After Franklin Karp resigned as president and CEO of New York-area C-tail chain Harvey Electronics in October, it was only a matter of time before an executive with such a high-caliber resume and wealth of experience landed on his feet. The lucky beneficiary of his services is Audio Video Systems, a longtime custom integrator based in Mineola, N.Y. Karp serves as the company’s chief operating officer.
Nancy Klosek visited Karp at his new office and discussed his new mission, the direction of the industry, and the differences (and similarities) between retail and pure custom.
Can you reflect a little upon your time at Harvey Electronics? What do you have to say about your tenure there?
I joined Harvey in 1991, so I was there just about 15 years and, honestly and truly, I have to say it was 15 terrific years. It was a tremendous learning experience. I feel like I got my MBA, and I wouldn’t trade that experience and what I learned and what I got to do there for anything.
Your current company, Audio Video Systems (AVS), has a timeline that pretty much parallels your own in the CE business—around 30 years. It’s strictly a custom house, while your background has been mixed retail and custom, with an increasing custom emphasis most recently at Harvey. What do you bring to the table at AVS as your primary benefit?
I was at Stereo Warehouse/Rabson’s for 19 years before Harvey. I started selling audio part-time there in 1971, when I started college. AVS is roughly 30 years old, and the two principals, Elliot Ingber and Fred Martin, are guys I met at Stereo Warehouse. We all go back to the early ’70s together.
I’m certainly not going to be teaching them about integration; they’re teaching me. But what I think I do bring to the table is experience with larger companies, more personnel.
What I [also] bring is the organizational background and the [knowledge of the] accounting and structure of a retail business that, frankly, I have noticed is kind of missing in most pure CI businesses around the country. The integrators are the youngest portion of our business, and the moms and pops and the guys who are into the gear, if you will, who migrated to custom away from retail, learned about doing business in a different way. They weren’t required to have the same kind of structure, the same kind of financial acumen going along in these last five to 10 years, where the business was just so robust and everybody was making money. It was kind of parallel to what the hi-fi business was in the ’70s. There were lots of guys who got into the hi-fi business just by accident. A lot of guys made a lot of money, and as the business matured, different skills were required to prosper and survive.
I think that as the CI world matures and the dynamic changes, there are different skills required today than were needed five years ago. From a business perspective, from just looking at vendors differently, looking at finance differently, looking at control differently—that’s the perspective I have that guys who’ve been immersed in the CI world haven’t had. They’ve been busy taking care of their clients and making sure everything is installed properly. For the most part, a lot of guys have not really looked at the rest of the structure they’ve built up, even though they’ve built up some very nice businesses around the country.
How wide-ranging are the sizes of the jobs AVS handles, and what’s your geographical range? Is your goal to expand business at any particular price level, or across the board? And what about geographical expansion?
It ranges across the board. A small job here would drop down to about $60,000, but we do jobs in excess of $1 million. AVS clearly plays in a different world than when I was at Harvey. I am looking for growth, and I think we will get growth at both ends.
With which groups of AVS’ partners—architects, interior designers, builders, end user clients—do you intend to beef up relationships? How will you implement those goals?
Relationships on the builder and architect sides are terrific here, but the communications, and how we go to market from the web site on up, are things we’re looking to enhance.
Do your goals include adding any other manufacturers or other partners to the roster of brands now listed on your web site? In which product areas might you add brands or relationships?
I think, just as a general rule, the way most integrators function today is they buy what they need when they need it, and they buy it from whomever makes the right item. They’re not as organized around particular brand relationships other than the major integration brands.
All of the CI guys of the world need to focus more and…do a better job of managing their inventory and managing those relationships. The 80-20 rule from retail needs to be applied, on some level, to the CI guys as well.
I don’t know where that falls out as far as who’s in, who’s out, who do you change. But I think that, as a basic premise, whether you’re a $20 million business, a $100 million business or a $3 million business, you can’t be important to 100 suppliers. You can be important to five, six, seven. That’s always what I was taught. I’m hoping to do that here.
Given your history at Harvey with buying groups and your longstanding personal relationships with members in both the Home Theater Specialists of America (HTSA) and recently, the Progressive Retailers Organization (PRO Group), is it your long- or short-term intention to continue AVS’ involvement in HTSA, in which it is currently a member?
It’s been very, very helpful. I urged Audio Video Systems to join HTSA years ago, so it has definitely paid off for them in contacts, not just additional dollars. I hope to continue to improve that relationship.
Can you address the changing role of buying groups in the industry, and their value to their memberships?
Buying groups have to evolve, and they are getting more focused with their vendor relationships as well. They’re helping to get vendors to bring more to the table, and I don’t just mean in dollars, but also in things like education and added-on services. That’s really where smart vendors can make a difference, especially with their smaller customers. It’s not always just about how much MDF (market development funds) you can get. I won’t say that’s not important, but vendors who listen to their customers and build and design product that works within the channel that we’re selling in is key. I think buying groups like HTSA, who can focus a group of integrators and custom guys on the right products from the right vendors, have an impact. The small guy can actually have a voice.
Now that the big boxes are getting very serious about their incursions into the custom world, how can companies like AVS strategize to stay well ahead of any possible threat to their survival? Do you need a five-month plan, a five-year plan, or both?
I think it’s both. That’s another thing I bring to the table, from the perspective of having lived in the world of the big guys. I’m not comfortable sitting here and saying, you know, “They can’t do what we do.” I think anyone who sits in his office with his staff and says, “We’re great; we do all this integration and the big guys can never do this,” is deluding himself.
That’s one of the things I bring. [I’m] always looking over my shoulder and thinking out two, three and four years from now [about] where the big-box guys want to be and what they want to do and what they’ll be capable of doing. I’m focused on that.
What else can you tell us about any short- or long-term plans you have at AVS?
The market we’re in is a tremendous market. There’s still tremendous opportunity without expanding geographically. We just added our first full-time outside sales guy. We’re really excited about that, because he comes from the CI world and brings years of experience and the contacts. We’re also looking to add more project managers and engineering because, despite what manufacturers say, the equipment we’re installing isn’t getting less complicated! CR