Is Selling Direct Viable for Manufacturers?

The better manufacturers both large and small have effective in-house service & support that can easily be leveraged into a direct sales model. As shrinkage in the domestic retail channel continues, USA will be down to 20-40 meaningful high-end shops in major urban areas only. The few shops left are lowering their stocking levels to the point that these retailers are pretty much useless to all but a few large manufacturers. Moreover, as the market for high end audio declines, there is a big question as to whether these shops can do anymore for a manufacturer what a retailer is supposed to do, which is to pull in new customers that the manufacturer would not otherwise obtain. That is what the retailer's 30-40% share of the purchase price is supposed to buy for the manufacturer.

Meanwhile, the business at all price points is becoming fragmented by an expanding number of small boutique manufacturers. These small manufacturers can't get traction with the remaining retailers, who are uninterested in dilluting their existing brands and who place demands on margins that the small manufacturer cannot meet by virtue of his limited economies of scale. The smaller manufacturer is thus both driven toward and stands to gain through a direct sales model or a limited distribution model based on low-margin reps selling out of home-based demo rooms.

Of course the export market is different and does require retail distribution.

In the zero-sum game of a declining 2CH marketplace, to the extent that many smaller manufacturers erode market share, the few remaining large ones lose and lose big. The larger manufacturer has the most to lose and probably will.

No, their business models wouldn't support it. To set-up this kind of retail support network internally (i.e. overhead) would take away the 40% margin or most of it pretty quickly and not enable personal support in-home for people who aren't experts in designing a system vs. a piece here and there.

This is why they have chosen to have dealers in the first place.

I agree with Restock, plenty of small manufacturers will sell direct with money back after a 30 day trial, Ridge Street, Daedalus, Tyler I believe. Certainly better than a quick listen in a dealers with different ancillaries. Having said that, a reputable dealer with a big ticket item, should offer a home dem too.
No reputable manufacturer should offer direct sales to an area covered by dealers and distributors. It just is'nt fair to them and believe me, they would find out fast and drop the line.

I think most of the well known companies could sell direct if they would offer the consumer the 40% discount they give to dealers. If they were trying to sell the product at full retail it would be hard. Like it or not price in a lot of cases dictates what people will buy. I own all ARC gear but if VTL, VAC or Hovland offered me 40% off I would be Inclined to buy it over ARC. I think eventually the big manufacters will sell direct. It's just a matter of time.

The big ticket items could not prosper without the use of talented companies/individuals who can properly represent them though.

I mean, who is really going to spend upwards of 5K on a component mail order? Maybe a few, but I think the majority of clients who want that type of item want to see, hear, touch and feel and learn what it is capable of from a knowledgable person who can demonstrate properly.

If I have the choice, of auditioning an item directly from the manufacturer with an in home trial (say 30days in my nicely fine-tuned system) vs. going to a dealer who has the item sitting around and may demo it on different equipment in badly set-up rooms and offers you only a few hours time - not much of a choice - I would rather go manufacturer direct. There could be traveling demo models that are shipped from place to place to allow people auditioning for free.

Also talking to the manufacturer directly you get quite often more reliable and accurate information than from many dealers.

As for the marketing - Do dealers and distributors really do so much marketing that the manufacturer couldn't take over that part?

There are some rare exception where dealers can make a difference and that do provide excellent service, but sadly those are in the minority these days. In the other cases, I would rather deal with Nelson himself than the Pass dealer in town who doesn't have most pieces in stock and won't allow you to audition the pieces at home either.

Either the manufacturer must go entirely direct, or not. The dealer network will not allow dual distribution, unless they were crazy. Think about it, buyers would use the dealers for auditions, then order direct. Dealers would flee, quickly.

100% Direct viable? For some small, cottage industry brands, yes. Others, no. The business model for large manufactuer's needs significant marketing to get break even.

Earlier I posted a discussion of 'in home dealers', that seems to be a middle ground.

Some items, particularly lower priced ones can survive with good marketing campaigns, and money back guarantees/in home auditions/etc.

The big ticket items could not prosper without the use of talented companies/individuals who can properly represent them though.

I mean, who is really going to spend upwards of 5K on a component mail order? Maybe a few, but I think the majority of clients who want that type of item want to see, hear, touch and feel and learn what it is capable of from a knowledgable person who can demonstrate properly.

Particularly with high end speakers!