Have you ever wondered why speaker manufactures do not consign speakers to dealers?

I think the answer would be for manufactures to set up a consignment store containing 10 speaker lines with low, middle and high end models so customers can listen to them.  Along with that, add electronic manufactures to show case their amplifiers and receivers.  Add also manufactures to showcase accessories such as speaker wire and inter connecting wire.  Each manufacture pays a percentage of the store's overhead.  I would make the store look really beautiful and located it near the Park Meadows Mall in Lone Tree, Colorado.  This is located in Douglas County which is 8th in the country for per capita income.

I am new to this hobby and I can see why it is in stall and decline mode.  When is the last time you have turned on the TV to watch a commercial selling 2 channel sound systems?

I look at home listings on the MLS and look at hundreds of homes that don't even have a pair of speaker in a room.  If this industry is to survive, manufactures need to educate the public to make them aware of another form of entertainment.  What about trying a direct mail or email campaign and researching a certain demographic more likely to be afford a nice system.  

I also like the idea of retailers setting up a really nice two channel system and home theater in a new home model home.  Then introduce the concept of developing a music room.  I think if home buyers were able to listen to a really nice 2 channel system, they just might want to create a listening space in their new home.

Thanks to all for this discussion.  

Larry do you read the reviews in Stereophile and The Absolute Sound and any others?

There are only about three retailers in Colorado who have a significant amount of gear on their floor to listen to.  However, most of the retailers work out of their homes and are lucky to have two pairs from a speaker manufacturer to listen to.  The ones they have on their floor are the least expensive models.  What if you wanted to listen to a pair of Paradigm Prestige 85F and 95F speakers and they only had a pair of the 85F's to listen to?  You certainly aren't going to buy the 95F's without listening to them first are you?  Also, what if while you were at the Paradigm dealer you wanted to listen to the Paradigm Persona 5, 7 & 9 and they didn't have any Persona's to listen to?  Do you think you would buy any of the Persona models before you listened to them first?  So then, how is Paradigm ever going to sell their Persona line speakers unless they consign them to the retailer so they can be heard?  Here is a case where Paradigm is their own worst enemy.  You would think they would prefer to sell their higher end line over their lesser expensive models wouldn't you?  In this case, how does Paradigm ever sell a pair of their Persona's if they are not on a retailers floor to listen to.  A manufacturer could consign speakers to a retailer for 3 to 6 months and then charge the retailer after that consignment period to motivate them to sell them.

I think this is why Hi-Fi sales are so slow throughout the country and why this hobby has been stagnant for so many years.  The industry needs to change in order to attract more people into this hobby.  How many of the people you know have a pair of speakers set up in their living room or family room to listen to?  The Hi-Fi industry needs to learn how to market themselves and to educate the public so they can become aware of how nice it is to listen to music in their homes the way it deserves to be listened to.  This is an untapped industry and you can't just wait for business to walk through your door without doing something to motivate people to explore this incredible entertainment platform.

One reason you'll rarely see a high-end two channel system in an open house or virtual tour is realtors. They will strongly advise getting the system out of the house so it "shows" better. Dedicated theaters are the exception, although still rare. 

My go-to dealer is 1500 miles from my home.  I recently was interested in some $12,000 speakers he sells and he shipped them to my home.  My only obligation was to pay for shipping if I didn't buy them. I ended up not buying and it cost me a few hundred dollars.  I really like to hear speakers in my home, not a dealer's room, so this worked well.

My guess is that there’s rarely any capital at risk with regard to getting what a dealer has IN a stock item OUT of it, so I’m not sure what the purpose of a consignment would actually be except to entice undercapitalized dealers to carry lines they shouldn’t. To keep the doors open dealers have to find something to sell that they can make a decent profit on so when a dealer goes belly up the causes are usually complicated and rarely have much to do with not being to get cleanly out of particular purchases of demo items.  Manufacturers are sometimes MORE on the hook because bad accounts go bad gradually, then THEY are the ones who can't get back their money from a bankrupt dealer.

@larry5729

I attend open houses in our neighborhood and I have yet to find a home with even two speakers in either their family room or living room.

