Re-Tales

Re-Tales #27: Ch-ch-ch-ch-changes in the hi-fi industry

Julie Mullins  |  Dec 8, 2022

I spoke with people working in hi-fi to get a sense for how the industry is evolving. Here's one way: Some companies at the market's higher end are eschewing the traditional distribution model, in which a domestic company serves as middleman for products from overseas, buying and reselling inventory to dealers and then providing support. In the newer model, distribution services are provided by the overseas manufacturing company itself, either directly or via a US subsidiary. Brinkmann, dCS, Estelon, Gryphon, and T+A employ variations on the model. Some of these companies outsource public relations, marketing, sales, and other services to US-based companies, but they keep control of product distribution.

Aldo Filippelli, who co-launched Dynaudio North America in 1995 and worked there until 2007, now runs Elite Marketing Dynamics, which provides sales management and other services to hi-fi companies—not only to overseas companies including Estelon but also to domestic ones like Krell.

Estelon handles importation logistics and shipments to dealers. Filippelli provides whatever services Estelon and its dealers need: business development, PR, trade show help, and so on. One of his aims is to educate client companies on how to expand their marketing and their markets. "The US market is very behind the times," Filippelli told me. "It's still very conventional. They don't really understand how to reach outside the audiophile world. ... They're leaving a lot of money on the table." Reaching outside the audiophile world is an important theme in the industry right now. More on that in a moment.

Have you noticed? Even some well-established companies, especially at the industry's higher end, have a rather small number of dealers. Is that another trend? Is it by choice?

One issue, certainly is that the choice of dealers is critical, especially for elite brands. Anthony Chiarella, who owns and operates Specialty Sound & Vision and serves as director of sales and marketing for Gryphon and Brinkmann, advises companies on dealer selection. "I have to give a really thorough picture of a dealer to a manufacturer," because choosing the wrong dealers "would diminish the brand."

So, is fewer dealers good—more exclusive? "There's definitely some cachet to having fewer dealers," Chiarella told me. Yet, overall, the industry needs more dealers, not fewer: "Nationally, there is a dearth of high-quality dealers."

US-based Wilson Audio Specialties, which makes luxury-priced loudspeakers, has neither increased nor decreased dealers. They've kept about the same, healthy number—35—for years, Peter McGrath, Wilson's head of sales (also a noted recording engineer), told me in an interview. Wilson, though, is not complacent: They're "always on the lookout for dealers," McGrath said. Prospective dealers must meet certain criteria to become Wilson dealers, and Wilson always seeks a long-term relationship.

Chiarella's point, that the industry needs more dealers, is important, but to achieve that, the industry must expand. Most companies recognize that expansion is essential. One way to achieve that is diversification—moving into other areas related to perfectionist sound. Some established high-end companies have moved into prestige car audio: Burmester with Mercedes-Benz; Estelon with Rolls-Royce, McIntosh with Wagoneer (now an elite Jeep marque), Naim with Bentley, Sonus Faber with Maserati, Tidal with Bugatti. Many of those same companies, plus many others (starting at a much lower price level) are making products for custom installation (CI).

CI, though, is complicated. The peculiar thing about the CI market is that typically, decorators, architects, or builders—not end users—interface with custom installers. Another thing is, CI hi-fi is hidden in the walls. "CI has killed audio retail," Chiarella told me. "It's as if audio has been banished."

In Europe, hi-fi systems are a source of pride, meant to be shown off, Chiarella said. That's true in Asia, too. Good visual design encourages that, Filippelli noted. He believes the trend toward hiding hi-fi will change when customers are exposed to more attractive alternatives. Sound isn't everything after all; design matters, too.

Aesthetics and industrial design have long mattered to many audiophiles; some hi-fi creations are in museum collections. But aesthetics do seem to be playing an increasingly important role. Hi-fi is gradually moving beyond its audio-geek roots.

Filippelli told me about a couple who wanted to buy a pair of Estelon speakers, but the wife didn't want ugly amplifiers. Once she saw a pair of D'Agostino amplifiers, the sale was made. "[A]verage people we want to attract into the industry ... care about the looks," Filippelli said.

The focus on design raises another point: price. From the industry perspective, a big part of hi-fi's future is in luxury goods. "The future of high-end audio retailing is a smaller number of larger sales," Chiarella told me. That's a trend most audiophiles have already noticed and that many have complained about: The top end of today's hi-fi market is priced much higher than it was a couple of decades ago.

