Audio Distribution in North America

Mike

Mike

Audioshark
Staff member
Joined
Apr 2, 2013
Messages
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Location
Sarasota, FL
This is probably just boring industry stuff 99% of you don't care about, but I find it interesting the trend we are seeing in the distribution of audio products in North America, especially as it relates to European and Asian brands.

A trend I've noticed of late in North America, is that we are seeing manufacturers wising up to those distributors who are acting as "sole sellers". Being a distributor is not being a sole seller, it means: establishing a proper dealer network (10+), marketing the product, getting the product in for review, ensuring proper stock of product, hustling their butts doing shows, constant communication with their dealers, support of their dealers and their dealers customers, visiting their dealers, participating in dealer events, assigning any prospect enquiries to the respective dealer, etc. It certainly does not mean "oh goodie, I'm the distributor, now I'm the sole seller!"

Many dealers even became distributors in hopes of a quick win-fall and a sole seller mentality of a hot brand, but I think the tides are turning.

We have seen over and over again manufacturers wising up to this nonsense and establishing their own distribution through hiring representatives right here in North America. Those representatives are tasked to do the proper things required (see above). It's a win/win for dealers, manufacturers and consumers as there is now a more direct line with the factory.

Hiring the right person/people as a manufacture representative is not easy - especially for an overseas company. But many have looked to long time experienced industry professionals from Levinson, Krell and more.

Don't get me wrong, there are some excellent distributors who do all of the things above - and more. But if the recent moves of Luxman, T+A and numerous others are any indication, than this is a trend that will continue. The good distributors will stay, the others will eventually get weeded out IMO. And as I said, this is good for the dealers, manufacturers and consumers.
 
Thanks Mike, for sharing this glimpse behind the curtain. I chuckle when I see folks in the forums talk about what a retail price ought to be based on cost of materials, with some markup, when a businessman knows all to well the many, many other costs of doing business, not least of which involves getting your product 'out there'.
 
Some of the circumstances are probably related to the state of high end audio in general (e.g. - http://hometheaterhifi.com/editorial/decline-high-end-audio-sales-new-outlook/). There certainly isn't as many dealers as there used to be. I know people who work in the high end industry. They have told me that there are just less choices when it comes to dealers as there used to be. Sometimes they just have to live with the situation (and there are cases where brands have been yanked from dealerships when the manufacturer has had time to re-evaluate the dealer). Part of it is that many of the chains that specialized in entry level high end and would carry some of the upper level stuff are just not there any longer. So I guess for now, based on the current circumstances, they have gone another route.
 
AlterAudio is a distributor for France. My dealer worked with Jeff Rowland ( distributor was PPL before).
And curiously, everybody in Europe stopped to buy Jeff Rowland ?????
I don't know why.

There is nothing about Magnepan(few dealers), Conrad Johnson ( Idon't know if it bought in France now), Sunfire, Magico...

It's sad...
 
It's interesting the number of high quality brands have established online stores such as Cary, KEF & Transparent, probably more than I know. Cary seems to be aggressive with the online sales, for a time they had a system that really didn't benefit the dealers, then when dealers began to back off Cary revised the dealer payment system, only time will tell whether it is or is not too late.

You see brands like B&W and McIntosh going into stores you once would have never thought, especially Mac with the online retailers. Let's face it a company has to do what it can to stay in business.

I wonder if it's too late to turn the tide for B&M stores. I feel B&M does more benefit for a product, who wants to just pick a product based on reviews or word of mouth. How many brands can you bring in online to audition, being practical. This is most likely the reason for audio shows growing in popularity. I think that aspect is a good thing, gives a wider audience a taste for what's out there.

Taking high end out of the equation, Best Buy seems to be the only "big box" store able to stay in business, HH Greg died. I really have to wonder what the underlying problem is. I suspect the CE manufacturers continual rush to the bottom, there has to be some margin to cover overhead. It only leaves online places like Amazon to function on razor thin margin and I suspect that may change with competition from Wal-Mart and attempting faster and more local delivery. Plus I heard they were looking into B&M, not sure if any were established, if so, it will be interesting to see what happens.
 
