TRENDS & INDUSTRY ISSUES

www.sdmmag.com/articles/102364-5-leading-trends-in-security-distribution

**One of 40 Snap One partner stores across the U.S., Volutone serves integrators in the Las Vegas area with an expanded product line, same-day availability, expert support and demo days.** // IMAGE COURTESY OF SNAP ONE

5 Leading Trends in Security Distribution

From trends that promise revenue growth such as the rise of managed services, to those that obstruct progress such as equipment shortages, distributors describe what’s affecting the dynamics with their security integrator/dealer customers in 2023.

September 11, 2023

In the security product distribution business, supply chain disruptions and product price increases still remain among the industry’s primary concerns, as they have for the last few years. But while product delays and shortages have improved somewhat, and distributors and security integrators are seeking any and all remedies to higher costs, several other trends that are impactful to security integrators are also in play. Some are even changing the dynamics of traditional distribution.

In addition to trends that may be having a negative effect on security integrators, such as product availability, distributors recently identified some positive trends, too, such as: the rise of managed services/security as a service; the effect of emerging technologies; demand from certain sectors such as multi-unit dwelling and applications such as network security; and online purchasing.

The Rise of Managed Services

Recurring monthly revenue (RMR) has become a growing revenue model in the security industry, and it isn’t only being generated by conventional alarm monitoring anymore. RMR-based growth is now also fueled by managed services and security-as-a-service.

“Instead of traditional hardware purchases, many companies are now moving to offering subscription-based services for security solutions,” says Brittany Board, director of technology partners at PSA, Westminster, Colo. “This shift is driven by the benefits of steady and predictable income streams for both manufacturers and integrators.”

Such services proffer benefits for all parties, especially the end customer. Selling managed services allows integrators to provide customers with ongoing support, maintenance and monitoring, in addition to cloud-based solutions such as storage. This enhances the overall customer experience and ensures long-term customer loyalty, Board believes.

**AlarMax hosts training for local dealers in one of its 25 branch locations.** // IMAGE COURTESY OF POWERHOUSE

As a result of this trend, she says, PSA has been proactive in identifying manufacturers that offer managed services and cloud-based security solutions. PSA is helping integrators adapt their business models to include these offerings by providing training and support for subscription-based solutions.

Wesco works in partnership with its top suppliers to continually expand its portfolio to include the top cloud-based security solutions for VSaaS, as well as VMS, access control-as-a-service, and industrial IoT solutions that improve upon existing security solutions to create end-to-end smart solutions, says Tara Dunning, vice president, global security strategy and sales at Wesco, Pittsburgh.

“As we continue to see greater availability and adoption of cloud-based solutions, we focus on training our sales organization and utilizing our technology and support services team to educate our customers on best practices and selecting the right solutions for their needs,” Dunning says.

Snap One’s portfolio includes advanced security systems, surveillance cameras, access control devices, and others — all seamlessly integrated with cloud-based technology, says Nathan Porter, executive vice president of operations at the Charlotte, N.C.-based distributor.

“These products provide robust security features, remote monitoring capabilities, and flexible scalability. In addition to our product offerings, we provide exceptional customer support and technical assistance for all of our cloud-based solutions,” Porter says.

Ben Sultze, director, system integration, locksmith and glass channels at Banner Solutions, St. Louis, says Banner has taken a more proactive position in identifying the right solutions to distribute. This comes as many new cloud-based technologies are being launched in the growing space.

Although he says that many cloud-based solutions aren’t distributed through wholesale, “[Banner Solutions’ team] has the knowledge to work with dealers who are deploying cloud-based solutions and make sure they have the electronic solutions to complete a deployment,” Sultze says.

How Distributors Are Working to Manage Cost Increases

With product costs still rising, distributors are working to minimize the impact on security integrators and dealers in several ways, including:

absorbing some costs themselves;
re-negotiating prices with their suppliers and implementing methods for improving efficiency in order to remove some cost; and
increasing benefits and services so that integrators will get more value for their money.

Snap One has witnessed cost increases on nearly all components and services in the supply chain, says Nathan Porter at the company. Snap One has worked, alongside its suppliers, to absorb certain costs and thus has been able to manage cost increases with minimal impact on its partners.