That's interesting.

Q- How can you net $1 million in the high end audio business?

A- Start with $2 million. 

Thank you all for your feedback and discussion.

I personally feel most of the dealers operate their business on a shoe string and they are often located out of their residence.  Because of limited resources, I feel manufactures need to consign 3 or 4 speakers so customers can listen to different price points.  I think customers might surprise the manufacture by deciding to spend more money after they hear the more expensive speakers.  Once people hear something better than the price range and budget they have targeted, they realize they will not be satisfied with the less expensive speakers long term.  

I think manufactures are making a huge mistake by not consigning inventory because they will limit themselves to selling just their low end lines.  They could perhaps consign them for 3 to 6 months and then charge the dealer if they are unable to sell them.  However, if they can't sell them in 30 to 60 days, they might as well close shop because they are going to starve to death.  This is where salesmanship comes into play.  They just need to learn how to ask for the order and turn their inventory.  Anybody can sit down with a customer to show and tell, but this is not going to generate income and keep the doors open.  If they need to provide a discount, they could increase the size of the order by adding an amplifier or something else to build gross profit dollars on the sale.

Dealers also need to market themselves.  Just waiting for the phone to ring will put anyone out of business.  This is why the Hi-Fi market is stagnant.  Dealers need to educate the public to teach them about what they are missing out in terms of home entertainment.  I would partner with a new home builder and perhaps install a two channel system in one or two of their model homes, with music playing in the background.  I also have noticed home builders need to layout their floor plans to 

acomodate a 2 channel system.

a 2 channel system.  They need to provide space for a component cabinet as well as where you locate the speakers to create a good sound stage.  This will help home buyers imagine entertaining their friends with a great sound system being played in the background.  This in turn might motivate their friends to want to buy a 2 channel system for their home.  People do want to keep up with the Jones's these days in order to show off their success.  What is the cost of a $10,000 to $20,000 2 channel system when comparing it to the price of a $500,000 new home.  It's like being penny wise and pound foolish.

Actually, it isn't anyone's "job" to do anything but try to scratch out a living. I would think there are manufacturers who do indeed consign speakers to dealers they trust. I'm in the natural food business for 42 years. I've had to reinvent my business several times over the years to keep the ball rolling. Smart business people do what it takes to stay in business.  

I used to be a dealer back in the early 80's .. most of the audio lines have multiple items and you have to represent all or most of the time was not easy to pick only one model of their speaker if they happened to have 4 other models.  Question to the dealers are the brands still sort of exclusive? ,say if you carry Vandersteen for example, could a local competitor of yours suddenly decide to take on the brand that you have built up  pick up the line being two blocks away from you and start selling them in your market? 

This is a non issue really. OP should seek out products from more established manufacturers as they usually have a good dealer network or even their own stores, i.e. Bang & Olufsen, Devialet, Harman, Apple, etc. Or brands with vast dealer networks such as Bowers & Wilkins, Martin Logan, yadda, yadda, yadda...

"When I was in the sales side we tried to resolve some of this by offering in home demo. With the condition that if the customer did not like it he would not get a refund but credit."

Yikes, while I'm very empathetic in regards to the problems faced by audio dealers, I also couldn't imagine going for that solution, as a customer.
If I were curious about a $15K speaker, in your model just demoing it (at home) automatically commits me to having spent that 15K (if not on that speaker, another you sell).
No way I could commit lots of money just to get a demo of a speaker.  I hear tons of speakers that seemed appealing during research, but which I didn't end up liking.

I've had a couple of in home demos and for the last one even offered to pay the dealer for his time.  He said no problem, it's part of what he does as a dealer.   (It turns out I intend to buy the speaker I demoed, from that dealer, btw).

Stevecham, you are absolutely right about your above feelings.

We just boxed up a pair of Paradigm Persona 3F and a Naim amp and preamp/dac streamer and drove 40 mins to a guys house to home demo.

If you offered to put the gear on your credit card, help box and unbox the speakers the dealer was being difficult. 

