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Alternatives to Brick and Mortar

I didn't want to further derail @millercarbon's Tekton Moab thread, but I think it is a worthwhile topic to discuss how to find speakers that meet our listening tastes, aesthetic tastes, budget, room, etc. Brick and mortar retail is dying because it's becoming very difficult to operate profitably. 

Full disclosure - I own and operate an e-commerce cycling business. For ten years, I also had a brick and mortar operation (multiple locations). The economics are a bit different than audio since our average sale was only in the very low three figures, but it's not that different. We still had bicycles that we sold for over $10K, but the cost of those sales was quite high. Over the ten years we had the stores (which were 4-5 times the national average in size and revenue), we made a profit from the stores in three of those years. Fortunately, our e-commerce business was much more profitable and allowed us to cover those losses. 

Brick and mortar is becoming more expensive due to higher lease rates, higher payroll costs, and competition with other sales channels. To keep a brick-and-mortar sales channel viable, the manufacturer has to offer the dealer a fairly sizable margin (generally 35% to 60%) and have enough sales velocity that the store can cover their expenses. It's pretty rare these days that there are products that fly off the shelves at a specialty audio retailer. 

Our handling costs are a lot lower in our e-commerce operation, but even in this business, the only products we're willing to carry that have less than 40% margins are products we can get 8 turns or more on. This means that the manufacturer has to have plenty of back stock and be able to replenish our inventory quickly, and also means that the product has to have high and consistent sell-through so we can accurately predict our inventory requirements.

For a specialty audio dealer, there are very few products that have high volume. If you think about how much time you've taken up of a dealer, products you've brought home to listen to, etc., versus the products you've actually purchased, it's an awful lot of cost that has to be absorbed by the dealer. I've read countless posts on this forum and others of people that have brought multiple products home from the dealer (or from an e-commerce vendor) only to return it. This costs the dealer (whether brick-and-mortar or e-commerce) a lot. A lot of this returned product has to be sold as open-box or b-stock at considerably less profit, let alone the shipping cost that is often absorbed by the dealer. To stay in business, they have to make enough profit on the product they actually sell to cover their expenses.

For an audio manufacturer, they have to consider the cost vs the value added by having a brick and mortar channel. More and more are deciding they can offer more value to the consumer by keeping the dealer margin in their own coffers. 

My career has resulted in my living in a number of different areas in the country since I've been an audiophile, so I've probably shopped at 25-30 different stores. Very few of these have had listening rooms that did the products justice. In many cases, the rooms were crammed with 5 to 20 different speakers. Even in the shops that catered to high-end budgets, the speakers were not optimally set up. This isn't surprising since the dealer is trying to sell a lot of different models. 

In the more affluent markets, dealers are willing to provide home auditions which helps a lot, but this is expensive for the dealer and they have to count on a reasonable conversion rate. Too many consumers are willing to take advantage of dealers that offer this. I've seen posts from consumers that literally try a dozen or more speakers, or other components. How do they expect the dealer network to survive. 

So what's the alternative? I think for the manufacturer, the best alternative is to do what companies like PS Audio offer. They have a very nice showroom at their facility if you are willing to make the effort. They offer easy returns if you want to purchase a product and aren't happy. And they participate in many audio shows where you can compare their products against many others. By selling direct, they save the considerable dealer margin can cover a lot of customer service costs, including dealing with higher returns and supporting more audio shows.

Sorry for the long post. I look forward to hearing your thoughts and ideas. 
128x128jaytor
mozartfan
2,143 posts
 
Audio shows for sure,,, The only way labs will reamin open over comming years if via audio shows. Every major city. 2X's a  year. Along with these shows , labs will need to supply pre buyers with local techs who will service that component. 
A good tech  is dif to come by, repairs in a  timely , reasonable cost. 
I called Brooks Jadis shop in Los Angeles , he suggests I ship the Defy7 for a  ck up,, = ship fees each way =$$$ Ridiculous. 
batron Rouge tech, not convenient, too slow on repairs,  weeks on end. Thankfully i found a  exp tech here in new orleans, by a  stroke of luck. 
verdantaudio's avatar
verdantaudio
1,470 posts
 
The ambassador idea is interesting and lots of times, if you have a customer geographically close to someone who wants a demo, they will consider it. 