The higher prices rise, the more appealing the secondary hi-fi market—the market for pre-owned goods—becomes. That's good for (some) customers, but manufacturers would prefer to keep those sales. Wilson has incentivized dealers to accept Wilson trade-ins by setting up a recertification program—"certified used," as with cars—and, in some cases, renewed warranties. The program offers Wilson buyers and sellers an alternative to resale at online auction sites and provides dealers with an extra revenue stream.

Back to distribution: Sources who addressed the issue, including Chiarella, made it clear that distributors play a crucial role in the hi-fi market and are likely to continue to, perhaps indefinitely, for all but the highest end of the market. For makers of luxury-priced equipment, volume is lower, with fewer dealers and transactions, so self-distribution is more feasible.

On the other hand, customer service expectations are high, and with fewer dealers, those expectations can be hard to meet. "Dealerships lean very heavily on the manufacturers for support," Filippelli said. Can manufacturers—or someone—meet that challenge?

COMMENTS
cognoscente's picture
Submitted by cognoscente on December 9, 2022 - 2:07am

All those questions about, and changes in distribution and dealers are NOT exclusive to the audio industry, just with a long delay. This has been going on for many years in other industries. Anyways what percentage of disposable income does an average family spend on sound(equipment)? And how much was that percentage in the 1970s and 1980s? Another question: how old is the average visitor to an audio fair, or buyer of "better" sound equipment? 60+ or 50-60? 40-50? 30-40? 20-30? And what was it like in the 1970s and 1980s? I have the impression that the audio industry still thrives on the (now very wealthy) enthusiasts who grew up with good audio equipment in the seventies and eighties, when everyone spent a lot on it. So what if in a few years...?

cognoscente's picture
Submitted by cognoscente on December 9, 2022 - 2:19am

and furthermore, the economic crisis / recession due to the (after-effects) of covid-19 and the geopolitical economic consequences of the war started by Russia, will not do the audio industry any good, as it does for many other industries.

Briandrumzilla's picture
Submitted by Briandrumzilla on December 9, 2022 - 3:22pm

Don’t forget to add in climate change.

Anyways, there will always be plenty of rich people that will buy stupidly overpriced gear.

cognoscente's picture
Submitted by cognoscente on December 10, 2022 - 2:35am

I admit guilt with my class A/B amplifier (and not class D) and my ladder DA converter (instead of a multi-bit)

On the other hand, certainly not overpriced (because of my conviction of the "diminishing marginal utility" principle - but when something is overpriced and where your diminishing marginal utility lies, of course, is something personal depends on several factors like income and interest.

ok's picture
Submitted by ok on December 9, 2022 - 4:53am

relies mostly on asian markets.

Doctor Fine's picture
Submitted by Doctor Fine on December 9, 2022 - 8:29am

And so the progression continues. The middle class in the USA is getting wiped out and kids no longer have interest in a PA system-sized audio setup. They can't afford cars. New homes are out of the question. Buying on time gets iffy when your employer fires workers left and right at will. I wouldn't bet on ever seeing annual sales figures like in the 70s. But $500,000 amplifiers? You bet!

gbroagfran's picture
Submitted by gbroagfran on December 13, 2022 - 8:22am

"Bob' bought me a great stereo, can't complain about it.

However, all of us old people will die soon and you can plow through their stuff and get what is important, like those Drs4"Bob" tapes you previously couldn't afford.

gbroagfran's picture
Submitted by gbroagfran on December 13, 2022 - 9:00am

no reply

David Harper's picture
Submitted by David Harper on December 9, 2022 - 11:41am

those overpriced "high end" speakers have those high end spiked feet under them. They provide a massive improvement in sound quality. Really. They do. We know what we hear.

cognoscente's picture
Submitted by cognoscente on December 10, 2022 - 2:09am

Everything, every perception, takes place in the head, "between the ears" (not in it). Seeing, smelling, hearing and therefore believing. Perception is a process in the brain.

As with anything, the truth is somewhere in the middle, things are never black and white.

cognoscente's picture
Submitted by cognoscente on December 10, 2022 - 2:21am

a 2k+ digital interlink? Really?

What I mean to say, your wealth and interest determines where your personal diminishing marginal utility lies. For people under 50 in the so-called Western World, clearly no longer with audio equipment, they like to travel alot for instance. Under 30, only the latest iPhone (with in-ears) and hanging out with friends is important.

Jack L's picture
Submitted by Jack L on December 10, 2022 - 11:56am

Hi

The above economy terminology is defined as decreasing satisfaction/happiness.

Given the right knowledge, it can be reversed as extending "marginal utility" for low pricing irrespective of own income/wealth.

Take the example of yours truly cheapskate, I managed to escalate my marginal utility to seventh heaven for dirt cheap low cost irrespecitve of my easy money made from the money markets as I got the right audio knowledge to bypass the manufacturers/vendors.

