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

Showing 9 responses by jaytor

I guess I didn't do a very good job in my original post explaining what I was getting at. I have nothing against dealers. I have worked with a number of dealers over the years that I really liked and got a lot of value from.

My concern is that this kind of dealer is becoming the exception, and not the norm. And it's not the dealer's fault.

When I was starting as an audio enthusiast in the early 70's, the products I became familiar with, and ultimately purchased, were those offered by the few dealers I had access to. Yes, Stereophile and TAS introduced me to a few other brands, but it's nothing like it is today.

The wealth of information available on the internet results in consumers (myself included) that are often looking at a much broader range of products and brands than any one dealer can carry (or even all dealers in a small city), particularly in the mid to upper end of the market. Closing the deal on a purchase for a dealer becomes much less likely. This, combined with rising operating costs, makes it more difficult for the traditional dealer model to survive, or at least to provide the service I'd like to see.

I'm not rooting for dealers to fail - quite the opposite. But I'd like to have the opportunity to hear products in a well designed listening environment and most of the dealers in my area, for one reason or another, don't seem to have been able to pull this off, and many of the products I'd like to hear aren't available for demonstration near me.

So what are the alternatives?
I'm glad to hear that you have several stores that are thriving. I think there are areas in the country where this is possible. 

I am not saying it saves the consumer money. I don't mean to be confrontational, but it's not just about saving the consumer money. It's also about keeping the industry healthy. 

Frankly, I would love it if consumers had more respect for the value that dealers offer, but I don't think they do. Many do everything they can to take advantage of dealers and think they are their just for their own benefit. 

Perhaps I do have an agenda since I personally experienced how hard it is to make a profit in brick-and-mortar.

I don't want to see my ability to experience multiple products in a good environment to disappear. So I made this post to get ideas on how to improve the situation. 
@mr_m - Yes, I agree. I don't even think it is fair to the dealer (whether brick and mortar or ecomm) to take (or purchase) 2, 3 or more products home knowing ahead of time that you're going to return one or more. I won't ask for a home demo unless I am fairly confident that I'm going to keep it. 

I can't say I haven't made mistakes. There have been a few products over the years that I ended up selling after 6 or 12 months, but I've taken the cost hit for that myself. Having had my own businesses for most of my career, I know how hard it is to make a profit, particularly for small businesses. 

This may not be the most cost effective way to build a system, but I do as much research as I can upfront (often relying on forums like this) and try to listen at shows and fellow audiophiles' systems before wasting the dealer's time and money.

I do understand that many people don't have the financial resources to be able to afford to make purchasing mistakes, but they need to keep in mind that the money they are "saving" is essentially coming out of the dealer's pocket.

If we want brick-and-mortar dealers to survive (and specialty e-comm dealers for that matter), we have to realize they have to be able to make a profit. 
@millercarbon - If you are legitimately in the market to buy a new car and have narrowed your choice down to a few models that will satisfy your budget, needs and desires, then, no, I don't think you're stealing from the dealer. Doing a test drive is a legitimate and necessary part of purchasing a new car.

On the other hand, if you are taking up the dealers time and wear-and-tear on their demo fleet to satisfy your urge to try a new model you read about in Road and Track and have no intention of buying, then yes I do consider this stealing from the dealer. 

I'm not saying that visiting a dealer to audition products, or even taking them home for a more thorough audition should be completely avoided. If you're serious about purchasing, this is a great way to confirm your choice. 

All I'm saying is that consumers should recognize that this is not free for the dealer. Having a good dealer that provides great service and carries products you are interested in should be considered a partnership. 

@audiokinesis - I think home audition can be a reasonable approach if the shipping costs are a fairly small part of the cost of the product, the risk of shipping damage is low, and the consumer is willing to accept at least some of the cost associated with a home trial. This is certainly a reasonable approach for products like cables, and lighter weight non-delicate source components.

This isn't really practical for hundred pound speakers though. 

In the past, I've enjoyed going to audiophile shows to hear a variety of products, but these seem to be getting more and more expensive unless you happen to live locally. I think more local audio shows would certainly help, particular if venues could be found that didn't gouge the vendor or consumer.

