Anthony

“The specialist knows more and more about less and less and finally knows everything about nothing.” —-Konrad Lorenz

Doubts about the future of retailing have become the bass note of the HiFi industry. We hear it everywhere, from other reps, from manufacturers and mostly from dealers themselves. Brands that, only a couple of years ago, were fiercely committed to brick-and-mortar are now selling online to maintain sales growth. What’s worse, Retailers are finding it increasingly difficult to justify the massive overhead that a brick-and-mortar showroom demands.

And yet, I feel overwhelmingly optimistic about the future of High End retailing. No, I haven’t been doing drugs (nothing worth bragging about, anyway), I’ve just seen a bunch of new dealers figure out ways to adapt the traditional retail model to the needs of their business and survive the spectre of ever-increasing operating costs. Although retailing will, I believe, remain healthy, I think the days of the ponderous, street level independents are, sadly, coming to an end.

Rents are skyrocketing in wealthy cities and suburbs alike. When Dylan and I were kids growing up in Bergen County, there were a FIVE independents on the highways of Paramus alone: Tech HiFi, Crazy Eddie (where Dylan and I worked), Leonard Radio, Stereo Circus and Stereo Warehouse. To those independents, let’s add the Chains. There was a Harvey, Sam Goody, Harmony House, Lafayette, a High End showroom inside Korvettes—itself defunct—and four or five Radio Shacks, all on a four-mile stretch of Routes 4 and 17. When Harvey closed in 2008, the high-end highway store disappeared, followed shortly thereafter by 6^th Ave and Expo.

It’s not that customers don’t want to patronize high end showrooms and it certainly isn’t the case that brick-and-mortars can’t work; rather, the business model which has dominated since the 1950s is showing its age and needs a facelift or, more precisely, facelifts. Here are three dealers—each of whom conduct business in very different ways—who are “Getting It Right”

Bright Audio: when Kerry Bright’s CI business outgrew his basement, he started shopping around for a retail showroom. Kerry knows his customer: hipsters from the East Village, computer-savvy and possessed of disposable income but careful how they spend it. They’re also night owls! Kerry, a trained sculptor and former contractor, found a great lease on Avenue A and got his hands dirty–doing much of the Gut Renovation himself–and designed a gorgeous showroom that makes the most of the small sales floor. Since Kerry’s customers tend to party until “…the wee small hours of the morning,” the showroom doesn’t open until noon, which means a single shift can work the entire business day, thereby minimizing payroll. Saturdays at Kerry’s are reminiscent of “The Good Ol’ Days” of audio retailing, the store packed with locals and regular customers. Bright Audio focuses on “Low End of the High End” components and outperforms with tube gear, turntables and analog accessories, bookshelf speakers and Computer Audio.

Ears Nova: Joshua Cohn hasn’t had a street-level showroom since he closed his Great Neck store in the early 2000’s. He doesn’t need one. EN’s customer base is ferociously loyal (many of his customers have been with him for over 30 years) and his business model doesn’t require a flood of customers. Occupying the entire second floor of an office building off 5^th Avenue, Joshua’s store is scrupulously clean, impeccably decorated and all his systems always seem to be in perfect tune. Unique among veteran dealers, Joshua carries as few lines as possible, thus fostering loyalty with his vendors and focusing his presentation. Joshua’s expertise in selling state-of-the-art systems enables him to operate with a small staff in a large space where the emphasis is on enthusiastic service and definitive demonstration. The fact that the store is brimming with rare gear, perfectly set up, is a big drawing card: making Ears Nova a “Destination” which connoisseurs will go out of their way to find.

Professional Audio Consultants: Ralph Tarnofsky had occupied his Essex Street showroom for 34 years. Back in 1980, he was strictly a high end, brick-and-mortar retailer—and hard-core audio aficionado–who needed to be in the center of Millburn’s shopping district, so he paid a premium for foot traffic. Once he locked his front door and became one of New Jersey’s first dedicated custom integrators, the escalating rent made less sense. Last year, Ralph found a new space: a freestanding building with more retail footage, a big basement and a parking lot…and the rent is substantially less than his tired old store. So, what did he give up? Ralph is no longer in the center of Millburn but on the fringe, about a quarter mile away. Not a problem for his customer base, since he’s still in town and the parking is now free! PAC’s new showroom echoes their ”Hybrid” business model, a mix of traditional performance audio, dedicated home theater and a panoply of “Stealth” products– that signify Ralph’s position as a top-notch custom house.