The other thing that is interesting is the idea of having more robust, regional, audiophile clubs.  I had a local audiophile club reach out to see if I wanted to demo equipment during a meeting.  The answer was YES!!!!!!  When can I show up?  

To me, that is a really fascinating approach because you get a group of people together that know what they are listening too and at minimum, can have a positive experience.  It works well for retailers and for small manufacturers like me but I am limited to the Northeast.  Big manufacturers will never turn out.  

The problem is regional leadership.  How to you join?  Is it just a local meetup?  Where/who does the hosting?  etc...  All very difficult.  

Shows are great but those are very specific parameters in terms of room, size etc...  Most exhibitors have a carefully curated list of songs that sound great on their system and it will take a crowbar to get them to deviate.  I take requests at shows and will schedule after hour demo times but again, not everyone is into that.  

It is a challenge and COVID 19 just makes it worse.  
larstusor
59 posts
 
Some of us live hours from any commercial airport and even further from a major city that would have high end dealerships at which to audition an array of competitive product lines. We have to either devote a huge amount of time and resources to search out products we are interested, including traveling great distances to see and hear them (with no A/B comparison available) or rely upon reviews and opinions on forums and in the print media, and on "mail order".  This is just a reality for those in the rural regions.  I have been fortunate enough in trying to use good judgment and buying decent quality components and speakers this way (without hearing them first).  Could I have done better at the same price point?  Maybe. I'll never really know.  But that's the price of a having what I believe is a better quality of life than living in a more urban setting.  I love listening to music but I love the sights, sounds and experience of nature even more, so I choose this over the convenience of better access to B&M dealerships.  I think as our population de-urbanizes even more in the future there will be less and less opportunity for the B&M model to compete successfully.  It is a matter of logistics as much as profit margin.
arion's avatar
arion
156 posts
 
There have been many good points made here. One of them is that a marketing model for larger more expensive gear can be very different than one for lower priced easily shipped gear. One major element has not been mentioned, the high cost of advertisement and marketing. It's truly a challenge for a small audio company to continuously shell out the kind of money required for even minimum exposure.

Shows are a good place for product exposure. Try getting one of the few available decent size rooms, impossible and hugely expensive. It costs us about $10K per major show, exhibiting in one of the small rooms. The idea that smaller audio companies can travel around the country and exhibit in six to eight shows per years in just not practical or affordable for most, not to mention the major investment in the time it takes to prepare and execute. Don't get me wrong, I love doing shows and would exhibit in many of them but the returns aren't there and it's not practical. Covid-19 has made a mess of this option.

Local audio clubs and home dealers can be a supplement for small manufactures. Typically the areas get saturated quickly especially in less populated regions.

Our new approach is to use multiple avenues. We have speaker models that are easy to ship through FedEx or UPS and are expanding on them. We will also try to have listening stations (non-selling dealer or home dealers). Our goal is to make available: in-home auditions, local auditions at audition only dealers and auditions at our showroom. Covid-19 makes auditioning a challenge.

Mike
jaytor's avatar
jaytor OP
747 posts
 
The current pandemic situation has to be particularly challenging for manufacturers that rely on being able to demonstrate products, and for retailers in the same situation. This is certainly likely to accelerate the demise of many brick-and-mortar audio stores, making it even harder to audition high(er)-end audio products.

When I started this thread, I was assuming we'd get past Covid-19 sometime in the next 6 to 12 months, and I was really wondering about our options when it's safer to start socially interacting and travelling again.

I don't really understand the thinking of hotel managers that are charging ridiculous amounts to host audio shows. Yeah, they have to move some furniture around, but it has the potential to fill every room for several days over a weekend - let alone fill the restaurants and bars after hours.

I used to attend CES every year in the late 90's, and really enjoyed spending a day at Alexis Park where all the high-end manufacturers were exhibiting, but my employer at the time was covering the tab. I was thinking of attending Axpona or Rocky Mountain this year (pre Covid), but the rates the host hotels were charging were insane. I can't imagine how much they are charging for demo rooms.

Perhaps hotels will be a bit hungrier for this business post-Covid and will be more reasonable. 

I like the idea of local audio clubs hosting vendors. Our local club has done this on occasion, but generally for tech talks - not demonstrations. Finding a suitable venue for an audio demo can be challenging - particularly one that is large enough to handle more than a small number of listeners.
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