Supporting Local Audio Stores are we?

I try to and have but I do worry about them. Its tough out there!

I used to support my local dealers but they have long since stopped carrying any product I'm interested in. The few that have survived are only interested in HT, and that is probably why they survived. And I live in a community with over 1.5 million folks in the greater metro area.

I've learned to do 'due diligence' over the internet. If the product I want can be found used, or new, locally I'll get it. But for the most part it comes UPS via the internet.

The days of old fashion B&M dealers with home demo stuff and a service department are long gone so far as I know, and without that, well who cares, even if you're a nice guy.

I have a few priorities that I have to support before an audio store gets a look in. It makes little or no sense to me in most cases to buy anything 'new' as TVAD has stated, if one looks at the gear on here for sale second hand a vast majority of it is 9/10, virtually as new coupled with very low use, not very old and can be had for perhaps half of the dealers price, and even lower than that for the 'new' item on some items.
My local store has B&W speakers and I would be buggered before I bought a pair of those, even second hand, even for nothing!

I have the luxury of being 10 miles from one of the countries true high end audio stores. They have been very gracious and liberal with home auditions and their staff goes to every effort to help me get the most from all them. I have purchased some new and also some demo pieces, often at prices only slightly higher that I see here. I think the support I receive is invaluable and has payed dividends.
Getting a well integrated system that delivers great musicality is the key for me and the folks at Goodwin's have helped make that possible.

I try to, but still buy mostly used. I just bought a pair of speakers from a local store as I got a few points off list and I auditioned and liked the speakers at the store (several times and even brought in some of my own equipment and hooked it up to the speakers)and I don't think it is right to take a lot of time from a store and not give them some business. Now, I also bought a preamp used that the same store sells. However, I saved over $2,000 doing so and the store did not stock that model so I could not get a demo. In fact, I am frustrate because I want to give the store more business in, for example, cables, but they don't have 'em in stock for me to borrow and try out. I am sure they don't stock them because of the expense of carrying inventory, but that becomes a "penny wise and pound foolish" proposition, to me, as service and education is where a store can "earn" my paying more than I can buy used and, if they don't provide the service, then I have less incentive to buy from the store. I figure I would not buy used if I was only saving 10-15%, but if I am saving a third or so then it is hard for me to justify paying that much extra just to support my local store.

On the net, via Audiogon various cables and power cords have come to me. I have auditioned pproducts from net brick and motar stores, when they were what I wanted or was looking for and passed the audition I bought them. As I rule though, I buy local, usually demo pieces. Have always gotten great service, long term loans (2 weeks to a month) and in my opinion great deals. Is a brand new piece of equipment better than a demo? Quite possibly, but is a demo better than a second hand piece again quite possibly. It comes down to this, and up to 10 or 15 percent difference the money goes locally. If we don't support our local stores, in time they will disapear and it is my bet that the quality in audio gear will go with them.
If a manufacturer has no middle man and to need to demo his equipment, he just builds what he needs to sell. With no chance to compare easily, except via friends, the quality does not have to stay there. As has been proven in the past. It is multiple outlets, from store selling new and used equipment, the net, Audiogon in particular, and people just putting stuff out there in the neighborhood that makes the market happen. There is enough room for everyone and for them all to make a buck but not a killing. As the old market adage goes, bears make money, bulls make money, hogs get slaughtered.

I live in a High End Audio Ghost town (Houston) with only 2 (1 really) high end store. They don't discount at all, are very nice, but service a very small clientel. I do a try to buy vinyl from only the local guys unless they just can't get it.

But it's tough to compete with the internet. I think the high end manufacturers that don't sell over the web for reasons of principal are stuck in the previous century. It's a small world, with great price discovery and unless you have a truly unique product or great following, both of which can disappear instantly, you are just costing yourself sales. The mark up on a lot of the high end audio gear is absolutely shocking.

It's getting tough to buy new because dealers carry limited stock. I have a dealer in my area that gives me good deals, lets me audition, hell he has shipped things to my house. when he has something i really like I try to buy.I try to use the used market to show me the way. I think once i'm more educated and want new items that are several thousand dollars, the used market will be very attractive, and might I say, I'm seeing very good deals these days in the used not new market.