So, what’s the point? After all, I didn’t write this simply to provide free advertising for three of my favorite dealers! What I’m trying to illustrate is that, with the glory days of enormous, street level stores quickly vanishing in the rearview mirror, dealers need to find new business models. Plural. Here are three NY Metro dealers, all of whom are succeeding at retail, yet doing so in entirely different ways. Kerry has created a “Hipster Heaven”, a small store with reasonable rent in a high-traffic area, catering to entry-level audiophiles (as critical to our business as his) while supporting his growing CI business. Joshua has an immense space, but controls cost by eschewing street presence in favor of “Destination” status. Ralph has also become a “Destination” but he only had to move a few blocks to do so. These aren’t the only dealers in our territory finding new ways to succeed and, as I’ve said, there are vast and varied approaches to success. What these dealers all have in common are a deep understanding of who their customer is, the willingness reinvent themselves and the acceptance that retailers must become “Niche Players” in order to remain profitable. I hope more dealers embrace these principles…I need the money!

Upward Mobility Is The New “Dead End”

How megabuck upgrades could drive us out of business

My blog is late this month. And while it would be easy to blame my shoulder surgery or vendor visits, the fact is that I had trouble thinking of a worthwhile topic. And then, last week, I called one of my dealers to discuss the Kiseki line of phono cartridges. I explained that, at present, there are two models in the Kiseki line, priced at $2,199 and $3,299. At this point in our conversation, the dealer told me: “Forget it. They’re too cheap. I’ll have trouble selling them.”

I think back to my early days as a HiFi enthusiast, when Koetsu broke the $1,000 price barrier for cartridges. A few years later, Van den Hul introduced a pure silver interconnect, again at an unheard-of $1,000. In “Recommended Components,” Stereophile noted: “A silly price. Still the best.”

So here we are, 25 years later and a $3K phono cartridge is too cheap for some dealers, while $1,000 interconnects are so commonplace, the price doesn’t even raise an eyebrow. As I’ve written in past blogs, $30K preamps, $100K amplifiers and $250K speakers are now relatively commonplace…and people are buying them.

Problem is that, at the other end of the spectrum, “Entry Level” gear has become remarkably good, better than much of the “Major Statement” gear from 10 years ago…but few dealers seem to care. The ARCAM A19 Integrated Amplifier ($999) and CS27s Disc Player ($1,499), Wharfedale’s incredible Diamond Series Loudspeakers ($299 and up) and everything made by PrimaLuna (starting at $1,799) suggest that true, state-of-the-art quality and performance have migrated to astonishingly low price points. So, why don’t more dealers care?

In a word—and I apologize to all of our good dealers for saying this—shortsightedness. It is true that the brick-and mortar business model carries very high overhead, which makes it less attractive for dealers to champion reasonably priced components. It is equally true that, if customers are buying price-no-object gear, its good business for dealers to sell it. Finally, we must all admit that it is much, much easier to sell one $100,000 component than it is to sell a hundred $1,000 components. There is, however, a “Bigger Picture” that these dealers are just plain missing; namely, we’re upgrading ourselves into extinction.

More than 30 years ago, when we were all just starting out in the industry, we were looking to build lifelong customers by selling them a great entry-level system and then enticing them with an endless series of upgrades. (In this, Dealers and Manufacturers were equally complicit.) And we were wildly successful: with the exception of a few Masters of the Universe, the folks buying today’s six-figure components “Got Hooked” when they bought their ARC SP-6 or Magnepan MGIIs back in the early 80’s.