There has to be an elastic relationship, as long as a key piece of demo gear is not out ouf our shop for more than a day we have no problems with lending out test gear. 

As per quality gear you can get from the above list, sorry most of them have restocking fees of 15% and without having a whole host of products to compare them with which is what a store offers you, it is hard to make a real judgement. We have had at one time JL audio, Paradigm, Kef subs all in the $1,500-2,000k price range for our clients to demo. 

If someone was considering PS Audio and didn't need a 250 watts, the new Krell amplifiers are freaking amazing sounding as well as the new Coda amps. 

Dave amd Troy 
Audio Doctor NJ

@tastyfreeze: "I hate the traveling to demo but do not have any other choice."

Yes, you do. You can in-home demo directly from high quality manufactures such as SVS, PS Audio, Schiit, Liberty Audio, Wyred 4 Sound. I'm sure there are many others and the list is growing.

All of the above underscores why brick and mortar dealers are on the decline. I don’t want it to be that way, on the contrary, I would like to see a fluorishing and robust audio dealer network. But when I wanted to home demo Vandersteen 3As from a San Francisco-based dealer years ago and was willing to put up my credit to cover any damage in the transit, boxing, they refused. I only lived a few miles away at the time. They had an in-store demo pair that wasn’t in perfect condition either as you could see they had been moved around quite a bit by the various scuffs. I called Richard Vandersteen and spoke with him about my experience with that particular dealer and his reply was, to paraphrase, "yeah, I’m not happy about it, but some of them are like that." Sheesh.

I have no problem with such dealerships going bust if that’s the "common" approach to "selling."

Cutomers come FIRST. They are the LIFEBLOOD of ANY business, big or small.

How feasible is it to expect a dealer to have 1 example of every model carried, then work with company distribution to drop ship all orders ?   There would be an investment requirement to have basic stock but not as much as needed to carry inventory.

@Larry5729,

You could join the Colorado Audio Society (CAS). Its full of like minded audio folk with many fine systems to hear when they have meets at various members' houses.  

Steve59 everyone has a different persepective and I am hardly a rich guy all of my money made in the last 15 years is sitting in my audio store.

The reality of what you think are naueasting markups don't tell you half the story, if all of us brick and mortar guys were making so much money don't you think there would be lots of audio stores not less?

The reality is that what you take home after you have paid all of your expenses is actually very little. 

Our shop is run out of our 4,000 sq foot Victorian Home we turned 4 room s into showrooms and stocked the place with many exciting product lines from top manufacturers.

When you factor in rent $6k a month, electricity $900 a month, internet, saleries, insurance, and all the rest you have a monthly expense of $10-15k a month, how much gear do you have to sell to clear that, a lot more then you think. 

Factor in shipping costs, credit card costs, the invariable discount many of your clients want and what you are left with isn't that great.

Then factor in the cost of purchasing new demo gear which has to be paid for and you can see why this is a very difficult business.

If it wasn't for our custom installation business which is much more profitable in general we wouldn't be here either.

Dave and Troy
Audio Doctor NJ

Good topic. Congrats on the Kanta’s! I’m interested in the 3’s but, can’t justify the margin so will probably be waiting awhile for a used pair to come up. The thought of somebody waiting days, weeks, months? for a fat fish to get caught on his hook and reel him in bewilders me. ’coarse i’ve been blessed with a trade and honest work so I can’t really relate. (smell of self richessness?) The markup on hifi is nauseating and I refuse to pay it. I find the product I like online in like new condition and bring it to my retailer, tell him I like the store and want to do my part but can’t justify retail and more times than not we’re able to strike a deal.
The fact that B&M srore’s are going away is proof enough this business model doesn’t work and with internet information consumers are more aware than ever. Both manufacturers and retailers will need a new business model to survive.

It’s the dealer’s job to provide demos. If he can’t demo what interests you, then I think you are in the wrong dealer.

Indeed. I surveyed the dealers at my nearby big city and none could demo my exact model, although they were dealers for the line.

I traveled about 250 miles to another dealer who demoed the model I was interested in and I gave him the sale.

