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.

From CEDIA to Stereo Exchange

By Anthony's Blog

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!

 

Help Wanted

By Anthony's Blog

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!

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