The interesting thing is, that ARC and those Maggies cost under $2 Grand and they were a revelation for dealers and customers alike. Today, our dealers bristle at the idea of selling anything so cheap, even though the modern products we offer at those prices are vastly superior! That’s a side issue. The real problem is that, 30 years ago, all of us—dealers, vendors and reps—understood that we were planting seeds for the future; that the customers purchasing the $1,500 ARC would be our “Buyers” for the next 30 years. What about today’s customers? The dude acquiring the $108K dCS Vivaldi is buying his Last System. The music lover choosing the $1,799 PrimaLuna is buying his First! The entry-level buyer of today has the same demographic as the ARC customer of the 1980s and has a quarter century of HiFi purchases ahead of him…and yet, we’re pushing them aside, concentrating on hooking “Big Fish” to the exclusion of attracting the vast pool of new customers we’ll need to keep our industry healthy for the next generation.

Many of our dealers tell me they’re “Winding down,” that they’re looking to retire and, hopefully, sell their businesses. But how does a dealer sell a business that has no customers? There are millions of young professionals who care about music and many of these, if introduced to Fine Audio, would not only maintain our sales but actually make them skyrocket. Those dealers planning to close up shop and take up shuffleboard won’t care but anyone hoping to sell their businesses—or, better still, stick around for a few years and watch our industry grow—need to look to the future, instead of the past. The products are here. The customers are here. All that’s needed is the will to succeed.

Three weeks, Two Shows and so many great new products!

I know, I know…our October blog is late but, between CEDIA, territory visits by FIVE vendors and Stereo Exchange’s in-store HiFi show, it’s been a crazy few weeks! Fortunately, we’ve had the privilege of seeing a host of incredible new products, proof that economic adversity inspires the best manufacturers to outdo themselves…a sort of “HiFi Darwinism.” Naturally, ALL of the best products we’ve seen were authored by SSV vendors, so here goes….

At CEDIA, Leon introduced their “Classic” series of standard-sized, “Off The Rack” products including a pair of LCR Soundbars retailing for $995 and $1,195 including brackets, with a two-day ship time and six-pack discounts. Same “Made in USA” build quality but lower price and (potentially) higher profit margin. So, why would anyone sell Snap AV? (Actually, we’ve got plenty of reasons to not sell Snap…just ask Dylan!)

Dynaudio was demonstrating their next-gen Xeo Wireless Speakers. The completely redesigned Xeo4 and Xeo 6 offer better range, higher performance, improved cosmetics, and a line of accessories which maximize flexibility (including the ability to connect a subwoofer and expand transmitter range.) Even more impressive was Dyn’s “Top-Secret” Focus XD range. Our last CEDIA appointment, Dylan and I were guided to a private hotel room where Dynaudio founder Wilfried Ehrenholz explained the new, DSP-controlled loudspeaker series. Powered, equalized and crossed-over entirely in the digital domain, Focus XD speakers are actually an entire audio system: just feed ‘em a digital datastream! Plunked on either side of a big credenza, these things produced some of the best high end sound Dylan and I have ever heard: transparent, dynamic, incredibly detailed with a wide, startlingly deep soundstage with holographic imaging….at a price that undercuts anything else with true high end pretensions. We can’t wait to receive our final-production rep samples because these just might be game-changers!

Talk about a game-changer: Simaudio’s new 430HA Headphone Amplifier is here!!! Immediately earning its title as The Best Headphone Amp available, the 430HA, when equipped with its optional DAC board, is also a full-functioned digital preamp, thanks to its Evolution Volume Control and Main Outputs. ANYONE who listens to headphones—even customers who already own a high end system—will buy one of these things! The new 380D DAC features DSD and DXD processing and an optional Evolution Volume Control, which transforms the 380 into a state-of-the-art digital preamplifier…and a true high end bargain!

I thought it was a gimmick until I heard it…now I want it! Auro 3D is, to my ears, the most sonically significant advancement in Surround Sound since DTS. Dylan and I were invited to a private demonstration at CEDIA and I was blown away by the palpable soundfield achieved with the use of height and “Voice of God” speakers. Happily, the Datasat RS20i and LS10 will be the first processors to offer Auro 3D, as well as the first to include both Auro AND Dolby’s competing Atmos 3D format. We strongly recommend our Datasat dealers to call their existing theater customers and recommend upgrading their systems to Auro 3D

Best Sound at CEDIA—as well as the longest lines for a demo–was convincingly won by the Wisdom/Datasat demo. With both music and movie software, the 9.4-channel system spanned the extremes of frequency and dynamic range. The sound produced in this room was addictive, as was evidenced by the number of show attendees—myself included—who stood in line three or four times for “Encore” demos.