"The mark up on a lot of high end audio gear is absolutely shocking."

Just looking for clarification Macdadtexas...I don't know what most people consider 'shocking' profits.
Are you of the impression that audio dealers making high margins or is it the audio manufacturers themselves who make 'shocking' margins on products. (You may have meant low, shocking can qo either way of course). I am guessing high, but clarification would be good, I think.

Great comments, good to see you alive and well Grant.

Larry

What's a Local Audio Store??? Seriously though, the big one by me went under a couple of years ago, and no, I was not supporting it. There are a couple of smaller stores by me now, and I'll buy a couple of nick-nacks here and there, but no major gear deals, the prices are just too high.

I do make an effort to buy American gear though, my electronics, turntable, and cables/cords are American made, my speakers Canadian and my CDP is Japanese. I suppose I could support American dealers if I chose to buy Chinese gear, but I can't afford American dealers AND American manufacturers.

Cheers,
John

I am a definite "free market" guy, and you should charge whatever you can get, (whatever people will pay), but after talking to some of the manufacturers today at CES, and seeing the pricing lists (msrp and dealer cost), I don't see how many of these companies will continue. An $8000 preamp (MSRP) with a $4600 dealer cost that they cannot discount?? How do you keep that on the shelf? Or, they cheat and discount, which then the manufacturer may pull the product line.

It's not that the markup is so outrageous, it's that the manufacturer cannot discount it then. I would buy a lot more new gear if the $4500 amp, with a dealer cost of $2600 could be discounted to a more realistic $3000 by the dealer. I think more units would move then as well.

It seems all hubris to me.

Macdad,

I would quibble with your analysis as I think $3,000 would be way cheap if dealer cost is $2600. Even $3500 would be a fine price and less profit than I expect they would need to keep the lights on. Still, I don't disagree with the "price fixing" issue in that I think if a store has paid the dealer cost, then they ought to be able to discount as they see fit. There are problems with this too as if they allow mail order then one high volume dealer will drive all the local shops out. Still, one commonly sees both price fixing and territory enforcement. Why both? Seems like one or the other ought to be sufficient and would allow for more flexibility of marketing strategy by the individual stores in their region if they were allowed to discount.

A million plus people in the local metropolitan area, but my/our high end store has long since gone to a HT focus. Before that, I bought an LS2B MkII preamp and a Theta Gen IIIa, both as demos, from them, and bought a V100 Mk II on A'gon after auditioning it earlier at the dealer because they stopped carrying ARC. I also had an out-of-town friend come to see me so he could audition speakers, and I was very frustrated at how the inventory had changed for the worse. It would be hard for me to buy some things from local dealers, since the local dealership is no longer high end. Agree with other posters, however, that auditioning comes at a cost, and that I owe something to a shop that permits me to listen to gear before buying.

Nonetheless, sure am glad this site exists.

I would take any retail business that would net me 15%, if there was a market for it. If you can't keep the lights on with that, there is no market.

High end audio (especially two channel) has become an exteremly niche market. WIth dealers closing up left and right (we lost the only two we had with the past three years, and they were not exactly high end) it's going to get worse. I have discovered so much more stuff than I ever would have because of audiogon and other audio related websites.

Buying new is tough because it always great to be the first to open the box and pull the plastic off for the first time, but it sure it tough to swallow prices from manufacturers that keep raising them. Since I discovered the DIY speaker hobby a few years ago, I can't bring myself to pay for the packing and marketing and research that is required for a commercially available product.

HT will stick around, but I think you will see less and less two channel gear. Sure, some will stay, and new ones will hopefully show up, but it will still remain something that only 1% of the population cares about.

I have one local dealer who only carries only a few high quality, good value lines that cover most of the bases for most and operates in very modest quarters with low overhead. He provides discounts to repeat customers and has a nice assortment of gear to audition.