Mike said:
This is probably just boring industry stuff 99% of you don't care about, but I find it interesting the trend we are seeing in the distribution of audio products in North America, especially as it relates to European and Asian brands...
Click to expand...

I don't understand why the street price for phono cartridges in Japan is the same or less than the wholesale cost in the US? I import my own goods from the EU/Asia and take the risk. A distributor saw my ad on Audiogon got all over me for reselling a cart he distributes, mine was new and I was undercutting him, I guess. The guy was a jackass and threatened me legally and said he'd get Audiogon to pull my membership, yada yada... I reworded my ad giving no illusions it carried a warranty and that it was 'gray market' acquired directly from the EU, it still sold in two days and the buyer was stoked.

My point is, cost has become paramount and traditional retailing model is dead. The news broke this week that more retailers in the US have filed for bankruptcy than the period just after the great recession. In my business, "last mile distribution" is on everyone's lips and infill DCs located near suburban areas is the hottest product category in commercial real estate right now. there is currently 1 billion (!) square feet of unused (abandoned) retail space in the US. that figure will undoubtedly get larger before this is all over.

The good news for high end audio is that its still a 'boutique' business and doesn't compete with e-tailers or the Amazon model, by the same token delivering the product at the lowest cost and cutting out layers of middle men and distributors is a the new normal. Look at who's got legs in this industry e-tailing hardware, Audio Advisor, Music Direct, Elusive Disc, et al. Even Upscale Audio out here in Cali moved to a 10,000 square foot dedicated warehouse, primarily to serve its ecommerce business which apparently, is booming.
 
Mike said:
This is probably just boring industry stuff 99% of you don't care about, but I find it interesting the trend we are seeing in the distribution of audio products in North America, especially as it relates to European and Asian brands.
.
Click to expand...
I am interested!

FINALLY, I get to be in the 1%.

LoL
 
Mr Peabody said:
Taking high end out of the equation, Best Buy seems to be the only "big box" store able to stay in business, HH Greg died. I really have to wonder what the underlying problem is. I suspect the CE manufacturers continual rush to the bottom, there has to be some margin to cover overhead. It only leaves online places like Amazon to function on razor thin margin and I suspect that may change with competition from Wal-Mart and attempting faster and more local delivery. Plus I heard they were looking into B&M, not sure if any were established, if so, it will be interesting to see what happens.
Click to expand...

Sorry to be the bearer of bad news but Best Buy is targetted for termination. Not sure how many Qtrs left till they become insolvent and Banks/Wall street will no longer extend credit or financing. Its an open secret that Retail in general is the current lunch of Wall street. Talbot/Kohls/ all those Urban Outfitter types...even Target and Walmart could go. Radioshack just went. Just as video kiled the radio star...Online killed the overdone retail. Where will all those laid off people go for new work?

PM me if you want more of my thoughts on the matter.
 
puroagave said:
I don't understand why the street price for phono cartridges in Japan is the same or less than the wholesale cost in the US? I import my own goods from the EU/Asia and take the risk. A distributor saw my ad on Audiogon got all over me for reselling a cart he distributes, mine was new and I was undercutting him, I guess. The guy was a jackass and threatened me legally and said he'd get Audiogon to pull my membership, yada yada... I reworded my ad giving no illusions it carried a warranty and that it was 'gray market' acquired directly from the EU, it still sold in two days and the buyer was stoked.

My point is, cost has become paramount and traditional retailing model is dead. The news broke this week that more retailers in the US have filed for bankruptcy than the period just after the great recession. In my business, "last mile distribution" is on everyone's lips and infill DCs located near suburban areas is the hottest product category in commercial real estate right now. there is currently 1 billion (!) square feet of unused (abandoned) retail space in the US. that figure will undoubtedly get larger before this is all over.

