How Do Hi Fi Companies Stay in Business?

[1KW]

So the answer is manufactures are too expensive making it hard for stores to make a profit. Are you listening to this thread manufactures, your digging your own grave. If retailers can't make a profit they go out of business. There is also no upgrade path such as when you trade in your car to buy a new one. Maybe hi end audio should look at the hi end car industry and come up with a solution. I'm not going to buy $40,000 speakers if the the $20,000 speakers I bought are only worth $7000-8000 on trade.

[1KW]

Originally Posted by Stahle

I agree, pricing for high end audio equipment has far outpaced inflation. Take for example a Mcintosh MC452. One could argue that back in the year 2000, the MC352 held the equivalent spot in the product lineup (MC352 to MC402 to MC452) and had a retail price I believe to be $4,500 at the time. Assuming the retail price was $4,500, that $4,500 would now be about $6,500 when factoring in inflation. Current retail pricing on the MC452 is now $9,000! I've seen this with other high end audio brands as well and you can't tell me that overhead has caused these kind of price increases. On another thread it was mentioned that the price for the MCD350 is going from $4,500 to $5,000 effective April 1st right after corporations received a huge tax cut, it doesn't make sense. If price increases such as these continue, I'm going to get priced out of this hobby and if many others are like me, they will too and that will hurt retail stores.

I guess if I look at the upside to all this, I'll be able to go into a big box store and purchase a much larger and more advanced TV at less of a price than I could in 2000 and that's without factoring in inflation. I'll just never be able to upgrade my audio system to go with it.

Greedy Bastards

[metaphacts]

Originally Posted by 1KW

So the answer is manufactures are too expensive making it hard for stores to make a profit. Are you listening to this thread manufactures, your digging your own grave. If retailers can't make a profit they go out of business. There is also no upgrade path such as when you trade in your car to buy a new one. Maybe hi end audio should look at the hi end car industry and come up with a solution. I'm not going to buy $40,000 speakers if the the $20,000 speakers I bought are only worth $7000-8000 on trade.

(Coming out of listening mode momentarily.)

Wilson Audio Trade In and Certified AuthenticTM Programs already exist and have for over two years.

Values are based on real world market retail values. The huge number of Alexia 1s you have seen on the web over the past 8 months were mostly traded in to Authorized Wilson dealers toward either Alexia 2 or Alexx.

(Back to listening mode.)

[1KW]

Originally Posted by metaphacts

(Coming out of listening mode momentarily.)

Wilson Audio Trade In and Certified AuthenticTM Programs already exist and have for over two years.

Values are based on real world market retail values. The huge number of Alexia 1s you have seen on the web over the past 8 months were mostly traded in to Authorized Wilson dealers toward either Alexia 2 or Alexx.

(Back to listening mode.)

Thank you for chiming in. That is great information to know as I was not aware that Wilson audio had a trade in Program. Had I known that I might have gone in that direction over Sonus Faber which unfortunately does not offer any such program and I have 2 pairs.

[PHC1]

Being in the audio hobby for over 30 years, much like many of our members here on AA, I have seen a great variety of audio "boutiques", ranging in facilities and service from "great" to "poor". I have seen the rise and fall of quite a few audio boutiques over the years.

I specifically said "boutiques" because high end audio is a "luxury" product after all. No one really "needs" expensive speakers, amplifiers, cables, etc.. Music can be enjoyed on any mid-fi system after all, much like any budget level automobile is good enough to get you to and from work and Mercedes, BMW, Lexus, Porsche are purely luxury purchases and not a "necessity".

What drives us to purchase a luxury item such as $10k, $15k, $25k to even over $200k speakers, amplifiers, turntables, etc? It is the same "passion" for quality, performance, brand loyalty or recognition that promises to deliver an experience above and beyond the generic and more common place alternatives.

While it is somewhat saddening to see the brick and mortar stores suffering and disappearing all together, from the whole malls to mom and pop shops to audio dealers (some are still hanging in there and some are doing very well as an exception to the trend), the internet brought along a whole new wave of convenient "online" purchasing. Times are changing, technological progress demands change, everything "evolves" over time.

While dissecting the question that David has posed, "how will HI-FI companies stay in business", it would be wise to break the Hi-Fi into categories and evaluate the current trends. Budget/Value, mid-level and ultra-high end/exotic.

1. Budget audio/value audio gear. Clearly the budget and value audio is entirely different from the exotic high end. There is not much profit in budget audio and as such can never support a business model built on such products in a brick and mortar store with overhead. There is not enough profit and not nearly enough traffic and sales volume to make it a viable business. Only a mega store like Best Buy that offers a very broad range of products and generates enough sales volume from everything like smart phones to TVs and computers to mid-fi, to refrigerators and washers can probably survive another decade or so... Others have tried and gone the way of Circuit City and Crazy Eddie... Gone forever. RIP...