If I spend time auditioning and like what I hear, I am inclined to buy there if the prices are competitive and value is there, which it usually is. I bought my tube pre-amp there recently new for a very competitive price on one of the last of a highly regarded but recently discontinued model. I'll continue to frequent his shop as long as it is around.

I also buy direct from the manufacturer over the internet and used from ebay and here as well case by case.

I do not support ritzy "high end" shops around that incur a lot of overhead to provide glitz and cater to the elitist crowd. These are increasingly focused on home theater systems these days anyway.

To put margins in perspective...I am told by a friend who has sold furniture for many years, that the wholesale to retail in furniture is, one third of the retail price. So a $1000. retail item costs the dealer about $300. He also said that this varries quite a bit, but that is the general rule. That would be not exactly but about the inverse of Audio pricing, which for many years had a markup of 40%, or $1000. had dealer cost of $600. That was for typical gear, amps, receivers and such. Some speakers had a markup of 50%, but that usually carried minimum annual purchase requirements.
Having been there, as a dealer, I am sure that, making $400. on an item that you pay $2600 for (as suggested above) would make for a much worse survival rate than we're now seeing.
The dealer cost mentioned above from, apparently someone who visited CES and was given dealer costs, may have represented a new company trying to make an entry into the market, or perhaps, maybe with with slower business, this may portend a shift in dealer cost to retail, with the hopes of helping dealers to stay in the game.
Without going crazy here, lets do the math for a dealer making the suggested margin.

Let's say that the dealer does $50K in a month, with a cost of almost 86%. That would mean that he/she makes a gross margin of $7000. If its a single store operation, mom and pop, and he rents space in a strip mall or small building, and pays $2500. rent, $400. for electricity, has a vehicle for $400. per month, insurance for $200 per month, one college kid as an assistant, for $10 per hour ($1600. per month), his personal profit before taxes is $1900. for his efforts which if they represent only a 40 hour week,(not likely) he's making less than $12.00 per hour.
This won't work. So let's double the profit to 28% and he's making $3800. per month or $24. per hour, or a little over $900 per week.
Depending on the part of the country one lives this can be a hard wage to live on.
Obviously these prices of doing business are silly and don't really reflect a true picture, but I think it shows that the 40% starting figure is a more realistic picture. It also shows why I asked the guy who stiffed me, saving the $53.00 why it was so upsetting.
Now these guys have to contend with the internet, AND 'no taxes', which in most states is at least 6% of the gross price which most people consider to be a worthwhile inducement to buy over the net. Wow...that's a tough living.
Now, further, let's assume the best...he sails along and does $50K every month until "Back to school" and the first thing that goes from the budget is 'luxury goods', toys like this. He does half. The expenses remain constant, but his profit goes in the toilet.
Herein lies the plight of the small audio retailer. I know, I was there. It really is a tough business.
This is not meant to piss any one off. It's simply a sophomoric look at the Audio business world.
Ironically, most manufacturers want VOLUME, and give preferred pricing to the stores who can to large volumes. This creates an adversarial relationship between the small dealers who can't, and the larger who can. I have heard horror stories from small dealers recently, that some large city dealers can call XYZ factory and 'make an offer' on a bulk purchase. For example, "I'll buy $50K of product, but give you $40K. The manufacturer sees the $40K of instant sales, and give in. The big dealer then has a 20% price reduction which he can pass on to the customer on an internet sale, and still make his normal margin, (not exactly correct, but its easy to see this scenario). Mom and pop, lose the sale to a NYC or Chicago dealer because the customer gets a 20% discount, AND saves 6% sales tax. Viscious circle huh?
Then mom and pop dealer's customer comes in a month later and 'fesses up' that he bought over the net and saved a ton, and frankly who can blame him?

All this from a simple, are you supporting local stores.
It's almost enough to make us think that perhaps all sales should be factory direct, except for one thing...no demos.

Any thoughts?

Larry

You have answered your own question, it is not a sustainable business model with a dealer network to support. It's a specialized market that needs to evolve, or it will go away.

