Thread: "Awesome" dealer experience....not.

Originally Posted by Myles B. Astor

I'm not sure that Andy is a representative example Cyril. New York rents are out of control. When Andy first moved into that store, the rent was pretty cheap. Finally, the rent had crept up so that he couldn't make a profit--not unlike what many stores, restaurants, etc. can't afford to do business.

Why do you think they're so few music stores left in the city? They can't make enough profit to pay overhead, salaries, etc.

That's why there's a Duane Reade, Starbucks, and nail shop on every block in the city.

Myles...you are of course right but I used Andy Singer as an extreme illustrative example of why cash is king. Yes he had signed a lease in union square on the cheap from the prior recession in 2001 and when that lease came off, he faced a very step hike in rents, which required him to close up shop and reopen a year and a half later in a studio by appointment show room in NYC where the rent is much cheaper. My generic point is most dealers just don't have the financial leeway to tie up cash in inventory beyond the demo gear that they hold because times are tough. Those who do are few and far between.

Originally Posted by CDLehner

Can that be true though?

I mean...I hope no one questions my passion for the hobby; as I said earlier...I just call it like I see it. But I think of audiophiles...as like 1%, of 1%; of 1%!

And I think of hi-end, audio B&Ms (salons, if you will); as artifacts of a bygone era. Please...don't lecture me about local support, and being able to listen and audition; get dealer advice, and forge relationships, etc. I'm not saying it doesn't have an up side; I have no dog in this fight. But I do think, a) it comes at a cost, and b) the hi-end model...is a little outdated, no?

I mean...even my company; which was a Fortune 500 company...that was recently acquired by Oracle. They came in, and found all kinds of inefficiencies. One of them had to do, with stock on hand. We used to ship from a warehouse...to our site; then to the customer. They were like WTF; just ship directly the customer dummy!

Now...you say "audiophiles want instant gratification; and sometimes, it can take weeks (months?) to get the product, if it's not in stock". See...that's part of the problem, with the model, right there! Why...in this day and age; should it take weeks/months, to get a product to the customer?
Amazon and Google, are gonna fly a drone...right into your freakin' Living Room! LOL And hi-end, needs to put your speakers...on a slow-boat from Denmark? Innovate or die.

CD...many high-end audio companies are very small businesses themselves (forget the dealers they try to sell through). As you say, the high-end audio arena represents a very niche business (1% of 1% of 1% as you put it), so it's not like these companies are rolling in the dough, and they don't have the luxury of maintain a lot of inventory on hand, so they have to manufacture-to-order. You guys are comparing these small companies to F500 manufacturers and retailers with tens of billions of dollars in revenues and billions of dollars of operating cash flow, that have the manufacturing capability to employ true JIT practices and to invest in inventory strategically. Let's take the Fine Sounds Group today which is now one of the largest high-end audio companies out there. Their proforma revenues in 2012 when they announced the McIntosh acquisition for the group (SF, Wadia, Audio Research, Sumiko and McIntosh) was $70 million in revenues. And this is one of the biggest high-end audio companies. Rockport Tech is Andy Payor and another fellow who does the cross-overs and speaker assemblies. The cabinets are done by a supplier down the road. The drivers are produced for him to spec by Scandinavian driver suppliers. I have been to Rockport. At any point in time, he may have 20-30 or so speakers at various stages of production with maybe 5 or so in finished form ready to be shipped, and this is to supply dealers globally. So if he gets an order from a dealer for a speaker that order goes into the production queue because the finished speakers he has on hand are already spoken for. He will maintain very little excess inventory. Why because any inventory that is not already sold represents cash tied up in inventory that he has not turned into a sale. And guess what most high-end audio companies are 2-10 person shops with a few million $ in sales (the successful ones). So that's why in most cases, it takes a few weeks to a few months sometimes to fill orders. The biggest high end audio marquees (i.e., the various brand at Fine Sounds, Wilson, Magico, Focal, etc...) are in that $20-$70 million range in revs at most. These are tiny companies in comparison to F500. And the bulk of high end companies are miniscule relative these big names in the high end. A company like CJ prolly has $5-7 million in revenues. I think ARC when they were bought by the Fine Sounds Group was in the $10 million range.

I don't think folks here understand how niche the high-end audio business is.

Originally Posted by cmalak

Jim...for sure as demo gear. The discussion we are talking about is whether dealers ought to stock inventory of the demo gear so that customers can get their product immediately or shortly after putting in an order as opposed to waiting for the manufacturer to deliver to dealer or drop ship to customer which can take some time (depending on the manufacturer). My point is most dealers do not have the financial wherewithal to tie up cash in inventory beyond demo gear. Just the reality and especially true of high $ value items. A lot of dealers will hold lower $ cost items in inventory (headphones, lower priced cabling, gear under the $1000 price category, etc...) to satisfy the impulse buy and walk-in customers shopping at that price point. Yes there a few dealers out there who are doing very well who probably understand what their highest turnover items are and also sought after pieces in inventory but those are in the minority.

