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
" Selling direct to consumer saves the customer NO MONEY"

Are you out of your ever loving mind??

Did you forget about Eric Alexander at Tekton??  Please, add up the cost of the drivers, crossover, cabinets, and then shipping.  Look at his profit margin.  Compare that to the mark up on any of the big boy brands you care to name.  This is very simple and factual math.

So yes, I saved a ton of money buying direct.
I appreciate the relationship I have with the dealers I visit. I understand the op but will add from my experience often times once I add shipping and PayPal fees I’m very close to paying what my dealer will discount the product new for. Contuzzi said dealers have floor models available for home demo and I’ve found that to be, in fact if I’m out of my comfort zone on a product I want I can usually buy the floor model at discount. Most manufacturers have a dealer locater that we can order products from if there’s none local and that would keep the dealers in the loop. 
There ARE companies that are cheaper being started without needing a dealer/distributor network.  PS Audio is not one. They have no showroom, just listening rooms featuring speakers not for sale. Yet.
If you wait for Black Friday or a show sale you can send them some junk (for trade in) and get 40% off.
They still make a profit.
I've bought more HiFi stuff at a discount on line in the past 3 years. than when I started in the 80's, primarily from 2 dealers then. One of whom is still operating physical sales successfully.
The other went back to masonry to feed his family.
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jaytor -- I recently retired to a small town in Hawaii where high end retailers are few and far between, but I lived in L.A. for most of my life and for much of that life I've been an audio enthusiast. 

In those days I always put my money down at brick-and-mortar stores.  It was truly seldom that I resorted to mail order.  It's just an incredible luxury to go to a quality retail outlet and have them put on a demo for you, letting you bring some of your own stuff for a good old taste test.  I want to see the merchandise IRL and flip switches.  It's only when the stuff is up to snuff that you take it home for the night.  Plus, I just hate waiting for a delivery guy to show up.  Even worse is waiting in an endless line at the post office/whatever to do the return.

As an aside, I gotta tell you, too, that, like several other posters on this site, I'm a ready-to-be-committed bicycle enthusiast.  And, when it comes to bicycles my brick-and-mortar predilection is even more extreme.  I've bought high-end bicycles from Bicycle John's in Burbank, I. Martin Imports in West Hollywood, and Velo Pasadena.  I bought my current ride, a Campy Chorus Bianchi Infinito, at a place that was within walking distance of me for a while (I can't remember their name but they were in Sherman Oaks).  The only high-end bicycle I ever bought sight unseen was a Rivendell Ramboulet...which turned out to be the one I liked the least and got rid of the most quickly.  Beautiful to look at but a dead dog for actually tooling down the road.  Now I'm happily downsized with just the Bianchi and a modestly built-up Tomac Buckshot.

Long story short:  If I could still buy at a brick-and-mortar store I would, but that luxury is now in the past.  I can say, though, that I've found a couple of dandy high-end bicycle shops in the vicinity and always do my best to patronize them.  It did, though, take an agonizing amount of time for one of the bicycle stores to score me a  fresh set of cleats for my Mavic pedals.