The Classic High-End Audio Retail Model: Does it Still Work?

[MylesBAstor]

With the ever increasing prices of commercial rents, especially in major urban centers like New York, San Francisco, LA, the "traditional" walk-in high-end audio store is rapidly becoming a pleasant memory. In addition, many of the people who started and have been running these B&M stores are getting on in years, retiring, or have passed away, Increasingly, many audio entrepreneurs in an effort to reduce overheads costs are instead to turning to an appointment only, run out of their homes, business model. And apparently some are very successful at it.

On the other hand, many major and established high-end manufacturers (that is after a credit check, etc.) maintain a policy of only "giving" their lines to traditional stores. In the end, however, there are only so many traditional stores to go around and other and newer audio companies, in an effort to penetrate major markets, instead give their lines to these by appointment only stores. (of course, there's still the question what do audiophiles who live 100s of miles from stores do?)

It would seem, though, that these newer brick and mortar stores need to get their customers from other avenues other than walk-in business or ads in magazines. Of course, there's also there's the question do these newer stores give the same vetting to products and service? Moreso, is it a sustainable model?

What's been everyone's experience and thoughts on the ever evolving high-end audio sales model?

[JackD201]

Location, location, location. IMO if you can't get and afford premium high traffic space you're in a high risk situation. Having high traffic locations allow for cash flow streams from the likes of software. The only exception I can think of is if you happen to already own a space. That's it in a nutshell but obviously there are many, may considerations more.

[Rob]

The new model and only model that works in So. California is to reduce your overhead to the bare minimum. Audio stores have become 'destination' type businesses, they're not reliant on high traffic locations. Their customers seek them out not the other way around. I've watched high-end audio retailing's demise in So Cal over the last 30+ years, Christopher Hansen was the last of the high profile stores to go out, they were leasing some of the most expensive and high-profile real estate in L.A. it did nothing to bring in sales, they vacated a multi-million dollar facility within 4 yrs of relocating.

You're seeing more and more high end audio guys going to low-rent flex/office and industrial space that is 1/3 to 1/8th the cost of traditional retail space. An audio dealer who is also a good friend sought my advice, he was already at the low end of the stick with respect to retail rents, fortunately - or unfortunately - depending on your POV, his next move is to an industrial space.The two top high-end dealers in that market cant survive in traditional retail space, of course this is So. California and rents here can be high, very high in many cases.

[Alex Siufy]

Gotta agree with the "rent is too damn high" aspect... It definitely doesn't help that high-end audio doesn't have the attraction it used to have.

I like having a proper retail space. We're barely a year old, but damn if we're not trying

Rob, you're more than welcome to stop by, if ever in the area!


cheers,
alex

[Rob]

I will Brother, lunch on me. Alex your space is def on the sexy side, near the beach and a stones throw from one of the wealthiest communities in SD...a dream spot for a boutique operation. So, how many surfers have stumbled into your store asking for Dartzeel?

[Alex Siufy]

Not many... But every single one of them was left impressed by them! And their girlfriends love the gold/red look! hehehe

[JackD201]

Hi Alex,

In your case, do you find software sales to be steady? A good friend of mine who has a store in an upscale mall here gets regular inflow of customers. This has resulted in hardware sales down the road. He says the presence of LPs that can be had for as low as 10 bucks also removes the intimidation factor. The intimidation factor was reported to me by another dealer in another upscale mall. He says that they see people looking through the windows but don't come in even if they prominently display affordable brands too. Their people are super friendly so I'm sure snoot isn't a factor.

As for us, since time constraints (delivery, set up, after sales support) dictated that we confine ourselves to end of the road lines, it made no sense to us to locate ourselves in a place where other luxury goods are sold. The downside is that those that are located in such places catch newbies while we are usually "discovered" by people already deep into the hobby.

[Rob]

I believe So Cal is a totally different market from the East Coast and very different again from Asia. I heard from more than a few Newport Show exhibitors the show out here resulted in fewer sales than even a small East Coast show like Capital Audio Fest (!). They've actually left that show selling off their demo system and with Newport they schlepped everything home. Maybe its the weather or too many diversions competing for consumer attention, in spite of our population of more than 20 million in So. Cal alone, me thinks the interest in 2 channel perfectionist audio is very small compared other markets around the country. One can point to the LAOCAS and being one of the largest clubs on paper but look at their actual turnout at monthly meetings.

[MylesBAstor]

I believe So Cal is a totally different market from the East Coast and very different again from Asia. I heard from more than a few Newport Show exhibitors the show out here resulted in fewer sales than even a small East Coast show like Capital Audio Fest (!). They've actually left that show selling off their demo system and with Newport they schlepped everything home. Maybe its the weather or too many diversions competing for consumer attention, in spite of our population of more than 20 million in So. Cal alone, me thinks the interest in 2 channel perfectionist audio is very small compared other markets around the country. One can point to the LAOCAS and being one of the largest clubs on paper but look at their actual turnout at monthly meetings.

You make some interesting points Rob. For a long time, I thought that the West Coast dealers treated audiophiles much differently than the East Coast dealers. One thing that impressed me was how the dealers welcomed and hosted monthly meetings of the LAOC audio society at their stores; that's practically unheard of in the New York Metropolitan area. Sadly, many NY stores had/have an adversarial relationship with audiophiles and treated them with disdain. Mainly because they complained that the club members would come into their stores and demand a discount. They also hated clubs because some manufacturers would undercut them and sell gear to club members out the back door.