Though, every time I turn mine on I think...how can anyone live without one of these? 

Yes, stereos are so 1950s.....

My experience in Colorado has been most of the dealers here work out of their homes with a shoe string budget.  As a result, they will often only carry the lower cost speaker models.  For example, I went to a dealer who carries both Monitor Audio and Paradigm speakers.  I wanted to compare the Paradigm Prestige 85F towers to their 95F towers and compare both of these to the Monitor Audio Silver 8 and Silver 10 towers.  The only speakers they had on their floor to demo were a pair of the Monitor Audio Silver 8's and a pair of the Paradigm Prestige 85F towers.  I felt the dealer assumed their customers would not spend the extra money on the larger more expensive speaker models.  Based on this scenario, how is it possible for Monitor Audio to sell their Monitor Audio Silver 10 and Gold series speakers or Paradigm to sell their larger Prestige speakers and Persona speakers if a customer is not able to listen to them?

I am not a big fan of Best Buy.  However, they do have multiple levels of speaker models to listen to.  They have it set up so you can listen to a pair of Bowers & Wilkins and by pressing a button you can listen to a pair of Martin Logan Motion 60's within seconds to compare.  They also have that same setup to compare amplifiers and receivers.

I attended the Rocky Mountain Audio Festival last October and realized the value of spending a few days listening to higher end gear.  It was also very helpful to talk to people attending the show to ask their opinions about certain manufacturers.

This is quite a fascinating hobby and I am just getting started.  What amazes me is how few of us are out there.  Most of the public has never heard a high end 2 channel system and as a result they do not know what they are missing by not having a music listening room to come home to.  I attend open houses in our neighborhood and I have yet to find a home with even two speakers in either their family room or living room.  

One often has to travel to be able to experience expensive boutique products. Nothing special about home audio there. It goes with the turf. These days smart vendors focus on facilitating in-home demos or audition periods. Always better to hear thing s in your own room if really serious about something.   

Having said that, I always try to check out B&B audio shops that sell things I might be interested in when I travel, but I generally don’t travel more than 60 miles or so just to audition something. I live only 60 miles or so from DC metro area so there are multiple shops not too far away when needed. Not all have that luxury though I am sure.

I had the same experience with Klipsch. They wanted me to travel 3 hours to demo a pair of speakers.  Ended up with the Focal Kanta 2's.  Klipschs' loss.  Focal has a markup of 47%, the retailers take, as I assume most others do as well.  Why they can't buy them, demo them, then re-sell them and still make a profit is beyond me.  Happy with the Kanta's as my L/R/C.

As a former store owner, I have a lot to say on this but am too busy to comment now.  Suffice it to say that manufacturers set dealer allotments based on many variables.

As for the HD story above, this is why HD and Walmart and others have ruined everything about quality manufacturing and made the world into a "worst case" in every item due to one and only one reason:

INSATIABLE GREED.  Period.

Also consider the dealers dilemma.Besides knowing that even the best customers will shop price as well as selection, he is competing in both the real and virtual sales world.He accepts this and keeps the store open. So maybe he selects three speaker brands four at the most. He does not have unlimited room and the room he has can properly place maybe 2 pair of speakers properly.Faced with three brands he would like to display three models in each line to hit popular price points. Also as an attraction and possible sale 1-2 pair of top line models. Right you are if you are spending 5k-20k or more on a pair you would like to hear them.The dealer demos from stock. If he can place say 2 pair of 15k-20k he is looking at a bit of a money in demo. When the year ends those demos no longer bring the same retail and often are sold at deep discount. This l is tough for the small or moderate location. You may think there is big profit but remember all the hours those sales guys are sitting waiting for you to come in, they get paid and the lights stay on. Store owners accept all this.There is no good solution. I have been there on both sides. Customer comes in you judge him a sale not a looker. Make an appointment and you set up his requested speakers best you can. He listens and goes away. You repack 20k-30k of goods and chalk it up to you did your best. When I was in the sales side we tried to resolve some of this by offering in home demo. With the condition that if the customer did not like it he would not get a refund but credit. This qualified the customer as real and they got what sounded best to them. A compromise for sure.