My dad does for sure, I do too but I beat him up on price to a bloody pulp and mock his snot bubbles leaking from his nose but I feel good that I am doing my part :)
John, man up and clean that snot off your shirt!

Seriously guys, please support the local dealer if possible, these guys are trying and do provide a valauble service and need to survive. Many dont know how important a good dealer relationship can be till its found.
They were the ones who brought us along all these years and to turn your back on them is wrong.

How many people support any local business if they can get a better price on the net? I'm as guilty as any but I realize that what goes around comes around. And it's a downward spiral.

Ironically, the only local dealer with whom I spent substantial dollars (~$20K) turned out to be a crook and a thief. Not sure how I managed to avoid getting screwed and didn't learn about his MO (take advance payments but don't deliver the products) until he ran out the string and vanished. Good ears, though :-)

This is NOT meant to imply anything negative about the honest efforts of the vast majority of B&M dealers, BTW.

I’m with Newbie and macdad by and large.

There are now four high end dealerships in my area, I believe, unless one or more has recently exited. Two of these locations will never have my business… nor from what I’ve gathered here and elsewhere online, will they have the $$$ out of other peoples pockets native to this area…. As they maintain a level of people skills that push more away from their doors than they keep returning. The air there is so arrogant it’s become more a joke than a concern. How these places remain open confounds me. Their sales expectations are for “lay downs”, and the discounts asked for when actually given are laughable…

On a $3500 MSRP Ss preamp, they offered me a $50 discount…. For cash. The audition was about 10 minutes, and I was forced to wait for about an hour and forty five minutes to hear THEIR musical selection, not mine. This wasn’t my only attempt to do business with these folks…. Yet the end result and ongoing practices were continuely evident on each occasion. I’ve since learned my lesson with these goobers. As far as I’m concerned, they no longer exist.

One other dealership in this region does go out of his way to be assistive and informative, and is far more flexible on pricing. He also carries now consignment merchandise, and sells demo units at times with attractive price points… yet remains well away from me.

I usually attempt to do business with this dealer first… IF a thing I want is something that he does inventory.

As a former seller of electronics and other major home products I found out a few things… dealerships or outlets require a certain amount of profit to stay in business. No question about that what so ever. That’s just fine with me.

Sometimes -folks eat steak… sometimes they eat beans…. But they will always eat. Determining those who are of either ilk is the key. Being flexible with pricing and having attributes conducive to recurring sales is vastly important. .. such as service, on site support, setup, installation, sales upgrades, etc. The more the better.

I suspect those which afford such things to their customers these practices are all but gone now…. Or are in the slightest minority.

Online purchases don’t afford me any of these items… as for all intents and purposes, and they aren’t available locally then it makes sense to buy online… at your own risk, for the savings alone these days.

When local B&M dealers come to realize some of their buying public arent’ the steak eaters, they’ll get more competitive with pricing in order to get that slice of business away from web sales. Even poor profit margins on a sale now and then are better than ‘walks’ or no sales.. Always.

Personally I’ve no problems paying a little more for a piece from a local dealer than I could have gotten online… but I’ll not pay a lot more. A $100… $200? Even $300? Possibly. $500 $800 or $1,000 more? Nope. Never.

Especially when thereafter no added support is available and for all intents and purposes I’m in the same boat as if I bought the item via the web. It simply does not make good sense to pay far more when nothing more is being added into the deal .. Period.

Would like to, but the high end dealer in my local town, part of the metro NYC area, has never been sales friendly. I have a B&O company storefront in my town and they are sales friendly to a fault. I've often pushed my neighbors to drop into the hi end dealer and they come off with the same issues. But I guess B&O with their margins they can afford top sales people. It is amazing how easy it is to get uneducated listeners to part with huge sums of money.

Over the last forty years I have spent about $300K on two channel audio and very little of that was new from B&M stores. New was mostly cables since they had loaner programs. I have purchased new from the UK, now and before the internet appeared. All else was used, some from B&M stores, mostly in New York City were I could ship and avoid the sales tax and often get a 30 day return accomodation. I've sold equipment to B&M stores, before the internet appeared.