Knowldge is the power for marginal utility escalation !

Jack L

PS: "2K+ digital interlink" ? It's a piece of cake for me for even much lessssss !

teched58's picture
Submitted by teched58 on December 11, 2022 - 7:23am

When are visiting hours?

Jack L's picture
Submitted by Jack L on December 11, 2022 - 11:14am

Hi

So you need consultation of music/HiFi/DIY with me ??

24/7/365 on Stereophile comment forums.

I think I would have made some good money if I made myself a HIFI music creator in the new Twitter platform as Elon Musk promised to pay more than any platforms for creators joining him.

But I don't bother as I'm makting eeeeeasy money from the money markets (thanks to my darling wife who manages for me).

Listening to music with own ears is believing

Jack L

Glotz's picture
Submitted by Glotz on December 13, 2022 - 9:00am

One would suspect most of what you say is bullshit. And hypocrisy.

Cause it is.

You have several posts in this story, and tons of misguided 'opinions', but you don't actually spend money supporting the industry in any meaningful way.

You're supposedly getting rich from these 'money markets' and yet you only afford audio parts for your stereo purchasing consumption.

Strangely, no one gives a toot what you say. You lack the capacity to directly and candidly communicate and respond to others in a respectful manner. Much of what you do contradicts what you say.

Please keep repeating the same posts and same inputs over and over and over again.

PS- Teched was talking to you as if you were in an insane asylum. You missed that, as usual.

Jack L's picture
Submitted by Jack L on December 13, 2022 - 4:04pm

Hi

Free advice - Go back to grammer school to learn your lousy Enlish & then learn more about HIFI before you shit up this forum with "bullshit & hypocrisy" again. YOU total HiFi ignore !!!!

Think, talk like a spoiled kid. Your dad not skinned you up enough ?

Jack L

Glotz's picture
Submitted by Glotz on December 13, 2022 - 9:26pm

Lol...

What is a 'total hifi ignore'??

And what is a 'skinning'??

Sounds kinky!

Wink-wink, nudge-nudge!

Jack L's picture
Submitted by Jack L on December 10, 2022 - 11:08am

Hi

Really ?

Please don't tell us Russia's brutish invasion of Ukraine so suddenly without officially declaring war for 9 months & 23 days now is "never black and white" !!! So Russia is not wrong then ????

One thing I agree with you: "hearing & therefore believing".

Listening to music with own ears is believing

Jack L

PeterG's picture
Submitted by PeterG on December 10, 2022 - 7:20am

Great piece! The number of dealers issue is a big one. It's really hard for me wrap my head around dropping thousands on a component that that I have not auditioned thoroughly, preferably at home for a few days

Julie Mullins's picture
Submitted by Julie Mullins on December 14, 2022 - 11:56am

Thank you. I agree it's a big one—and complex. Auditioning is always preferable, but in the absence of a dealer within a reasonable distance, home auditions get tricky. Unless there's some kind of guarantee and way to cover return shipping, etc. if needed...which would make it almost like an audition (though it becomes a less favorable situation for the manufacturer/distributor/dealer).

Glotz's picture
Submitted by Glotz on December 10, 2022 - 11:55am

I know of several that will let you audition at length for 2 months without a restocking fee.

Direct from the manufacturer requires more courage though. Some do implement restocking fees.

The perception of audition period is the same; it's the deliver method that changes, obviously. Most times, the mail-order auditioning period is actually much longer than local dealers. There is much less psychological pressure to keep a purchased component as well through mail-order.

I completely agree that the American market is much more retarded in business modeling when it comes to the dealer / distributor relationship.

Glotz's picture
Submitted by Glotz on December 10, 2022 - 11:56am

'Blame' that is placed on the average American consumer is appropriate. They have new technologies like soundbars that force their brains into thinking that new and easy is always better. This is pure anathema to the high-end. Yet strangely, most want the most advanced technology in every other aspect of life.

What is not justified visually from our eyes, is justified with our ears. We just don't trust our ears as much as we trust our eyes.

I think it's somewhat unfair to judge middle-class audio offering as constrained or dying. There are thousands of more offerings now than in the 70's, and sound vastly better than 95 percent of those products. It was just a tighter group of performance offerings because the value of the dollar was greater. There wasn't $20,000 anything in the market then.

Lastly, to say that gear is overpriced is over-reaching. Those products produce the sound that justifies their price. If someone wants rarified auto performance, it costs then and it costs now. The same hold true with audio. The shameful thing naysayers spout is that $500K anything can't be worth that, though they haven't heard it nor experienced it. It just pure speculation and unworthy of serious argument.