Retailers make the money, not manufacturers - especially big box stores. I work for a manufacturing company. We once petitioned Home Depot for a $1 price increase due to proven legitimate raw goods increases (steel, corrugated, EPS). Home Depot raised the price in their stores $15 as a result. That was on a $114 item - became $129. Took us 3 months of negotiation to break even, while THD increased profit by $14 each.

If the retailer makes more than the manufacturer then that is truly upside down. 

Elizabeth, 90-day on paper terms are extremely rare even for demo gear, but they do exist and sometimes more.You are correct otherwise. And distributors do not get a big chunk. They get a relatively small piece--they only provide a service including sometimes warehousing and shipping.

teo_audio, where do you get the notion that the dealer makes more profit than the manufacturer??? I used to be a dealer for Wisdom, Talon, Electrocompaniet, Spendor, Sim Audio, Sim2Seleco, TacT, Myryad and a number of other manufacturers. What do you think my margins were before rent, medicare, FICA, insurance, CC fees, utilities, forget paying anyone for any labor? What percentage do you think would make a break-even? Do you know how manufacturers price their products? Especially the more high-end, extremely limited edition ones? I didn't mention cabling and other accessories which are all over the map from mass produced to handmade with exotic materials and expensive equipment required to produce them within a specific range of tolerances.

you have a fantastic dealer in Audio Alternative in Fort Collins......

The dealer makes the lion’s share of the money in some ways.

And the manufacturer carries a considerable load, in the remainder.

If the dealer is not holding up their end...well....

Dealers can ask for an accommodation price (or are offered one) for showroom floor samples, is how it might go.

There’s always a way to make it work.

It costs $$$   Two dealers local to me do a pretty good job of showcasing some pretty nice speakers...  Audio Visual Therapy in Nashua and Natural Sound in Framingham.  They have some  pretty expensive speakers on display for demo.   And if you want really insane speaker systems visit Goodwins High End in Waltham MA

Great question and one that I also was wondering about.  When I was shopping for some expensive speakers recently, I couldn’t find any place to hear them. I called every dealer within several hours driving distance. Dealers whio carried the brand (KEF) told me they only could afford to stock a very limited selection of high end models.  Can’t really blame the dealers. The investment to carry a wide selection of high end equipment is pretty big. I called the US distributor and asked how they could sell the speakers whien they weren’t available to audition.  No satisfactory answer.   You would think that consigning speakers or temporarily lending speakers to dealers is clearly  in the manufactures’ interests since it obviously would promote sales. In the end, I bought KEF Reference 5 speakers but, because no one within several hundred miles stocked them,  I didn’t I hear them until they were delivered (i based my decision on hearing the KEF Reference 3 which has many similarities).  . 

I would think a manufacture would have vette dealers that they could send them a few extra products for clients to try.

I hate the traveling to demo but do not have any other choice.  

Maybe they assume people who have the funds to buy high end audio gear might travel sometimes.   I know when I travel I tend to check out local high shops.   I’ve bought cars across the country, flown out and drove them home several times.    High shops are kinda dwindling down in smaller markets, blue tooth has killed the low end / midfi market 

In today's world, consignment would create too many satellite in-home dealers who weren't exactly serious about selling.  I am a dealer and operate out of my home, but I have also invested heavily in product and am committed to seeing returns on those investments.  This buy-in is a commitment to the manufacturers and distributors that is very much needed.

Decades ago this wasn't as much of an issue as in home dealers weren't really a thing.  Manufacturers would consign some gear knowing that the dealer would move some.  To go with that, gear also wasn't as absurdly priced as it is today and there was a larger market segment willing to pay for quality.

I've had several clients who trade gear religiously tell me they thought seriously about being a dealer without ever realizing you have to pay to play.  It's amazing how quickly their tune changes when they look around at my stock and realize I've had to invest in every piece.

I don't think it's a manufacturer's job to offer consignments. It's the dealer's job to provide demos. If he can't demo what interests you, then I think you are in the wrong dealer.