I have been a business broker and are very familiar with the business model needed to operate a successful store front. Only a truly ultra high end audio store that does HT, installations etc. is viable today given the used/new market internet distribution system. Never miss the opportunity on a visit to New York City to drop into the Lyric store on Lexington Avenue. If you are bound for Hell, this will give you a taste of what it is like.

Lastly, looking back I know I would never have joined our craziness if a B&M had not existed, it was the Electronic Workshop on 8th Street in NYC. Hook me they did. It is long gone, as is the Tower Records store around the corner which turned me into a vinyl junkie. So much for the virtual world.

Watch out USA and European equipment manufacturers, China is going to eat you alive.

I believe we are seeing the end of an era. Setting aside the used market issue, and focusing on new sales, I think there will be a time soon when only the very high end dealers in large markets will survive by selling to folks with more money than time. In the smaller markets, most people will either purchase from big boxes, or direct through internet sales. This is a phenomenon not exclusive to audio, but that is also occuring in many retail markets as buyers trade price for service. I think this is also related to the wealth of easy information on the internet, compared to the days when a main source of information was the retail dealer. Now, you can get on-line and see detailed images of what you are looking for, learn about it, read feedback from other users, and compare prices all from the comfort of your easy chair. Many savvy direct sellers offer free auditions for everything from cables to components and speakers. Then you can purchase directly from the manufacturer at a competitive price, still get support and a warranty, and have it shipped directly to your home. Hard for brick and mortar to beat that.

Guys (girls),
I had resisted being on Audiogon for quite a while because it seemed that no matter what the subject there was always someone willing to be a jerk, intentionally starting a fight. Really, it was never ending trash talking, more like an 8th grade gym class.
Now, as of my last couple of interchanges, the whole group seems committed to discussing and showing thier points in an adult and civilized tone; what a breath fresh air.
I don't know how A'gon changed the discussion culture, or if you're all just a higher level group of people that I've met in the past, but this, to me is what Audiogon intended with their forum part of their site.

Thanks for GREAT and INTELLIGENT point, counterpoint...lets keep it going, it's great to get perspectives from everyone.

Best,
Larry

My recent experience in selling off a bunch of equipment has taught me that people buy on price, price, and price. There isn't all that much more to it than that. No matter how low that price is or how much of an opportunity/bargain it is, the lion's share of people will will still try to wiggle as much of a discount out as possible.

Of course, I have racked up a ton of stories during this time that will hopefully help me make heads or tails of things going forward.

It must be incredibly difficult operating a high-end audio store these days. The folks that do certainly have both my empathy and admiration. That being said, it's incredibly easy to see why the less flexible ones are really skating on thin ice - a depressed market for high-end audio componentry combined with intractability is quite likely a recipe for the failure of one's business.

Back in the day 1976 to 1983 had a high end shop. Carried NAD as entry level,Luxman as mid - level and Threshold as the high end. Turntables were Linn, Luxman, Micro Seiki. Cassette decks only Nakamichi. Speakers were Magnepan,DCM,Polk and Allison. In those days there were not many accessories such as cables and power cords.

Carried roughly $125K to $140K in inventory and had monthly sales avg of 60K. Always took trade-ins of like equipment to be applied to new gear. It did not take long to realize that the used sales were quite a viable part of the business. Used sales added very nicely to the bottom line.

Service was our forte. No matter what you purchased it was always delivered and set up for the customer and the customer was guided through its operating parameters of what to do, but more important what not to do.

The store itself was set up basically like someones living room, with couchs and chairs, tables, drapes, you get the idea. Always had refreshments and deli trays on hand for the customers. In other words a home type environment, where customers could kick back relax listen to music and the gear that was on display.

Never any pressure to buy,or to ignore the customer.

One of the important things to remember about this time, is that the manufacturers had protected territories for their dealers. Say I wanted to add Audio Research to the inventory. Audio Research would not sell to me as they already had a dealer within that marketing area. And most of the manufacturers had the same or similiar arrangements.

