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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
mozartfan
2,143 posts
 
And throw Covid 19 on top of all this, which equals good dealers going out of business for good......

No doubt, , Hifi dealers?? where? maybe Chicago, NYC, LA, Denver,, cities with pops of more than 5 M,, Houston.. But here in New Orleans, ziltch. There are onlya  few hifi buffs left in this city,,and we are getting up in age. 
Its a dying hobby, as we've all known past,,ohh 10 years or so. 
A hifi retail store would really only bea  good place to actually hear a  certain speaker,,and then,, yep, head on over to the 3 main places for used audio gear,,and take your picks and makes some offers,, You can see listings running into days/weeks/months on nearly all components, That said, some gear sells fast, I picked up a  Jadis DPL  in less than 24 hrs after listed. I typed in jadis every day and GOT IT, a  preamp i needed badly.
As for speakers,, most are too heavy to ship,,at least economically, *impossible* to return., Unless you have $$$$ to return ship, and which seller will accep ta  return on a large   speaker??
Times will be tough ahead for any speaker lab/dealer/reseller.
This is a  post CV19 era, where  things are all topsy turvey. 
Buying new speakers, ?? when the market is full of used offerings at   steep discounts. 
Amps/preamps, have some market value, however higher up price scale, slower will be the sale. 
Every now and then we see a  **newbie** introducing his questions,,,,,not enough entrants into this hooby to keep all labs afloat over comming decades. 
Its all about survival for some of us, hifi budgets will be the 1st to be cut. 

. 
mozartfan
2,143 posts
 
Still doesn't solve the problem for very large speakers or massive amplifiers which need to be shipped LTL freight where return shipping would be $1000 but it is an interesting idea for smaller, lighter products.

Yeah my speakers are @ 60 lbs, Very close to my limit to handle/or ever acre to move, I have zero interest in any speaker more than say 90 lbs. MAX, so 60-90, should be speaker size, Labs making over 90 lbs,, will not survive. 
Speakers costing more than say,,,ohh $3K/pair, is pretty much max for this post CV19 economy. , I could never fork out more than $3K for a speaker. At $3K, I would expect Beryllium tweets, if not Diamond Tweets from Seas at $7K a  pair..,,,hummm wait something is wrong,, $3K , tweets Diamond @ .$7K pair,,, well no I should not expect a  $3K speaker to include the SEAS Diamond tweeter at $7K a  pair,, tahts ridiculous. 
Point is, labs have to consider scaling down, both in size and price. 
~~Big~~ (size/price) is Dinosaurish. 
My MTM speakers are big on sound, , I never fell for that gimmick ~~Bigger The Better~~

back in 1974, a  friend and i would compare the gigantic macintosh vs the Electro Voice A1's with a  back firing voice coil woofer,+ woofer  + mid tweet in front,, We perfered the A1's over the Macintosh  which boasted 15+ drivers in each cabinet. 
Sure the Macintosh produced more db level, yet the A1's had a   greater finesse for music. The Mcintosh you needed a  fork life to move,, The A1's, a  cinch. 
If I may, throw  a tomato at this point,, in this experience ,,, I find the Wilson line, ~over  bloated, over hyped~For which reason they sit,,and sit,,and never move,,not not in a  living room,,I am speaking on the used,,and UNWANTED market places...lol
Wilson used, shipping,,pick up ONLY or shipping $1K+
Ridiculous. 

arion's avatar
arion
160 posts
 
We had some of our products in several B&M dealers around the country in the past. We had some strong sales from a few of them and lost money from a couple of them. I can tell you that the manufacture's side of dealing with dealers can be just as interesting as the consumer's side of dealing with dealers. Most are gone now. We also had a few "brand ambassadors" (AKA home dealers) in the past. My experience is that single product home dealers rarely work out. In the beginning there is enthusiasm and the the lure of the dig discount. Then nothing.

That said, I wish there still was a strong dealer network. I would rather adjust our price structure and let sales professionals do what they do best, sell. Just before COVID we were considering perusing a select few dealers. Selling larger speakers without exposure (places to audition) is difficult. We have shipped large speakers for in-home auditions. It's expensive for the interested party and expensive for us. We discourage it but are willing participate if all aspects are clearly understood and agreed upon. 

What we do encourage is that interested people come to our showroom and audition our speakers in our relaxed, comfortable setting. The audition can span over a couple of days if requested. They can sample as many model as they want and with several different amplifiers. We even encourage people to bring their amps if they are married to them and they are compatible. If the interested person buys our speaker, we then reimburse them for all their travelling expenses (not first class flights) and lodging expenses. We have had reasonable success using this model. We are preparing an in-home trial program for our Iris monitors since they can be shipped. We realize that being flexible with our sales model is important.

Mike
jaytor's avatar
jaytor OP
765 posts
 
@arion - Mike, I think offering showroom auditions is a viable strategy for manufacturers that are producing fairly high-end speakers. I'm not sure how effective that could be for less expensive products (let's say under $10K), at least as the only option. But I like your concept. We have done something similar in the past with higher-end bicycles when we had a fancy fit system and professional fitter on staff.

I understand your perspective on brand ambassadors. If the only reason people are signing up is to get a discount, that's not going to be very effective for the manufacturer. Perhaps some other kinds of perks (not sure what that would be) or a small commission. 

I've had several local audiophiles that were interested in my speakers over for auditions just because I wanted to support the brand - not for any compensation. But I'm not sure how common that is. 

I expect the more expensive the product is, the less effective a brand ambassador program is going to be. The owners are probably less motivated by any kind of financial benefit and may value their privacy too much to open up their home to strangers.
mitchagain
445 posts
 
It is human nature to: 1) be resistant to change and 2) to procrastinate about dealing with change until the last possible moment. So, good night and good luck when it comes to that hurdle.

However, I agree that more audio shows are needed; and, perhaps they can find a way to better promote the brick and mortar stores within that region. As a consumer, it would be nice to be able to drive to an audio show for a weekend, rather than flying into Chicago, Denver, LA, Los Vegas, New York City, Washington DC, etc. I used to attend a yearly industry convention because I have to obtain CE credits for my job. The convention would be held in many of the same convention oriented cities that are noted above. Such a trip would cost me around $1K, not to mention wasting vacation days. Once I discovered that local vendors were offering free CE classes, I stopped attending those conventions.

If I owned a brick and mortar audio store, I know that I would want to carry a mixture of products that I was "evangelical" about its performance, as well as "practical" about the ability to sell larger quantities of product at hopefully a higher profit margin. Perhaps manufacturers can offer better pricing for their "dedicated" dealers, while at the same time not demanding exclusivity. In a perfect world it would be nice to walk into any audio dealer and order a product by any manufacturer, even if it involved an additional markup for a "special order." And, if brick and mortar retailers could somehow have a small room of used audio to demo, perhaps they could entice more budget minded novices to get started into our great hobby!




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