OTOH, my own visits to SoCal dealers was always a pleasant experience. That's been followed up by meeting other dealers such as Larry Marcus of Paragon Sight and Sound in Michigan and seeing how he has built a following of loyal customers at his store. I was blown away by the turnout at his store's grand re-opening and the attendance at the analog night.

But as I travel around, it still comes down to the store, the owner's business model, how they train the staff and most of all the customer experience. Gone are the days of dealers living off Wall St. bonus checks leaving many to rethink their business model.

Your comments about dealers making sales from shows was interesting. Most exhibitors complain that shows are a poor ROI.

[Rob]

You make some interesting points Rob. For a long time, I thought that the West Coast dealers treated audiophiles much differently than the East Coast dealers. One thing that impressed me was how the dealers welcomed and hosted monthly meetings of the LAOC audio society at their stores; that's practically unheard of in the New York Metropolitan area. Sadly, many NY stores had/have an adversarial relationship with audiophiles and treated them with disdain. Mainly because they complained that the club members would come into their stores and demand a discount. They also hated clubs because some manufacturers would undercut them and sell gear to club members out the back door.

OTOH, my own visits to SoCal dealers was always a pleasant experience. That's been followed up by meeting other dealers such as Larry Marcus of Paragon Sight and Sound in Michigan and seeing how he has built a following of loyal customers at his store. I was blown away by the turnout at his store's grand re-opening and the attendance at the analog night.

But as I travel around, it still comes down to the store, the owner's business model, how they train the staff and most of all the customer experience. Gone are the days of dealers living off Wall St. bonus checks leaving many to rethink their business model.

Your comments about dealers making sales from shows was interesting. Most exhibitors complain that shows are a poor ROI.

Again, I think it depends on the market. So Cal is a different animal and if you ask the participating dealers if club events help or hurt, what they will tell you privately will not be the kumbaya moment you were expecting.

[MylesBAstor]

David K. brought up an interesting point in the Munich HiFi show pic thread when we were discussing the death of CES.

One thing we didn't discuss in the "new" business model was manufacturers opening their own boutique stores. Cello tried it and failed but that doesn't mean anything. Mac is doing it now with the WOM and I wonder how their dealers feel about that? Is that something dealers might consider? Opening boutiques to show off their gear in the best possible light in the major urban centers in the US? Of course, what would that mean to their overseas business?

[Rob]

David K. brought up an interesting point in the Munich HiFi show pic thread when we were discussing the death of CES.

One thing we didn't discuss in the "new" business model was manufacturers opening their own boutique stores. Cello tried it and failed but that doesn't mean anything. Mac is doing it now with the WOM and I wonder how their dealers feel about that? Is that something dealers might consider? Opening boutiques to show off their gear in the best possible light in the major urban centers in the US? Of course, what would that mean to their overseas business?

Two good reads from the era of the dedicated store back when Cello did it. I knew Joe Cali, I never met Jerry but Joe was everything claimed in the article. Between Joe Cali and Mark Schifter they are the only two guys you'd want to go to "war" with in an all out battle to gain market share and learn the art of 'selling.'

The Lost Art of The High End Audio-Video Demo

http://hometheaterreview.com/the-los...io-video-demo/
http://audiophilereview.com/amps/the...d-so-well.html

[cpp]

What I see in the walk in stores close to me (withing 50 miles) is their business model is not just high end audio equipment but the merging of complementary business opportunities to support "the rent". For instance one store also sells a lot of high end home theater equipment , the other store in their upstairs has local art, and a guitar area where a customer can play various types of guitars.

[fcrowder]

I think that to work, a brick and mortar dealer has to offer something that the internet stores do not as they cannot typically compete on lowest price. This often takes the form of better service and better ability to asemble synergistic sysytems at various price points in conjunction with carrying products with highly restricted dealer networks and significant disincentives to discounting. There continue to be manufacturers that do not sell out of the back door (take Spectral for instance who is highly supportive of their dealers). When a dealer has an exlusive area such as the western US or the entire country, it eliminates discounting as a real issue. You also have to get traffic through the store. Someone who buys a record today may buy a system eventually.

[MylesBAstor]

Dealer knowledgeability is huge but they do run into that audiophile who knows it all.

[MylesBAstor]

I think that to work, a brick and mortar dealer has to offer something that the internet stores do not as they cannot typically compete on lowest price. This often takes the form of better service and better ability to asemble synergistic sysytems at various price points in conjunction with carrying products with highly restricted dealer networks and significant disincentives to discounting. There continue to be manufacturers that do not sell out of the back door (take Spectral for instance who is highly supportive of their dealers). When a dealer has an exlusive area such as the western US or the entire country, it eliminates discounting as a real issue. You also have to get traffic through the store. Someone who buys a record today may buy a system eventually.

Totally agree. Has to be about providing some added value. I think Alex put it well earlier in terms of the store vetting their brands.

There are many brands that follow all their sales. Magnepan and Krell are two that pop into my mind. Krell had a real problem years ago with transhipping of their products.