To anyone that has been in this hobby/business realizes that in two channel audio, this is an ever evolving hobby, with solid repeat sales. Home Theater on the other hand does not work in the same vein. It is for the most part one big sale and thats it. Out the door and gone.

Back then HT was not even a blimp on the radar as was the internet.

But business moves forward and to remain viable one has to embrace all the possibilities to enhance the bottom line.

Another key to our success was a striking employee. Her name was Candace. She started out as a customer and I ended up hiring her. She had that personality that men trusted and ,here is the good part was able to converse with wifes and girl friends why their husbands and boyfriends were in this hobby and why it was non-threatening to their relationship. One of the best hires I ever did.

Yes the business ebvironment has changed, but solid business models have a far greater chance of success, than to think of all the ways it can fail.

I buy on value, which is not quite the same thing as price. I don't mind paying a lot if the product is truly exceptional. I won't pay for hype. For me exceptional performance is how it sounds or how it functions, but some people value a noble brand name or a chassis design which belongs in an art museum. To each his own.

When there was a good store in town serious audiophiles hung out there, and, once in a while, bought something. It was a place to exchange ideas. Of course it went bankrupt. Now we hang out on Audiogon.

I live in the Los Angeles area and most of the dealers have gone the home theater route. The couple that survive either work out of a very small store or work out of their house. The heyday of high-end brick and mortar stores is over. Lucklily I grew up in the day where you could walk into a variety of stores and hear different gear. One of the dealers admitted to me that if it weren't for a couple of customers he would of closed 5 years ago. I guess these 2 customers buy new systems every year and keep him in business. Keep in mind he works out of his house so his expenses are much lower than someone with a store. Plus he has no workers. The other dealer fixes and upgrades gear so I believe that is why he is still around.

One can buy new, direct from the builder in many cases. No retailer needed. Some of these direct from builder items are sold without the crazy, inflated retail prices often seen in this industry.

It is MOSTLY these inflated retail prices that make many used Agon buys look so good. Example,

One shops for a brand new set of speakers with a $12,000 suggested retail price. Dealers, especially those that do both internet and store, sell the speakers for a discounted price of say $6300-$6900. They call them "demos" but we all know they are not. The buyer pays $6300 and can now sell them on Agon for $5900 - $6300 in time. This is a real example as an FYI.

Look at the retail prices of this stuff folks! Very little of it sells for anything near it for the most part. In one case I purchased speakers new from the builder and sold them for a $1000 profit a year later. (yes, these speakers also sold through a dealer network)

I recently puchased amps and a preamp direct from a builder. They are sold at real world prices with no silly, inflated suggested retail price. These amps and pre simply don't show up used for the most part. When and if they do one may save $10-20% tops. Why save that little, when in my case I get free upgrades and killer service for years!
I paid the price - the only price these amps will sell for.
The price was outstanding as the performance of the pieces far surpasses anything else I have heard.

There are many small companies selling direct and making killer gear for real world prices. I am finding this to be the current sweet spot in high end audio. This is the sweet spot for us the high end consumer based on my recent experience.

So, go ahead and get to know some of these these smaller audio companies that sell direct. Talk the owner/builder and find your way to killer gear at reasonable prices. Many of them are on the cutting edge of technology and make gear that sounds well - world class!

Guess what, no need to deal with used items that show up DOA, broken or modified in ways you may never know.

I will always use Agon to buy used gear so get me wrong, but boy do we have some nice direct options today.

Direct from builder and used are the wave of the future I am certain.

My dealer hangs in there being open only on weekends except for appointments and has been in business this way as far back as I remember. I think it is a second source of income for him.

Tvad - Ferrari dealerships come to mind.