I also think supporting good local dealers - particularly those that are able to effectively demonstrate good quality equipment - is part of the solution. I'm just not sure how long such dealers are going to exist except perhaps in larger, more affluent cities.
@audiokinesis - I think PAP has a slight advantage in that it requires the consumer to put in a fair amount of their own effort to put the speakers together, and the speakers themselves require a larger than average listening environment, so customers that order these speakers are more likely fairly confident that they will want to keep them. 

PAP also probably has lower shipping costs than more conventional speakers of similar size since they are shipped in pieces, and don't have a huge, heavy enclosure (although it's not exactly light). 

But I agree, it is an interesting approach. 

@larry5729 - I completely agree that consumers are missing out. But I don't think TV advertising is a cost effective solution for manufacturers. As you pointed out, only a very small percentage of homes have even a mid-fi sound system these days. Unless you are appealing to a significant percentage of the viewing audience (with the possible exception of extremely high margin pharmaceuticals), TV advertising just isn't viable. 

I did a TV ad for my bike shop for the local audience and ran it during the Tour de France TV coverage on Comcast. This might have been worth doing once since I was trying to raise awareness for a relatively new shop and the Tour de France was a very focused audience, and since it was such a niche audience, ad rates were relatively low. I also had internal staff that created the content. Even so, I couldn't justify doing this twice given the return.

It might be worth it for a large store in a metro area to run a TV commercial, but probably only if they were also advertising more mainstream products (large-screen TVs) and got some financial support from their vendors. I have seen this type of commercial occasionally in my area, and particularly radio ads. 

For manufacturers, getting articles in general magazines that are typically read by more affluent readers (Forbes, New Yorker, Architecture Digest, Conde Nast, inflight airline magazines,  etc.) probably makes more sense, and I have seen these every once in a while. 

It's challenging when you have a fairly niche market. I don't think most consumers have the buying power they once did, and personal music players (ipods, smart phones) have really taken over as the primary mode in which people listen to music (sadly).

Even friends that are blown away after listening to my 2-channel system or watching a movie on my home theater would still not consider making the investment in a decent system. It's just not a priority for most people any longer.
@verdantaudio - this is an interesting idea that I think could certainly work for lighter items. 

Another idea I was thinking about was for manufacturers to have "brand ambassadors" in different areas of the country. The manufacturer could offer a discounted price to customers that were willing to demonstrate their product to interested parties in their homes (post COVID). Most of us love to show off our systems anyway and enjoying meeting/talking to other audiophiles. 
@spacecadet65 - I used to live in the Boston area (Carlisle) and shopped at Goodwin's (when they were in Harvard square before their fire, and then in Alan's apartment - I moved out of the area before he opened his new store in Waltham) and at Natural Sound in Natack. Are these shops still around? Are they some of the shops that are now focused on home installs?
@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.
The current pandemic situation has to be particularly challenging for manufacturers that rely on being able to demonstrate products, and for retailers in the same situation. This is certainly likely to accelerate the demise of many brick-and-mortar audio stores, making it even harder to audition high(er)-end audio products.

When I started this thread, I was assuming we'd get past Covid-19 sometime in the next 6 to 12 months, and I was really wondering about our options when it's safer to start socially interacting and travelling again.

I don't really understand the thinking of hotel managers that are charging ridiculous amounts to host audio shows. Yeah, they have to move some furniture around, but it has the potential to fill every room for several days over a weekend - let alone fill the restaurants and bars after hours.

I used to attend CES every year in the late 90's, and really enjoyed spending a day at Alexis Park where all the high-end manufacturers were exhibiting, but my employer at the time was covering the tab. I was thinking of attending Axpona or Rocky Mountain this year (pre Covid), but the rates the host hotels were charging were insane. I can't imagine how much they are charging for demo rooms.

Perhaps hotels will be a bit hungrier for this business post-Covid and will be more reasonable. 

I like the idea of local audio clubs hosting vendors. Our local club has done this on occasion, but generally for tech talks - not demonstrations. Finding a suitable venue for an audio demo can be challenging - particularly one that is large enough to handle more than a small number of listeners.