Is Selling Direct Viable for Manufacturers?


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Can companies like Krell, Pass Labs and Audio Research make a go of it without dealers? How important is the showroom for hi-fi sales? How many showrooms have you been in that are reasonably laid out like your listening room? How necessary are brick and mortar stores for hi-fi sales?
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Showing 1 response by dgarretson

The better manufacturers both large and small have effective in-house service & support that can easily be leveraged into a direct sales model. As shrinkage in the domestic retail channel continues, USA will be down to 20-40 meaningful high-end shops in major urban areas only. The few shops left are lowering their stocking levels to the point that these retailers are pretty much useless to all but a few large manufacturers. Moreover, as the market for high end audio declines, there is a big question as to whether these shops can do anymore for a manufacturer what a retailer is supposed to do, which is to pull in new customers that the manufacturer would not otherwise obtain. That is what the retailer's 30-40% share of the purchase price is supposed to buy for the manufacturer.

Meanwhile, the business at all price points is becoming fragmented by an expanding number of small boutique manufacturers. These small manufacturers can't get traction with the remaining retailers, who are uninterested in dilluting their existing brands and who place demands on margins that the small manufacturer cannot meet by virtue of his limited economies of scale. The smaller manufacturer is thus both driven toward and stands to gain through a direct sales model or a limited distribution model based on low-margin reps selling out of home-based demo rooms.

Of course the export market is different and does require retail distribution.

In the zero-sum game of a declining 2CH marketplace, to the extent that many smaller manufacturers erode market share, the few remaining large ones lose and lose big. The larger manufacturer has the most to lose and probably will.