The budget and value audio companies that are playing it smart are simply cutting out the middleman all together and offering direct online sales with a money back guarantee. Try before you buy is now accessible from your keyboard and in the comfort of your home with very little to nothing to lose from such a purchase. This even includes some speaker companies. Smart! No one really wants to spend a few hours driving somewhere to go and audition a pair of headphones, desktop speakers, etc unless you really have nothing better to do with your free time. It can be accomplished with a few keystrokes at home. It is exactly how it should be these days with the rise of value oriented audio gear lately.


2. Mid-Level.

This is the level of gear we most often come in contact with at most high end audio boutiques. From Sonus Faber and McIntosh at the Magnolia stores, to the ARC, BAT, Krell, Simaudio, ML, Bryston, Magnepan, Martin Logan, Dynaudio, Totem, etc ... This level of gear has supported and has been the bread and butter of the audio boutiques for quite some time.

This level of gear from the manufacturers often encompass a wide range of price levels as well. Everything from the reasonable and affordable to ultra high end for some brands. This level is of gear becomes a bit more challenging without the dealer network in place. A $10k pair of speakers or amplifier shipped directly from the manufacturer without a return policy in place or try it at home before you buy it? I don't see that working out very well unless there are at least some "factory boutiques" in places in at least some of the cities like "World of McIntosh" in SOHO NYC to capture the imagination, interest and passion necessary for such a purchase. This requires seeing, hearing and coming in contact with such products to spark further interest in the actual purchase process.

We see the greatest diversity in these audio boutiques that are still around today. Ranging from great to poor dealers. Time will obviously shake out the rest who fail to engage their customers with the level of representation of the brands and customer service to harbor the customer loyalty and repeat business that is a must in this line of business. This will continue with the various levels of greatness or lack thereof until it ceases to exist all together. This level of gear has always been sensitive to the economic cycles and like the tides of the ocean will ultimately wash out even more dealers over time and the next recession or two...



3. Ultra high end.

Ultra high end, at least the way I envision it... I will define anything over $30k ultra high end for the sake of argument.

So you want to audition some serious gear... You have the passion, the desire and the means to own some of the world's greatest gear. Congrats!

What has been the typical scenario here? Is it not what raised this question and topic to begin with?

You want to audition a pair of Wilson Alexx or Alexandria or Sonus Faber Aida, etc... You call around the local dealers, which may or may not have those specific models in inventory for display and audition. Does one expect a local dealer to carry ALL of the models of the brands they represent? Perhaps they will have THAT speaker but the next customer that calls looking for another model in the line up should also expect the dealer to HAVE IT....

If the dealer does not, well, here come the complaints that he does not stock everything.... On top of that, you want to audition those speakers in the "very best" room he has (or doesn't have....) not an unreasonable demand. You deserve the best audition you can get if you are considering spending as much on that pair of speakers as a luxury automobile! Not always the case. It is unreasonable to think that the dealer should have ALL the models of ALL the brands he represents, to have the square footage facility and overhead to support that kind of a showroom and then of course we also want a nice discount at the same time! Obviously this does not always exist or we wouldn't be talking about it?

Some dealers will go the extra mile to not only let you audition the pair of speakers or amplifier or whatever gear but will come out to your house and carefully set the gear up so that it performs its best in your environment. Not always the case either!



What would I do if I was the manufacturer of ultra high end? In my mind there is only one proper way to do it!

If you are offering speakers, amplifiers and other gear that extends out to the stratosphere in price, don't put it into someone else's hands to represent your gear! Much like an "experience center" that BMW and Porsche has built, any serious high end manufacturer should have a proper facility where ALL the models can be auditioned with the proper setup to perform their best.

The client willing to spend that kind of money on a product that should bring him/her enjoyment proportional to the purchase price of such a luxury/performance item deserves to experience that item of desire under optimal conditions and enjoy the "experience" of selecting such product. I doubt it would be out of reach for the more popular ultra high end manufacturers to add on a few well equipped rooms where a client can make an appointment and fly over for a tour of the facility, enjoy the auditioning and selection process of such fine gear and having experienced such product under optimal conditions will likely want to own it.

No doubt a visit and a short stay in and around the area would not be out of the question when it comes to a well-heeled audiophile willing to write a large check! I certainly would if I was in the market for such a product! It is no different than a visit to the BMW, Porsche, Ferrari, Lamborghini or Pagani museums and/or factories, plenty of enthusiasts and current/future owners are only too happy to do just that.


Eliminating the middleman for such ultra high end products (and the profit margin of dealers) would leave more than enough room for a team of two or three trained factory representatives to arrive shortly after the delivery of crates and achieve an optimal setup in the client's home. Surely speakers costing $65k just as an example would allow for such a team to either drive or fly over to customer's home for a total experience and personal attention as well as to assure total satisfaction. That is how you retain the loyal customers and ensure long term survivability for the company. That's the approach I would take myself. I think clients spending that kind of money deserve it and I would offer them no less than just that!

