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December 2014

Upward Mobility Is The New “Dead End”

By Anthony's Blog

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.