Seems like we all want the moon but are expecting to pay the price of a thrift store shirt.
Some bitch about how much the dealer pays for item X from manufacturer Y, and sells for Z.
I think you may possibly have to work in retail to understand overheads etc, and not come out with figures out of your ass that you think you should be paying, or how much profit a company should be making. If you can't afford it or don't like the price, and are truly miffed when somebody makes a profit, then buy second hand. I mean who goes to work for nothing? except for maybe the pope, oops forgot he belongs to the richest entity on the planet, and then preaches about ending starvation, but that's a different topic.I used to work for a large department store,
possibly the most famous in the world, our mark up funnily enough I was in furniture, was wait for it... 150/170%!, now that may seen a lot of 'mark up' from what we paid for it, and you would be correct, BUT, the overheads, when they are all taken into consideration including the 110,000,000 million pounds sterling tax per year, (that awful three letter cuss word), staff, utilities, maintenance, land tax (huge amount due to size of premises in the most expensive part of town) etc etc, the profit margin whittled down to not a large percentage at the end of the day.
I try not to buy new because I think hi-fi gear, especially
as we are a dying breed, a mere grain of sand in the desert is way way to expensive. I would be interested to know how much a pair of the Martin Design Coltrane speakers selling at $295,000 costs the manufacturer to make, not really a good example so maybe a mass produced speaker manufacturer like Wilson, Dali or some such company would be a better example. An earth shattering price, a lottery win speaker for 99.9% of the population, and the other 00.1% should have better ears, more sense, and less money, oops back to the subject of money again,lol.

The biggest problem facing the dealer channel is its delivery mechanism. Margins have lost any grounding in reality, and so a $500 amplifier needs to be sold for $5000 in order for the manufacturer, the distributor, if any, and the retailer to stay in business. Why? Small volume for the mf, light sales for the retailer, and the need to make big margin at 2 or 3 levels in the delivery-to-market chain. And, as the potential customers for any product diminishes, the people involved in selling that product must derive larger profit margins to sustain the business. it's a vicious circle all right, Because as prices rise, less and less consumers see value and leave the market. It's a death spiral, and it's made high end audio pricing a laughingstock for people who get a glimpse at it from outside the hobby. Try justifying a 2 way loudspeaker priced at 25k to anyone outside the hobby. Especially when the parts cost for said loudspeaker might come in around 2.5k.

How has the industry responded to this condition? They've raised prices, naturally, and they institute price fixing at the dealer level to protect the network. which, of course, offers the same operating conditions no matter if a dealer can get by with a 20% profit margin or needs a 50% markup (And yes, margins for speakers can get at least that high, as well as electronics, with showroom discounts or bulk pricing) to pay his bills. This results in constraining the retailer who tries to bring some sanity to the price of the product and perhaps grow the volume on a product, and protects the retailer who continues to push a business model that has not evolved in, what, 50 years? Forever? This dealer seems to be happier selling one unit at a 50% margin rather than 5 units at a 20% margin. And so a consumer looks for better value, and takes his business online. As it exists currently, the dealer channel is unsupportable.

Is the business salvageable? I think so. Interest in better quality audio gear seems as strong a it ever was. Used gear that's priced well seems to sell very well here and on EBay. There are products that show good value at retail or just below, PSB and Magnepan come to mind.
And, and this is a big one, there's another media migration in the works,:CD to media servers. Sadly,, the industry still doesn't seem to get it if the products on display at the CES are any example. 25k CD players; 7k media servers like the Blue Smoke? Preamps with no DAC, DAC's with no volume control? Fortunately, some companies do get it, like Berkeley Systems and AVI. Maybe high end audio needs a sub-structure of companies that will help bring some value back to the market; and maybe these products need a to be offered at 30 day home trial direct from manufacturer or dealer. Let's face it, a listen at the dealer can not compare to having the product at home in your system for a month. Or, conversely, develop dealers who have other, more mainstream products to sell, such as computer dealers, who salivate at the thought of a 20% profit margin. Let them sell at whatever the market will bear, at some point pricing will self-regulate. Bring products to the awareness of the general public in stores that sell other products; how many average consumers enter high end audio stores? And yet, everyone listens to music.

No one likes to think they have made a bad deal;, we all look for good value when we make a purchase. But when I know 5k of my speaker purchase money is going to support my local dealer when I buy 10k speakers, I don't feel like I'm receiving good value. And, of course, I'm not. I'm really buying a 1k speaker with overhead. Of course it costs money to get a product to market, but when that cost is 10 times what the product's finished goods cost is, the perception of value, which is critical, loses credibility.