The good news for high end audio is that its still a 'boutique' business and doesn't compete with e-tailers or the Amazon model, by the same token delivering the product at the lowest cost and cutting out layers of middle men and distributors is a the new normal. Look at who's got legs in this industry e-tailing hardware, Audio Advisor, Music Direct, Elusive Disc, et al. Even Upscale Audio out here in Cali moved to a 10,000 square foot dedicated warehouse, primarily to serve its ecommerce business which apparently, is booming.
Click to expand...
Agreed on all counts. I have an unverified report where the average retail floorspace per US consumer is over 50sq meters and in Europe its 2.5sq mtrs, That tells the whole bubble story. They say that 400 of the 1100 US luxury malls are slated for demolition.

It feels like a secular recession is on the way for later this year. Not cyclical...secular! Automation is upon us. I thought the French wee crazy when this idea came up initially, but now I think they may be on to something...TAX THE ROBOT!
 
The internet the destroyer of all things shopping within four walls. Might as well call the internet 'The Destroyer of Worlds' and a demon sole bent on increasing unemployment.
 
Robots will be worse than the Internet. Even worse, they will synergise and amplify the effects I spoke of before.

Not to be a luddite, as we cant halt progress, but we need to properly manage the consequences. Machines were made for man, not the other way around.
 
Mike see what you started...you started with a somewhat esoteric point about a group of distributors who also were acting as the sole source (I.e. Only dealer) for some brands in the US to mop up the sales for themselves and discussion morphed to death of B&M sales in hi-end audio (long-time trend) to death of B&M retail overall (long-time coming and ovetly happening in last 5 years) to secular decline in employment because of the forecast rise in automation that will displace (some say as many as 50 % of all manufacturing and distribution jobs)!

Gotta love it...[emoji851][emoji57]
 
And actually if you extend automation concept to AI, then some forecasts say 50% of all jobs could be displaced!
 
If I believed all the naysayer economists, the world would have ended 2500 times by now.

Back to our regular scheduled programming.

I work with some excellent distributors like Bob Clark at Profundo, who really goes out of his way. There are others too - like my Chord distributor and AG distributor. Others too. If you see a distributor hustling at shows, getting products in for review, establishing a real dealer network, etc. chances are - they are not a sole seller.

But I'm seeing this trend of dealer-manufacturer direct. And that's good too.

What I'm saying is that we are seeing a shake out of the sole sellers vs real distributors and the rise of manufacturer handled distribution. Evolution? I think so.


Sent from my iPhone using Tapatalk
 
There's one Distributor/Sole dealer I know of in the premium turntable space but this has been the case for years and must be with the blessing of the TT manufacturer [emoji848]
 
cmalak said:
There's one Distributor/Sole dealer I know of in the premium turntable space but this has been the case for years and must be with the blessing of the TT manufacturer [emoji848]
Click to expand...

Curious as to who. AF? Continuum?


Sent from my iPhone using Tapatalk
 
wisnon said:
Robots will be worse than the Internet. Even worse, they will synergise and amplify the effects I spoke of before.

Not to be a luddite, as we cant halt progress, but we need to properly manage the consequences. Machines were made for man, not the other way around.
Click to expand...

When is the last time you went on a tour of an auto factory. (I've been through the Porsche, BWM and Corvette plant) Its Robots everywhere, building cars, moving parts all over the plant, painting cars its actually amazing but at the same time its the demise of human labor. Ford now has robots working along side man, called co-bots. From a Ford site "" Ford is now reviewing further use of collaborative robots, which can be programmed to do anything from making a coffee to shaking hands" and these co-bots also are used in pharmaceutical and electronics industries, we even have hospitals having robots perform tissue surgery.(STAR- Smart Tissue Autonomous Robot ) . And 4 days ago a robot performed first ever robot surgery inside the human eye.
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Man might program them or we think we do :), but the days of the robot is here and moving forward in a rapid rate. There are even 45,000 robots that automate the picking and packing process across 20 Amazon fulfillment centres. The time of man in an industrial labor role is dwindling. Maybe the high end audio world is still immune and man still has some pride left in building and distributing audiophile gear.
 
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