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.
