"There seems to be a new price model targeting this new, narrower customer base of concentrated wealth around the world. Outrageous markups can make the vendor rich when the customer base is not price sensitive, and also be an easier business model than dealing with higher volume at lower margins. Sell 1000 $5000 power cords and you're done."
What makes you think that people will buy $1000 $5000 power cords just because you make them?
I think you read a little to far into my post.
"Two points you made that I don't agree with. First, I've been buying from internet dealers for a long time and you are wrong, no way do they have the same over head that a B&M store does. Not even close. And if done well they can reach a national audience which is what is needed to stay in business. In the many transactions that I've engaged in with internet dealers, they acted as simple order takers. There was zero pre sales service or post sales service and I don't expect any. Give me the product at 35% off and have a nice day."
About the first point, regarding the overhead of internet dealers, I'm not wrong. I never said it was an identical comparison. There are a lot of variables and depending on a particular dealer, how many common expenses that will be similar or shared, will have to be examined on a case by case basis. Your experience with such internet dealers, are valid examples, but are relative to you. Nothing wrong with that, but looking at the whole picture requires you do consider all of whats available, not just the stores that you've done business with.
"And if done well they can reach a national audience which is what is needed to stay in business."
That's a good point, but it costs money to do that. Also, just because you got a 35% discount on something doesn't mean that's the standard. In fact, many brands would bar a dealer from obtaining their brand if they saw that discounting like that was normal business polity. So, like I said, its all relative to the products and brands. They all have different requirements. Its just normal, everyday business.
"The other thing you said I don't agree with is that the used market would be hurt if people stopped buying new gear from B&M dealers. This is wrong. If the manufactures were openly selling at lower markup over the internet than the used prices would just be cheaper. People would still buy new gear just without the 45% dealer markup. Then the used market would also benefit from lower prices. Look at a company like wyred4sound. They sell an amp for $2k that would be $4k if sold by a B&M store. When it sells used, it's just all that much cheaper.
And as for a company like Wilson doing business as an internet operation. Not sure. I will say that people do buy Wilson speakers all the time here on Audiogon. So the used market is willing to buy these products mail order."
Its possible that I wasn't clear on that. I wasn't talking about all products. Just the ones that are more expensive and specialized. I used Wilson as an example, because in order to set them up for a proper demo, a lot goes into it. A good room, assoc. equipment, knowledgeable setup people, etc... Like many high end products, they're not meant to be sold mail order. I then said that if you don't have a good new market, the used market will suffer. It has to. Without people to buy new Wilson's, there won't be a used market. That was the whole point. I agree that people will buy used Wilson's here on Audiogon, but people have to get them first new. And without B&M stores, brands like Wilson, will probably not survive.
"I can't remember last time I bought anything of value at B&M that wasn't drop shipped. There's NO reason to stock anything except for demo/display units.
The only differences between B&M and internet are physical location and ability to demo components but at a STEEP PRICE. If you're an educated consumer, don't need B&M IMO. Bye! Bye!"
Did you even read my post? If the above is true, can you give me an actual example?
"The internet buyers don't want to pay full retail and they should not have to since they get nothing for the markup from the dealer."
That's not true. Just because a dealer sells a product on the internet doesn't mean there is no service provided. Most, if not all legit internet audio dealers do have a physical location with employees just like a B&M store. Here's a small list of things that an internet dealer has to do or provide their customers.
Sales consultation. Customers still need help with all aspects of making a purchase. It really doesn't matter if they walk in or call in.
Inventory must be stocked. Yes, sometimes an item is drop shipped from the mfg, but that's not always the case. Most dealer agreements require a minimum inventory of products that are to be kept.
Not every piece of audio equipment is made in the same country that it gets sold in. That usually requires the dealer to import the product, or deal with an importer in the same fashion that they would a mfg.
Possibly do basic repairs.
After sale support.
Have to deal with a higher rate of returns because there is no local B&M store the customer can visit.
Internet dealers have all the same business expenses that most regular businesses have.
Then there is the actual dealer agreement. Those things are loaded with all kinds of specific requirements. Rules for selling. Territory. Pricing. Insurance requirements. Competence requirements for dealers. Advertising requirements. Minimum purchases. Other brands and equipment the dealer must have to properly support a specific brand.
And there's plenty more on top of all that. Just to be clear, I'm not saying the business model isn't changing, I'm just pointing out that there is a significant amount of overhead involved in an internet based audio business. These business do provide real services to their customers. And even though we are seeing more factory direct types of businesses, they're not the norm. Companies that manufacture audio components, still need dealers to handle aspects of the business that they can't.
"But does this mean the end of high end audio? No it's just the end of the old model. Personally I don't care if every B&M dealer goes under tomorrow. It's inevitable anyway. I don't use B&M dealers. Can't afford the mark up. The new model will be internet direct sales with 30 day home trials."
