While the Australian dollar continues to shift at a daily rate, it has remained relatively close to parity with the US dollar for an extended period of time now. This is in stark contrast to 2008, when our dollar moved between 95 and 60 US cents, followed by a recovery to 93 US cents in 2009. In early 2010 it again dropped to the 80 US cent mark, before returning to the levels we see today.

This extended period of relatively low volatility, and the consequent high rate of the Australian dollar, has led to a surge in online purchasing across a range of industries. The connected home market is no different, with the high exchange rate prompting many installers to buy direct from the US over the internet, thus avoiding the middle man and pocketing a tidy profit in the process… win, win, or so it would seem.

Unfortunately there are pitfalls installers and integrators should be aware of before heading online.

First and foremost is warranty, or lack thereof, warns Len Wallis, director of Len Wallis Audio, a leading supplier of home automation and entertainment system and specialist design and installation company. With warranty issues in mind, the company buys its products from importer-distributors, and does not see the online marketplace threat.

“I don’t see serious competition from online purchases,” says Len. “If there’s too much differential then, yes, the potential customer might check direct purchase prices, but when you buy online what do you do about warranty?”

While importer-distributor prices might remain higher, often as a result of existing stock bought at less advantageous exchange rates, the peace of mind resulting from a solid warranty is well worth forfeiting minor savings, he argues. Though Len does suggest that in order to remain competitive, prices should always remain within 20% of online direct sale prices.

Warranty issues resulting from online purchases can lead installers into a legal minefield as, following an online purchase, the installer is legally recognised as the distributor of the product in Australia. They are, therefore, also liable should a product fail, explains Michael Leahy, Custom Electronic Design and Installation Association (CEDIA) legal counsel.

“Buying online is problematic, as you take on warranty obligations, you have no one to turn to except who you bought it from – whether they be in China or Texas.”

Interestingly, he adds that should the end user be the one to purchase the product online, obligation rests with them. And this is becoming an increasingly common occurrence. A growing online marketplace and increasingly tech-savvy customer based, combined with the high dollar rate, has seen many clients purchase their own equipment online for the integrator to install. This means many installers are losing margins they would previously attained from the on-sell and up sell of equipment, which is compounded further by the already existing market changes, such as the introduction of the iPad splintering the sale of traditional touch panels.

Web-savvy consumers make it increasingly difficult for installers to compete in a global marketplace, but educating your clients about the associated warranty and legal pitfalls of online shopping may be useful in combating this.

Melbourne-based importer-distributor of digital entertainment and home automation products, Alloys, argues that saving a few dollars through online purchasing is not the ideal way for an installer or integrator to stand out in the marketplace – particularly considering the warranty issues.

Andrew Rubin, Business Development Manager, explains: “The dollar at parity at the moment is a bit of a worry, but our key clients are systems integrators who have programming, hardware and wiring expertise in-house – those that can demand an adequate margin for their services.”

He argues that opportunistic online purchases will not, in the long run, beat quality service and quality installations featuring warranted products.

Peter Curley, managing director of home automation import-distribution business Home Theatre Group, agrees that home automation integrators should think outside the box when attracting customers, and market themselves on quality products and installations rather than cheap prices fuelled through online sales.

“You can’t expect business to walk through the door – integrators have to look into different business opportunities – for example, schools or universities – they have to get creative. There’s no point in going direct for purchases, there’s no money in it, only trouble.”

From an installer’s perspective, James Billington, director of installation company Smart Home Systems, agrees. As a major systems integrator working with top-end developers, architects and builder-developers, quality products which complement the design expertise of the business are considered more important than quick-fix online savings.

“Even for lighting control, we buy products where extensive training is necessary; expertise is the essence of our business,” James explains.
Sticking to its regular supply channels means the company has been largely unaffected by currency movements, he adds.

“If the exchange rate holds we may see somewhat lower prices filter through supply channels, but we haven’t seen this yet.”

Rob Sanders, managing director of importer-distributor Ozhifi says, in most cases, online prices simply aren’t low enough to justify the risks.

“We only buy from companies that give a good margin. If we get a good margin, then there’s little point in the installer going direct.”

There’s also no saying how long the Australian dollar will remain at, or close to parity, which also impacts how worthwhile buying online is. A simple fall in the Australian dollar would make online purchases less advantageous.

The nuclear fallout of the recent Japanese earthquakes and tsunami saw our dollar trade between 98.83US cents and 99.74US cents over a less than 24 hour period in mid-March. And being that it is fuelled by all range of factors, from natural disasters to import and export, house prices and job figures, there is no exact science to predicting where the dollar is headed next.

CONTACT:
Len Wallis Audio (02) 9427 6755 www.lenwallisaudio.com
Alloys (03) 9415 8888 www.alloys.com.au
Home Theatre Group (07) 3276 1355 www.htgroup.com.au
Ozhifi (03) 9646 8511, www.ozhifi.com
Smart Home Systems (02) 6686 7885 www.smarthomesystems.com.au