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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
teo_audio
2,197 posts
 
I think that Jaytor did a great job of explaining himself and the realities of the market.

I think the next combative post down from the Op, was just..welll....

The customers and the world economic scenarios is what is killing retail. the world generally speaking, has no more room for retail.

The previously expansive middle of the world has been eaten up by the excessive number of humans who seem to each want to individually own the entire world.

It’s difficult to avoid as that is part of the basic design spec for a human being. We can’t all individually be ’king of the world’, but we all do something in that direction, in each and every breath as this is part of the basic underlying animal carrier specification.

It’s a bit of this, a bit of that and most definitely a bit of the aforementioned ’feverish lemming to the cliff’ running that has takes us to where we are right now.

the audio retail market condition is just one of the multitudes of canaries in the coal mine, for those who have the eyes to see it for what it is.

And thus chose a direction that includes survival. Which is no retail, no brick and mortar.

As the majority lemming customs are, overall, making it so. They are doing as they are being squeezed. And are involved in the creation of the squeeze, even though some will deny culpability, etc.

Of course, this only like, a hundredth of what I'd like to say, so please, no one take my  incomplete remarks out context by adding one's own context...and attack me with such. Thanks....

speedbump6
760 posts
 
Contuzzi, you obviously do not own a business. If you did then you would understand better about the things that affect overhead. Yes having speakers to let you go home with to try out does cost money. They’re not sending their display room models, or they can’t demo them to a customer in the store. Also, I’m sure that for higher end speakers, the dealer would bring and set them up, there’s labor costs involved that they have to eat, whether or not you purchase. I think jays post was right on the mark, and wasn’t trying to be negative in any way, just shining light in the current state of affairs. I know see real of my local dealers very well, and owning a different kind of business myself, we talk about the issues involved, as running a brick and mortar store of any kind can be a challenge these days. We all find that most consumers are not aware of the costs involved, nor do many care. We consumers tend to want the best deal, while expecting a high level of service. And we want it now! Lol. It’s just part of the modern world, and we each have to find our niche in order to survive, and thrive. Peoples buying habits have changed over the years, so old ways of doing things don’t work the same, and therefore my industry, and others like to audio industry have lost a lot of independents who just were not able to find their niche. The types of products I carry today is wildly different than when I started, and so is the customer that I’m catering to. The same can be said of audio stores. It can be hard to market to a younger audience who has many distractions, and high end audio doesn’t have the sex appeal to them that other toys might. The market for us older customers grows limited with time, and if they hang their future on that, eventually it won’t last. 
millercarbon's avatar
millercarbon
12,531 posts
 
These problems have always been there. Even back before the internet Stereophile let people know about stuff they'd never find in driving distance. So your choice is be limited by what's nearby, or take a chance on the Stereophile reviewer and try and have it shipped. I tried both back then, usually trying everything local first.  

All during those same early years I was friends with a really good dealer. By really good he had heard an amazing amount of gear and was honest and straightforward about how things sound. I personally compared enough stuff over the years to know he was right. As a result all during those years I bought everything from him, unless he didn't carry it. He had no analog, for example. So because of analog, from back in the 90's I had to learn how to read reviews. 

There's your story. If you are a geed dealer like Stewart then you can earn the business of good audiophiles like me. At the rate good audiophiles like me buy gear you probably only need a couple thousand of us to survive. Good audiophiles like me are one in a hundred. Audiophiles of any stripe are also about one in a hundred. Run the numbers. Now you know why all the successful high end audio stores are in huge cities. Even then its not easy.

It can however be done. I got my glasses last year from a private owner shop, and it was the most I ever spent on glasses, but also the happiest they ever made me. There's a Costco and half a dozen LensCrafter type places all within 10 miles. There's the internet- send your Rx they send your glasses. This guy thrives by being unbelievably excellent. He's a bona fide optometrist who gave me the best most informative exam I ever had, surrounded by staff that personally helps you select quality frames that look good on you. I was blown away.  

That's what you have to do to be a successful high end audio retailer these days. You can't compete on price so don't even try. You can compete on excellence. It just ain't easy. Because still, 1% of 1%. 

That's why I think we can expect to see more and more people doing like Tekton and Raven and going direct.
mr_m
1,900 posts
 
While I can't think of an alternative for the moment, I do believe that going to a brick and mortar shop, listening to a product you like, and then go home and order same product on line for 2 to 3 percent cheaper is immoral and just plain wrong. It's nothing short of stealing from the brick and mortar shop. IMO.
jaytor's avatar
jaytor OP
765 posts
 
@mr_m - Yes, I agree. I don't even think it is fair to the dealer (whether brick and mortar or ecomm) to take (or purchase) 2, 3 or more products home knowing ahead of time that you're going to return one or more. I won't ask for a home demo unless I am fairly confident that I'm going to keep it. 

I can't say I haven't made mistakes. There have been a few products over the years that I ended up selling after 6 or 12 months, but I've taken the cost hit for that myself. Having had my own businesses for most of my career, I know how hard it is to make a profit, particularly for small businesses. 

This may not be the most cost effective way to build a system, but I do as much research as I can upfront (often relying on forums like this) and try to listen at shows and fellow audiophiles' systems before wasting the dealer's time and money.

I do understand that many people don't have the financial resources to be able to afford to make purchasing mistakes, but they need to keep in mind that the money they are "saving" is essentially coming out of the dealer's pocket.

If we want brick-and-mortar dealers to survive (and specialty e-comm dealers for that matter), we have to realize they have to be able to make a profit. 
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