I think you are partially right on that, but its not something I would wish for as an audiophile. That model may get by for entry and mid level quality gear, but as the gear gets more expensive and specialized, a B&M dealer really becomes necessary. For example, lets say you want to buy a really nice pair of speakers like Wilson, Avalon, JM Labs, or any other big expensive speaker in the same league. If there were no B&M stores, selling speakers like that would not be realistic. In order for a proper demo, products at that level need to be setup properly and matched to equipment that brings out the best in them. Stuff like that can't be done mail order. Could you imagine a company like Wilson doing business that way? Chances are that they wouldn't be able to stay in business. Also, you may say, I'll just buy used and sell them at a small loss if the speakers are not for me. That can be a valuable strategy. I've done it myself. The problem with just looking at the situation from that perspective is that you still need people to buy new speakers before you can even have a used market. That's why I don't want to see B&M stores go out.
That said, your post is excellent. These type of topics really need to be discussed. I don't think too many audiophiles consider what's involved in getting audio components form the manufacturer to the end customer. There's a lot involved. Last, I know that many will list bad experiences that they had when using dealers. Unfortunately, I think that way too many of those complaints are true. The only thing I can say to that is to try and find a good dealer, and support them, if possible. And if anyone knows any good dealers, maybe they should be mentioned to others looking for one.
The point I was trying to make is that there is a wide variety of places to deal with. Some suck, but there are some very good ones, as well. I wanted some examples just to see what type of retailer/brands you were dealing with. Quite often, manufacturers that are either new or not doing well lower their standards. Established brands in good health, are far less likely to allow low service, internet type sales. (not to be confused with retailers who are breaking their contract and getting away with it.)
A lot of the high-end is about ego. I can afford it and you can't."
I hear that one all the time but no one can ever give me an example. Most people have no idea that high end audio even exists. If someone wants to show off, there's other ways to do it than with audio equipment. I think its remotely possible that one could buy expensive gear just because they like the way it sounds, and no other reason.
At least you didn't buy a car because it had a good CD player in it..."
Correct. But as luck would have it, I wasn't happy with the CD player I sold my car for. A few weeks later, I traded up for something better.
I liken high end audio to fine swiss watches. The technology has existed across many decades. The updates are mainly in style and materials with some breakthroughs in design here and there. The focus in high end audio is on workmanship and style, not economies of scale or reducing the cost in the next generation product."
That's really not true. The only thing subjective about a watch is how it looks. Its function, or purpose, is to tell time. In that respect, all watches are the same regardless of cost. Not so with audio. With audio, the product is subjective in use. 5 people can have different watches, at different price points, but they'll all give you the same time. Listen to 5 different CD players, and you'll get 5 results that are not the same. Also, with regards to the last sentence, I'm not sure how you came up with that. Can you give me an example?
It would appear that the average age of the audiophile is rising by the year. The inevitable stopping point of the aging process will coincide rather identically with the stopping point of that individual's consumption of new audio products. It will, in fact, have double-edged effect of further damaging the market place with the addition of more used gear to the inventory. Supply and demand dynamics will cause opportunities for those who are entering the market place to purchase wonderful used gear at a fraction of the prices being demanded by boutique charlatans and genuine innovators alike. This should cause an extreme cleansing of the manufacturing ranks."
I understand why you would think that, but the opposite is true. Audiophiles are always upgrading. If they can't get rid of their old gear, they won't be able to buy new. A good supply of used gear is a very good thing. Take Audiogon for example. This web site allows someone to buy a component that they may not be able to afford if they had to get new. After the sale, the seller will usually upgrade. Also, and more importantly, a website like this increases the number of audiophiles that exist overall. Audioqon is a source for gear that many people all around would not otherwise have access to. For proof, just look at all the threads started here, where the poster asks for advice because they can't buy equipment any other way. I remember when I sold my Rotel 1072 here. Rotel is extremely difficult about not shipping to customers.They would rather loose a sale than ship something to someone that doesn't have a local dealer. I got close to full list price for it from someone who didn't have a dealer anywhere near them.
Hi ZD, it's true; I really do liken fine watches to high end audio :). You make generalizations and say a watch's only function is to tell time. By that same logic, a CD player's only function is to play music and most people would argue that they all sound the same."
Sorry. After reading my post again, I don't think I did a good job of explaining my point. With a watch, the subjective function of the product varies greatly per person, and per watch. That all watches tell time, is a generic function. You don't upgrade from a $50 to a $5000 watch because the expensive one keeps better time. Its for some other reason. Looks, status, whatever... (Yes, with anything, there will always be an occasional exception. A scientist may need something super accurate. That type of thing.). My CD player was meant in context of this thread, and website in general. Of course, most people will think all CD players sound the same. But not on this web site. People (here) usually don't buy an expensive CD player like they would a piece of jewellery (or watch). We want better sound for the money.
Just to clarify, an expensive watch is usually bought for aesthetix reasons alone, where as an expensive CD player, is usually bought for an increase in performance.
Schubert is absolutely right. Yes, there can be an ocassional exception, but other wise he's right.
"+1 what Onhwy61 said. See, I can't imagine someone buying a $24k turntable; but wearing a $20 timex digital watch or driving a 20 year old Jeep. Show me someone that hard core into audio that every dime they have goes into way out there equipment."
I can provide you with a very long list of people that would do just that. Myself included. But I will concede a specific point. My purchases would define me as an audiophile. I'll admit that.
I hate to admit it, but I actually sold my car to but a CD player. Wasn't enough, of course, but it was a start.