“However, our partners are significantly affected by cost increases other than product costs,” Porter adds. “Labor, fuel, and general operating expenses are growing at or above the overall inflation rate.”

Cost increases have been inevitable and ADI says it is doing what it can to lessen the impact on its customers. “When possible, we’re working with suppliers to negotiate pricing to help stabilize costs,” Aarnes explains. In other cases, supplier cost increases have driven ADI to implement customer price adjustments, which Aarnes says have been “widely understood and enable us to continue providing the value-added services and support our customers rely on.”

Aarnes also says ADI works very closely with its customers and encourages them to forecast their needs and stock up on their most installed products. ADI is committed to transparent communication with its customers, he emphasizes.

Banner Solutions’ Sultze credits the efficiencies associated with its website and online ordering process to maintaining a reasonable cost-to-serve model. “With manufacturer price increases continuing to drive up cost of goods, we have had to become more efficient in how we maintain inventory and provide resources to make it easier to do business with Banner Solutions,” Sultze says.

Vital communication is also prioritized at Wesco. The distributor says it notifies dealers and integrators of all supplier price increases as soon possible, so they can communicate these to their customers and adjust accordingly. It continues to expand its Wesco services offering to help customers work smarter. Wesco’s portfolio includes advisory services, supply chain management, logistics and transportation, procurement, warehousing and inventory management, kitting and labeling, limited assembly of products, and installation enhancement.

By offering competitive prices, rebates, and rewards programs, PowerHouse Alliance aims to support dealers as they experience cost increases. Dennis Holzer says members have increased their stocking levels to be able to remain a steady resource for dealers. Over the last 18 months, PowerHouse Alliance has expanded the number of vendors and products it offers to provide more variety and choice to dealers for their customers’ needs. “We have also relaxed some requirements to help dealers when product is not readily available, such as freight,” Holzer adds.

PSA offers various membership benefits to help integrators offset the increased costs of doing business. These benefits may include “training bucks,” free shipping, extended terms and credit limits, as well as overall personnel cost savings, notes Brittany Board of PSA. Like other distributors, PSA emphasizes prompt notifications of any price increases so that integrators can plan ahead, adjust their pricing strategies, and communicate any potential cost adjustments to their customers, Board says. This includes updating its database regularly to reflect current prices.

The Effect of Emerging Technologies

With its built-in, vision-based solutions and IoT-enabled technology, the security camera has become the ultimate sensor, Dunning describes. This has led to increased adoption of, and demand for, security-as-a-service.

“Security technologies of today — machine learning, facial recognition, generative AI, a secure remote workforce, autonomous devices — offer more than traditional physical security and surveillance solutions,” Dunning explains. “They are being utilized to improve operational efficiency, compliance, safety and even revenue.”

Emerging technologies can sometimes change the way the security industry positions itself in the marketplace. Emerging technologies and their expanded use cases require new ways of thinking about security, Dunning believes. At their core, they put pressure on suppliers and distributors to ramp up the training they provide to security integrators. For example, “The shift to data analytics and digitalization emphasizes the need for strong cybersecurity protocols to ensure the security of physical assets; and for more training and education for our customers around data privacy and the ethical and safe use of data,” Dunning says.

**Ui Supplies hosts a Colorbeam and PowerShades training for their customers in their Plainview, N.Y. warehouse.** // IMAGE COURTESY OF POWERHOUSE

Market Demand: Hot Sectors & Applications

Concerns around privacy and data security remain a challenge for the industry to address, says Dennis Holzer, executive director of PowerHouse Alliance, Pittsburgh. “Because of this, networking in particular has gained traction and is another fantastic upgrade opportunity; a homeowner’s security system is not reliable without a connection to the internet that is strong and reliable,” Holzer says.

In addition, PowerHouse Alliance, which continually reviews market trends with its members, asserts that as more consumers prioritize convenience and security, the national consortium will see increased adoption and upgrades of smart home security systems. Based on a Z-Wave Alliance report that shows a vast majority of system owners in the U.S. have added smart home devices after initial purchase, PowerHouse Alliance encourages security dealers to focus on repeat business in this area.