SurgeX is already renowned for the producing the ONLY power conditioners that completely eliminate spikes and surges, a fact that has made them the “Go-To” product for ”Mission-Critical” commercial projects. Now, with release of Access Manager, SurgeX is poised to dominate the residential market, as well! Several of our top integrators have already shifted their power business to SurgeX…please ask us how SurgeX can improve your installations!

Hiring the next generation of HiFi Salesmen

In the inaugural installment of this blog, “Where have all the audiophiles gone?” I asked who was going to buy the stuff we sell. The next question is: who’s going to sell it?

Walk into most Audio Salons and you’ll see a bunch of middle-aged guys—there are virtually no gals in HiFi—dressed in khaki slacks and golf shirts embroidered with store logos, clustered around the front counter. Most of them are college-educated, virtually all of them are “Lifers” in the HiFi industry but ALL of them have one thing in common: they all started out as audio hobbyists.

This sort of resume worked well for the first generation of High End salespeople: after all, enthusiasm sells! Back then, we had hundreds of customers lining up to buy gear, prices were reasonable, there was no internet competition and the customers, like the salespeople themselves, were Audio Geeks. There was both a kinship and a common viewpoint that made this salesman/client relationship work. This will not, I think, be the case in the future.

At SSV, we’ve seen an increasingly large proportion of our sales come from our most expensive products. These items are being purchased by wealthy professionals, so the salespeople who cater to these clients need to be just as professional. Audio knowledge, though essential, will be secondary to sales professionalism. As opposed to hobbyists, sales professionals will focus on making as much money as possible by promoting the best interests of the dealership and its brands first!

Going forward, salesmen must recommend products based upon the needs, desires and budgets of the customers, as well as the best interest of the dealer. In the past, a salesman developed a Love Affair with a particular component or brand and would therefore make “Blanket Recommendations,” advocating that product to everyone with whom he spoke, regardless of whether it made sense for the individual. We still see this silliness today: a salesman so focused upon selling a given item that everything else is neglected, or even denigrated. (Sales 101: NEVER bad-mouth a competitor!) What’s worse, we see salespeople underselling: spending a millionaire’s money as if it were their own…and leaving serious profit on the table! These aren’t just bad habits: they’re poor salesmanship! Imagine a doctor who wrote the same prescription for EVERY patient, regardless of the symptoms? Just like a doctor, the salesman will need to interview every customer to make an educated assessment of what products will satisfy each client’s requirements. Any other behavior is amateurish. It is an injustice to both customer and dealer and oh, by the way, it takes income out of the salesman’s pocket!

Even more importantly, salesmen need to exploit all of the programs and promotions offered by the dealer’s suppliers. If a vendor has a “Trade-Up Program,” EVERY relevant customer needs to know about it. Same thing if there’s a new product or a special deal. Again using SSV as an example, Simaudio offers a VERY generous Trade-Up Program: one-year at full MSRP, two years at 75%. Every Sim customer should be called 30 days prior to expiration of the offer. (You’d think that commission salespeople would know this without being told!) To our chagrin, Dylan and I keep hearing from customers who never heard about this offer! Two years ago, we started selling a $19K processor by Datasat (you probably know them better as DTS) and explained how dealers could pluck “Low-hanging fruit” by calling all of their past theater customers and pitching the new processor. To this point, only Lyric has done this. Funny thing here is that Lyric salespeople aren’t paid commission! They’re just behaving professionally.

Almost every day on the road—especially during Summer—I’ll walk into a dealer and hear the salesmen moaning about how bad business is, how little money they’re making, etc., etc. And yet, rather than complaining, if those same salesmen worked the phones and took advantage of all of the “Calls to action”—cash spiffs, points for product, trade-in/trade-up programs—provided by their vendors, they’d be generating serious cash!

Lately, I’ve encountered a couple of young, money-motivated salespeople. They dress better, know less about HiFi, more about selling, come to work every day with a game plan, spend less time kibitzing and complaining, more time on the phone and they treat everyone who walks through the door as a serious opportunity to promote their store…and themselves. Do I need to tell you they’re making money?

The streets really ARE paved with gold, guys…reach out and grab it!