Are there any out of state mail order companies that won't charge sales tax?
It seems Amazon charges no matter what.
It seems Amazon charges no matter what.
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.
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.
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- 49 posts total
It depends on how much business we sell in each state. There is a threshold where you have to pay sales tax when you cross a certain limit. Thus, the smaller the retailer, the more likely you are to get away without paying sales tax. With the exception of OK and PA ($10K is threshold), you have to sell more than $100K in a state to have to pay sales tax in it. There are a few that are higher. This means there is no chance that large entities like Amazon have a hope of not paying taxes AND since they operate a marketplace, they also collect tax on third party sales as many states require this. |
For me, one of the saddest consequences of audio shops going out of business is that potential new audiophiles might never discover how wonderful a good sound system can be. I became interested in higher end audio products in college (late 1980's). There was an audio store in downtown Davis, CA, and I wandered in out of curiosity. I had always liked listening to music and had a very basic set up at home. Once I heard music played on the system in the shop's main listening area, I was hooked. Without that experience, I might never have discovered high end audio. Cheers, Scott |
Interesting thread......As an audio retailer, I can perhaps provide a little insight as well. It's for sure sad to see quite a few dealers leaving the market. Home based dealers (like myself) are becoming a more popular option that allows less overhead. I'm coming up on 12 years in business and oddly enough, this year will end up being one of the better years I've had. (though it's been a VERY strange year indeed) Being a dealer in current times comes down to been extremely careful (picky) in brand selection and total dollar level of demo gear. It's a very fine balancing line that takes quite a bit of time and effort to figure out. I'll be the first to admit that I do not always have every piece of gear my customers want to hear/demo, but I do certainly try to have the more popular options on hand. Your larger dealers that have been able to hold on, now seem to switching gears to web based sells. I can see this being somewhat successful, but at the same time in the long run, may be detrimental due large numbers of customer trials and returns. Sort of a toss up at this point. Taylor www.goldprintaudio.com |
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- 49 posts total