Cyril
He does carry inventory on some items (even a few relatively expensive ones). He doesn't keep XLF's, Aida's, AR 750's etc in his warehouse. Then again you would be surprised at how often people will take the demo gear as on occasion I have. It is like new, fully warranted and often broken in.

I give up :-) You guys keep on pointing out the exceptions to the rule who happen to be the successful dealers who can afford to carry some inventory. I guess you all think dealers are minting money and taking the cashola to the bank. I just read the tea leaves which is every other day, weak, month you hear of another dealer closing. And my pint is most cannot afford to carry inventory across the board. But I will stop now

Cyril
I understand your point very clearly. The hobby we are grew up with is dying as we knew it. Just because some of us spend time on sites such as this we think that a lot of people care about audio which is far, far from reality. As was noted we are less than the 1% of the 1%..... Rebranding the hobby to capture the luxury goods buyer will only buy some manufacturers a bit of time at most. When the Asian market is satiated we will see a further culling of the herd.

As far as inventory goes I am well aware of the financial implications. I was responsible for a billion dollar piece of business with operations all over the world.

Businesses moving virtual is not limited to just audio. Look across the board and you will see many businesses moving virtually or home based. Rent, CAM, electricity for an office, cleaning, insurance, etc, etc, has grown exponentially.

Home/hobby based dealers are the future. The markups are just not there to support all the overhead mentioned above. Manufacturers like Wilson can try to limit this impact by ignoring the home based dealer, but then there are 500 other competing products ready to step in and happily work with the home based dealer.

Manufacturers COULD offer a much higher discount to store front dealers, so the home based dealer is limited to a maximum percentage discount.

I'm sure we can come up with other ideas - but what was met with hostility 5 years ago, is becoming, as I predicted, the norm.

And we all know what the next step in this evolution MIGHT be....


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Originally Posted by puroagave

when i said dealers were reluctant to stock high value items I meant having product on display. it seems many don't even have part of the product range on display just specific models they think they can sell. its a self fulfilling prophecy you take out what you put in, if sales suck for lack of product to demo, you're probably not well funded enough to support a successful model.

recently a dealer offered to schlep $50k speakers over to my place for an audition in a residential setting, then why have a store? the more i think about it, the home-based 'consultant' is probably the future. the consultant is an agent for the mfr taking a fee for the 'sale' and having product drop shipped directly to the consumer/buyer.

agreed

Originally Posted by still-one

Cyril
I understand your point very clearly. The hobby we are grew up with is dying as we knew it. Just because some of us spend time on sites such as this we think that a lot of people care about audio which is far, far from reality. As was noted we are less than the 1% of the 1%..... Rebranding the hobby to capture the luxury goods buyer will only buy some manufacturers a bit of time at most. When the Asian market is satiated we will see a further culling of the herd.

As far as inventory goes I am well aware of the financial implications. I was responsible for a billion dollar piece of business with operations all over the world.

Jim...I know you do. In terms of your professional background, you were in the auto or auto supplier space (do I remember correctly ?).

Originally Posted by Mike

Businesses moving virtual is not limited to just audio. Look across the board and you will see many businesses moving virtually or home based. Rent, CAM, electricity for an office, cleaning, insurance, etc, etc, has grown exponentially.

Home/hobby based dealers are the future. The markups are just not there to support all the overhead mentioned above. Manufacturers like Wilson can try to limit this impact by ignoring the home based dealer, but then there are 500 other competing products ready to step in and happily work with the home based dealer.

Manufacturers COULD offer a much higher discount to store front dealers, so the home based dealer is limited to a maximum percentage discount.

I'm sure we can come up with other ideas - but what was met with hostility 5 years ago, is becoming, as I predicted, the norm.

And we all know what the next step in this evolution MIGHT be....


Sent from my iPhone using Tapatalk

Mike...yes...and many examples of the home-based dealers represented here on AS and a few people we know who have successfully implemented hybrid models

Originally Posted by cmalak

Jim...I know you do. In terms of your professional background, you were in the auto or auto supplier space (do I remember correctly ?).

My first 20 years I was with GM. The last 22 I worked for Johnson Controls the second largest auto supplier in the world.

Originally Posted by still-one

My first 20 years I was with GM. The last 22 I worked for Johnson Controls the second largest auto supplier in the world.

Jim...I used to cover Industrials companies at an investment firm, although JCI was covered by another analyst. Great firm.