On the commercial side, PowerHouse Alliance is seeing greater customer demand for surveillance in professional installations, as workers return to the office. “The rising growth of multi-dwelling-unit (MDU) properties also contributes to the demand for security in these settings, as well as package-theft solutions,” Holzer says, adding that the company has been able to offer products suited for both types of projects.

Multi-family-housing electronics also have become a priority of Banner Solutions’ distribution model. Helping dealers and integrators complete their projects on time requires inventory of electronic locks and components, Sultze says. “With lead times still extended on some solutions, dealers need options and expertise on how to deploy solutions in the most efficient way,” he says.

Therefore, Banner Solutions has invested in talent on its electronic access control team so that its security dealer and integrator partners can rely on the company’s technical expertise for both electronic and mechanical products, Sultze describes. “Having the best team in the industry is our goal and our team continues to expand their knowledge so they can be a resource for our channel partners,” he says.

Online Purchasing

Perhaps stemming from the pandemic as well as other factors, ADI indicates more of its customers are interested in purchasing products online. The distributor says it continues to make significant investments in its digital footprint and online shopping experience, which rounds out its other purchasing methods and provides security dealer customers with an “omnichannel” experience.

“Our e-commerce site, known as the Digital Branch, gives customers access to the full range of products and services available at ADI,” describes Rob Aarnes, president, ADI Global Distribution, Melville, N.Y. “Since redesigning the site in 2020, we continue to make improvements and add new features and functionality that incorporates feedback from our customers. The implementation of our new Product Information Management (PIM) system transforms how we merchandise our offering and improves the overall online customer buying journey.”

ADI’s recently launched Capture Cloud VMS, powered by Eagle Eye, provides a smart and secure cloud surveillance solution that delivers an end-to-end video management system and helps dealers earn new recurring revenue. // IMAGE COURTESY OF ADI

Product Availability

While progress has been made in reducing the backlog and improving supply chain logistics, some product lines may still face challenges in returning to full production, Board at PSA says. Both the supply chain disruption as well as product bans in the security industry have posed significant challenges for security integrators, she says. “Integrators are faced with tough decisions on how to navigate the market and maintain their business operations effectively when they are not able to procure the equipment they are accustomed to purchasing,” she says. “PSA’s response to these challenges reflects a proactive and supportive approach to helping integrators make the best choices for their individual businesses.”

Board says some integrators have chosen to wait for the supply chain issues to be resolved, which requires PSA to maintain excellent communication with all parties about updates on lead times and product availability. “By relaying this information to the integrators, they can make informed decisions about their orders and plan their projects accordingly,” Board says.

New This Year in Training Offered by Distributors

This year Wesco announced the launch of IoT Advisory Services to help its customers stay current on the latest technologies. “As information technology (IT) and operations technology (OT) come together, customers across every sector are looking to gain real-time, data-driven insights into their businesses,” explains Tara Dunning of Wesco. “Through our combination of IT and OT expertise, deployment support, installation enhancement services, broad portfolio of products and supply chain expertise, Wesco and our partners help integrators and end-user customers define a clear path to solving their most important operational challenges by harnessing IoT.”

The distributor also recently launched Wesco University, an academy that offers technical and standards-based information for contractors, integrators, end users and consultants. The curriculum is organized by technology and industry, and contains courses of varying technical levels. Courses are provided at no cost, and many are recognized for BICSI Continuing Education Credits (CEUs) and/or CTS Renewal Units.

A significant development this year from PSA is the launch of PSA University, an innovative online learning platform. The platform serves as a central repository for education and resources from manufacturers and service providers, as well as content from PSA peer committees and industry partners. PSA is curating career paths on the platform to provide a structured roadmap for skill development and career progression within the security industry. By supporting integrators with resources that promote employee growth, PSA aims to address the challenges posed by the ongoing labor shortage in the industry.

PSA also is leveraging its “training bucks” benefit — available to both owners and members — to pay for training provided by manufacturers and industry partners.

Snap One revamped its virtual workshops to offer interactive and immersive learning experiences. “Through live sessions, participants can engage with our expert trainers, ask questions, and collaborate with fellow professionals,” describes Rus Rasmussen, senior director of worldwide education at Snap One. “These workshops cover a wide range of topics, including product installation, system design, troubleshooting, and more.”