Well Luxury Yachts come to mind but its besides the point, I think many are coming of age in audio where they for reasons from no dealer in area to lack of income have never experienced what a great dealer can give you. A demo both in store even when closed so your really alone, in home for extended audition, a call for technical support and a trip over to tweak, measure and even pack up and assist in a items sale to replace it with a new one. Some dont put much value in that and thats just fine but we are all going to be a bit worse off when they all go the way of the Dinosaur..even if we dont see it yet.
What happens years down the road when there may sadly and hopefully not be any store front dealers and its all over the net?, the comparison in price will soon fade and once again folks will feel they are being conned and overcharged
then what happens after that, do we all just switch to used gear until the entire thing will collapse because we only are driven by low price? Internet direct is like having a coupon now.....what happens when it expires?
There is also another way to look at this, internet direct sellers are can actually be argued that they are taking even more advantage of us because there profit margins are huge, many items are not half or 60-70% of reatail of compareable dealer stuctured products so they are making at times really obscene profits that actually make you even madder than paying a dealer mark up for the service. IMO

Yes but the must have stuff that goes in them is exactly like our situation, and I bet they are spending alot of time on their butt's as of late!

Yea and many are bought by a person of trust from the sellers side...the seller just shows up and shows off his new toy, what does he care anyway?.....he just wants to feel important and have a new toy.

Been doing this since 68,so the trends are familiar.Back in the day you bought usually from the store or a friend.If it didnt break,you kept it for years.When I was fat in the 80's,I bought from the store still again,not alot oftrading.Now and for the last 6 years,not fat so cant afford stores,but can afford to trade alittle here.If I got fat again,I think I would like to go back to the 2 stores here in Mpls and pay the price.There were and are good guys,I cannot go there now though without a big rate of cash,YMMV,Bob

if products can be bought direct from manufacturers and those manufacturers are cooperative in answering questions, they take on the roles of designer and audio dealer.

in such a situation dealers may be superfluous.

Stereos will always be stereos.
High end racing sail boats sunset as fast or faster than high end (performance) audio gear and at a price that is many times that of audio.

I happen to think that higher-end sports and/or luxury cars are a very valid comparison to high end audio. Manufacturers lure you with great perceived "build-quality", fancy chassis, great sound sometimes, and dealers are occasionally snooty to most people, and almost certainly snooty to the unshaven guy in sweats who walks in on Saturday morning, but will be obsequious beyond belief to the guy who drives up in a Rolls. Most luxury cars are 96% the same as their rivals, and most sports cars measure their 0-60 speed within about a second of each other, and all are spec-ed out much better than most people could possibly make use of (lack of driving skills in cars, lack of room treatments in audio). And if you want absolutely the fastest thing out there (0-60 in the low 3-handle), you either buy from Bugatti Veyron for $1.5mil+, or you buy a weird car - an Ariel- the equivalent of the small mfr making an over-achieving amp cloaked in 'normal amp' looks. According to the dealer, the car is the be-all-and-end-all, and the buyer will be set for life, and blah-blah-blah. It costs far more than what is needed to be absolutely functional as a ride to work, and a couple of years later, there will be a Mark II, or a different model, and the only 'upgrade path' is to sell the older one and buy the newer one.

Tvad, Ferraris only "increase in value" when you drive them off the lot if they are the long-hyped new, new thing and there is a waiting list. A 5-year-old Ferrari is in only rare cases more expensive than it was retail. Something like a Ferrari Testarossa, 456GT, or older 355s now go for less than a third of original retail (I also happen to think that all three are fabulous cars for the current used price). After a certain point, well-cared-for examples become 'vintage' cars or 'classic cars' and start to appreciate again (witness the uptick in pricing for 308s and 328s), or occasionally they become stars and continue to appreciate above and beyond their inflation-adjusted original price (like the Ferrari 365GTB4).