National Training School coursework to become a Certified Level I Alarm Technician.

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