Snap One’s online, on-demand, self-paced courses feature comprehensive modules and interactive content. The company offers certification programs to validate expertise and demonstrate proficiency in Snap One products and solutions. The training curriculum has been expanded to include new topics that address the evolving needs of the industry, whether those are technologies or best practices across a diverse range of subjects. Finally, in-person training at Snap One’s local stores are focused more on recently launched products, new third-party products, and the most important product lines.

Banner Solutions has begun hosting a series of webinars focused on the multi-family segment. “These webinars are hosted by different manufacturers and subject-matter experts to provide insight into the shift to electronics in the multi-family housing market and what solutions are available to help our dealers and integrators capture new business,” describes Ben Sultze of Banner Solutions.

The distributor also has been hosting regional events with small tradeshows, demonstrating the partnerships it has and the resources available to dealers and integrators.

Each of PowerHouse Alliance’s member locations offers a variety of virtual and in-person training for their dealer customers. In the last year, members have expanded their training offerings tremendously, says Dennis Holzer at PowerHouse Alliance. Several members have opened new training facilities and members continue to conduct virtual training. “For example, 21st Century Distributing hosted its third annual Virtual Roadshow where participants attended live interactive training and product demos over the course of three days, including key leadership, sales, and business tips from consulting group Consilio,” Holzer says.

ADI offers numerous learning opportunities throughout the year to help its customers learn about the newest products and industry trends, enhance their business skills, and earn CEUs. Those opportunities include training in ADI branches, at the ADI Expo Series events, in online webinars, or through ADI’s on-demand training platform.

At the expos, ADI has added new “Exclusive Pro AV Zones,” which feature leading Pro AV manufacturers, product demonstrations, and certification training courses. Attendees get a first-hand look at emerging AV technologies and systems design, says Rob Aarnes at ADI.

For other security integrators that cannot wait or need immediate solutions due to product unavailability, PSA has helped them explore alternative, comparable products that can be substituted.

Commenting on product delays, Porter at Snap One says ocean freight times and costs are moderating to pre-COVID levels, and air freight is seeing a partial recovery. “This allows us to source product closer to the time we need it, rather than planning many months in advance,” Porter says.

“COVID-related factory shutdowns are less common and not having a material impact on manufacturing capacity or delivery dates,” Porter describes. “There’s a general improvement on component availability, with a few pain points where specific chip suppliers are still constrained. The end result is better stocking and supply for 2023 versus 2022.”

Security integrators gather at one of Snap One's partners stores in Ft. Lauderdale as Jerry Bulda conducts a Clare training session on installation, setup, integrations, features and benefits of ClareOne and ClareVision. // IMAGE COURTESY OF SNAP ONE

“Integrators are faced with tough decisions on how to navigate the market and maintain their business operations effectively when they are not able to procure the equipment they are accustomed to purchasing. PSA’s response to these challenges reflects a proactive and supportive approach to helping integrators make the best choices for their individual businesses.”
— Brittany Board, PSA

Having knowledge of these trends has prompted Snap One to adapt its distribution strategies. “We are leveraging data analytics to gain insights into customer preferences and market trends,” Porter says. “This enables us to adjust product offerings, optimize inventory management, and deliver value-added services that support the success of security dealers and integrators.”

Like other distributors, Wesco has adapted to the ongoing changes in the global supply chain, building resiliency through several initiatives such as ensuring multiple choices for similar solutions, optimizing order-to-delivery time frames, and improving routes from manufacturers to warehouses, among other actions. “Although we are not back to the pre-pandemic levels, we are continuing to see steady improvement on product lead times and availability,” Dunning says.

Sultze at Banner Solutions agrees, saying the distributor is seeing many lead times come back into line from pre-pandemic levels. “There are still a few solutions with extended lead times, but we have kept a healthy backlog of orders with those manufacturers so we can keep a stream of those solutions coming into our inventory.”

Laura Stepanek is an SDM contributing writer. Laura was the Editor of SDM from 2001-2020 and first joined the publication in 1984. She holds a bachelor’s degree in English from Barat College of DePaul University.