Finally, I am not questioning the OPs facts, but perhaps there is a big misunderstanding about the "5% for 1 hour" thing??
@xtremefidelity First of all, a 1-hour demo is absurd. Second, paying $250 to demo a $5000 component at home for an hour is even more absurd. Your competitive advantage is you have first crack at customers in your area. Allowing them to do demos at home is something you offer that costs online sellers, and almost alway potential customers, much more to do so use that to your advantage. Have a policy where you loan stuff out on whatever day you’re closed so there’s no downtime for that product in the store. You don’t have to bring it them as most often they’ll be more than happy to come pick it up and bring it home themselves — I did — so it costs you no time or effort. If you don’t have a demo unit available for a potential customer to try, shame on YOU because you’re undermining your strongest competitive advantage. Just have a verbal agreement that if they’re interested in the component they’ll give you the opportunity to compete for the business and to just let you know what their current best offer is. Now, this doesn’t include large, heavy equipment where you have to help a customer get it into their room and set it up, but they should understand this and expect to pay something reasonable for that labor-intensive service and they have the means to pay for it, and if they aren’t willing to pay anything at that level it’s a big red flag unless they’re an established customer. And the big profits on those products make it more than worth the effort. Communicate to them that you want to EARN their business and add services like if they buy something you’ll help them set it up in their system. THAT’S the kind of service people appreciate and will pay up for. If they have a problem with a component, tell them they can just bring it back to you and you’ll take care of it because you can do it much easier than they can. THOSE are the type of things you can do as a local dealer that no online retailer can even touch. You have a huge advantage, especially as there are fewer and fewer brick and mortar retailers every year, so think about how you can leverage that competitive advantage that online retailers can’t match and what frustrates so many online customers. Also, consider adding outstanding product lines that protect their dealers and aren’t offered online where there’s a local dealer. These are just a few ideas off the top of my head, but I’m sure there are many, many more. Rethink how you can use your considerable advantage rather than thinking of it as a negative, and you can blow those online retailers away because you have a ton of things to offer the internet can never provide. Get creative. Once you figure out how to go over and above what customers expect you’ll grow word-of-mouth advertising, become a place of respect and trust where you’ll become the go-to place for audio in your community, and grow a very loyal customer base. Just my $0.02 FWIW, and best of luck going forward.