[PHC1]

Typical profit margins for automotive dealers run in the 1-2% for the budget cars and stretching to 10-15% for the luxury automobiles requiring a multi-million dollar investment into top notch sales and service facility if you are even dreaming of selling a Porsche, BMW, Lexus, Mercedes, etc... A Ferrari dealer required to bring a facility up to standards will spend $5M-$10M or more just to be able to sell more cars and have some chances of getting more inventory/desirable models than the dealer who is stalling on that "upgrade"!

Grocery stores profit margins are in the 1-3% also requiring multi-million dollar investments.

Here we have audio dealers which often do not even take care of setting up their products properly, bare rooms, listening to a pair of speakers in a 12x14 room with 15 other pairs lined up against the walls of that same room. When I mention that sir, "your room sounds like crap" and I can not enjoy or hear this pair of speakers like they are supposed to perform, the answer is "I know".... What???

We as customers allow these practices to go on with the audio dealers who expect 30-40% profit margins and do not even take care or pride in the stuff they sell! I don't know what they are smoking these days thinking they can successfully run a business like that but the trend is pretty clear, they are dropping like flies. If they can't make it with those profit margins, something has to be very wrong with the picture. Turning off customers with poor demo rooms and representation effort and after purchase support does not do any good to the dealer or the manufacturer who has entrusted the dealer to represent their product.

Manufacturers should seriously think about that. Rant over.

[1KW]

Serge I agree with some of your points but for me I don’t need a place like so ho Mcintosh World. In fact I would rather get a deal that is fair to both parties. Every luxury product from watches to expensive photography equipment to cars etc has a upgrade path . Except for the recent post from Metphacts I never heard of such a thing in hi end audio so there is no reason often for customers to go back to the store. Combine less traffic with low profit margins and you have a going out of buisness problem. The online dealers that sell music and equipment have customers coming back for the music atleast that is until hi res streaming is available. I’m not sure what the answer is but it is a sad state our hobby is in.

[j3brow]

Excellent points Serge. Dead on.

[PHC1]

Originally Posted by 1KW

Serge I agree with some of your points but for me I don’t need a place like so ho Mcintosh World. In fact I would rather get a deal that is fair to both parties. Every luxury product from watches to expensive photography equipment to cars etc has a upgrade path . Except for the recent post from Metphacts I never heard of such a thing in hi end audio so there is no reason often for customers to go back to the store. Combine less traffic with low profit margins and you have a going out of buisness problem. The online dealers that sell music and equipment have customers coming back for the music atleast that is until hi res streaming is available. I’m not sure what the answer is but it is a sad state our hobby is in.

David, I'm not sure what you mean by you don't need a place like a McIntosh World but you'd rather get a fair deal to both parties. Both parties being you and the dealer? Well the dealer's share is coming out of your pocket.... The profit margins used to be 40 percent or higher on most of the gear... For the privilege of coming into the store and often leaving feeling disappointed in the audition because it was not even worth the time to drive over to hear the speaker in a room 3 times smaller than it should have been, reflective, reverberant and then having to feel ashamed that you asked what the best price would be and the dealer acting like he was insulted that his 40 percent margin was questioned? I'm over that nonsense personally.

I would much rather see the audio hobby take on a more modern approach of direct sales with an opportunity to come and experience the product at the manufacturer with a room that is worthy of showcasing their products if they care enough about them. Otherwise why would I even want to bother with that brand?

If we want to continue purchasing these ridiculously overpriced components, at the very least manufacturers should insist on some serious standards from their dealers and not this circus that we often see and experience by wasting our time driving over. It doesn't do anyone any good.

Perhaps some manufacturers have simply lost touch with reality that they are selling nothing more than toys for grown boys that have an obsession with such toys and don't mind paying for them. At least make sure the toy store that sells your toys meets the standards. Everyone else does it. You'd be hard pressed to find another example of such expensive luxury items being so poorly represented as high end audio.

Not going to mention the name of the dealer but having your call returned "only" a week later by a brick and mortar dealer and being notified he is by appointment only now and we will have to find mutually agreeable time to meet does not exactly make me want to deal with that dealer anymore and I simply won't.

[akfaulkner]

I tend to agree with many thoughts here. I am on the younger side of folks that I know are audiophiles so I have a lot of friends that just don't go to high end dealers bc it's not worth it, also typically the high end dealers are so behind in technology.

Just go into a high end audio store and ask for a demo of using a Amazon Alexa or Google Home controlled audio system...afaik I have never seen this at a dealer. Basically I think they are missing out on the lifestyle aspects and tech integration.

Even with that, I feel like a high end audio store still has a place if they focus on the music and movies....build a community...want to sell theater systems, have a couple of hosted movie nights to test out the equipment. Want to sell more audio gear, then have new hosted music Friday or weekend events...build a website and portal around this and provide people a place to learn and discover music and movies and couple this with more lifestyle products then I am sure you can upsell enough folks and get good repeat business!

But I don't own a audio store so it's probably hot air . Fun to think about though