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July 2014

Why HiFi Shows Are Killing HiFi

By | Anthony's Blog

July 24, 2014: I’d already come up with two blog ideas for August and was well into finishing my second when, on this gorgeous Summer afternoon, I walked into Lyric and heard my old friend Bob Herman call out: “Anthony, come here for a minute!” Plastered on his computer screen was a picture of a BIG (over $500K) system featured on the Audio Asylum website. Gorgeous photos of exquisite equipment installed in an enormous, purpose-built room, the walls lined with software storage, room treatments and expensive artwork. Sounds like the kind of rig that would make a veteran High End salesman drool, Right? Well, not so much…actually: Bob was furious. He was also, of course, correct.

The problem here was the list of equipment: Enormous, four-column speakers costing over $200,000, a $38,000 Turntable sporting a pair of $5,000-plus tonearms and equally expensive phono cartridges, etc…. The list goes on and all of these products have two things in common: 1) neither I nor anyone at Lyric had ever heard of ANY of these brands; and 2) none of these products are sold by dealers! So, how do customers wind up with this stuff? They buy it at HiFi Shows, “Direct from the Manufacturer!”

As anyone in the HiFi Biz will tell you, most HiFi Show attendees are “Tire Kickers” with neither the intention nor the ability to buy anything. (“These are the geeks we routinely throw out of our store,” one dealer used to say!) A few of them, however, come to these shows looking for a deal. They visit the rooms of established retailers demonstrating top brands and are offered “Show Special” discounts of 10-20% on demos once the show is over…a healthy break on “A-List” product! Then, those customers wander down the hall where they find “Brand-X Audio” showing impressive product and making terrific sound. They sit down, hear a great 10-minute demo and are wooed by the company President (who is also the designer, assembler and shipping clerk) who explains that this is a $100,000 MSRP product but, since they don’t currently have a local dealer, he’ll be happy to sell the product at Dealer Cost. Dollar signs in his eyes, the customer bites…costing both the “A-list” brand AND the established dealer a big-ticket sale.

The thing is, this behavior is far from unique; rather, it has become a new business model! Many upstart HiFi companies, unable to secure brick-and-mortar dealers, travel from show to show for the purpose of selling directly to end-users. In the process, they’re poaching sales from the best brands and dealers. They’re also undermining established profit margins by selling to consumers at a heavy discount from some contrived list price. Here’s the worst part: none of this would be possible without the active support of the top brands and dealers!!!

Here’s what I mean…. Let’s say there’s a HiFi Show in New York. In order to attract ticket-buyers, the show needs “Drawing Cards:” dealers and brands that end-users will pay to visit. So, Stereo Exchange and Lyric sign up. They drag Audio Research, Simaudio, and a bunch of other top brands along with them. Consumers buy tickets, primarily to visit the Dem Rooms of these “Top-Tier” dealers and vendors. And then, as I said earlier, they stumble upon a room full of pricey product they’ve never experienced, but which is being offered at massive discounts. Now, the customers have never heard of these companies beforehand, and they sure-as-hell wouldn’t spend $30 to attend a show full of no-name products BUT, since they bought a ticket to check out “The Big Boys,” they wind up in the front-row seat of a third-rate manufacturer who’s dangling a 50% discount in front of them like a candy cane on Christmas morning. Never mind that these products have terrible resale value, little customer support, nonexistent pedigree, questionable engineering, etc. All the customer knows is, they’re being sold at a massive discount while the Name Brands are being sold at—or close to–MSRP. Has anybody ever paid full retail for this no-name stuff? I don’t think so!

One of the most frequent and fervent complaints I hear, both from retailers and manufacturers, is “There are too damn many shows. They cost too much, they waste too much time and we don’t sell anything.” Damn right. Problem is, there are companies who DO sell stuff at these shows…they just happen to be companies that can’t find quality dealers to represent them, so these travelling HiFi shows have become their DeFacto Dealerships, none of which would be possible without the support and attendance of established dealers and manufacturers who are, in effect, subsidizing their competitors to thrive at their expense! (Dealers are equally culpable, as “Home-Base” and Internet dealerships attend these same shows, riding the coattails of “A-list” dealers and parasitically poaching customers that we’ve spent years cultivating!) When asked, manufacturers admit they hate these shows and lose money at them, yet still they attend. Why? Because they’re “…afraid that if we don’t attend, reviewers and consumers will think we’re in trouble.” Ridiculous! If the manufacturers really need to be afraid about something, let them be afraid about spending money to help their upstart, dealer-less brethren swipe their customers!

There is a HiFi Show taking place in New York this September. (In an insult to our Jewish dealers, vendors and customers, it occurs during Rosh Hashanah.) I am adamantly advising most of my Dealers and Manufacturers NOT to attend. If you’d like to help these no-name brands and dealers steal your customers and sales then please, ignore this advice and book a room. I promise: you’ll get what you paid for!

 

Special Thanks to Bob Herman of Lyric HiFi for inspiring this Blog