In fact, the ability for us to buy state of the art equipment has become more and more affordable. Technology has enabled us to be more precise in manufacturing and electronics than ever before.

Jack L's picture
Submitted by Jack L on December 10, 2022 - 12:22pm

Hi

My question: HOW do you know "those products can justify their price" SONICALLY ? YOUR own audition conclusion or hearsay ? Or yoU have your own undisclosed agenda to promote pricy audios here ?

IMO, 500 grands can a condo home or a luxurious car !

I would accept your statement adjusted to: "Those products proudced measured specification that may justify their price".

Be a real consumer, pal.

Listening is believing

Jack L

Glotz's picture
Submitted by Glotz on December 10, 2022 - 12:46pm

also means actually BUYING new gear, lol. I do that to the tune of $15,000 worth of new gear in the past 2 years.

When was the last time YOU bought new gear?

Hypocrite indeed.

MatthewT's picture
Submitted by MatthewT on December 10, 2022 - 12:51pm

That might leave a mark on a normal human, but it is Jack you are talking about. Has he told you about his DIY "audios" lately?

Glotz's picture
Submitted by Glotz on December 10, 2022 - 1:01pm

Consumer indeed.

Sorry, I hate being acerbic and gruff, but that mf deserves it. Glad to see Jim isn't censoring this free 'speach'. This is the way. Sanity and truth is the by-product.

I will never troll a single poster in here by just their opinion. It's when they attack myself or others the gloves come off- for good.

Jack L's picture
Submitted by Jack L on December 10, 2022 - 6:42pm

Hi

You just did "troll" it per your above post. Too old to forget so quick what just you did ??

Jack L

Jack L's picture
Submitted by Jack L on December 10, 2022 - 7:05pm

Hi

If you really knew "DIY audios", let's exchange notes.

Otherwise back off to bother your kissing cousins !

Jack L

Jack L's picture
Submitted by Jack L on December 10, 2022 - 6:20pm

Hi

COOL it !!! Don't get heart attack & become a DEAD "dog"!!!

Be CIVIL ! Your bad mouth stinks like dog shit !!!!

Your English comprehension is worse than a high school kid. Where you learnt your English again ???

First off, you think wherever dealers selling "Audio Research" you went was "very high end dealers" ?? You have not seen the hi-end audio world around you yet, pal!

Have you even heard of Audio Note Japan products yet? It's flagship 17W+17W SET stereo power amp "Kegon" sold USD125,000 10 years back! It's turntable/arm (custom-design built by SME) with MC cartridge sold for USD125,000 8 years ago. I auditioned them all !!!

I flew 15-hour non-stop flight to Audio Note Japan regional office to audition the complete Audio Note sound system: TT, tube phono-preamp+SUT+SET power amp (hand-built by AN late founder: Kindo-San) & Audio Note standloudspeakers (made in England), with Audio Note pure silver cables. A half million USD sound system !!!!

"I've offerd several olive branches over the year" qtd Glotz.

So I must have missed them though I am over 3 years posting in Stereophile forums except this very one in your above post:

"The shameful thing naysayers spout is that $500K anything can't worth that, though they haven't heard it nor experienced it. It just pure speculation & unworthy if serious argument."

So have YOU ever heard that $500K audio yet???? Otherwise how dare you condemn that "naysayers spout" "shameful" ? If you really auditioned it, so tell us how good that $500K sounded & tell us what equipment were they ???? I am all ears !

For many of those rich & willing with limited HIFi experience, specifications are the guideline for them to compare & to purchase.
That's why I stated:
"Those products produced measured specifications that MAY justify their price" for those who go for specifications only as their music experience is so limited.

It does not mean what you understood wrongly due to your poor lousy English comprehension as "Measuremenmt now trump listening ..."

Learn better English before you BARK up the wrong tree again, doggie man !

"Real consumer" is not gauged on how much money you spent on the audio. A "real consumer" is a SMART consumer who knows to maximize the money spent to get the best possible musical sound. Now you learn it ! Be thankful, pal.

Listening to music with own ears is believing

Jack L

Tromatic's picture
Submitted by Tromatic on December 11, 2022 - 11:58am

For just Jack L where he can spew his four letter word BS and no other readers have listen to him?

Glotz's picture
Submitted by Glotz on December 11, 2022 - 8:04am

"Where you learnt your English again ???" Lolz...

There is no way to respond to you but with laughter.

Merry Xmas, you complete nut.

Jack L's picture
Submitted by Jack L on December 11, 2022 - 11:03am

Hi

Simply you are not knowledgeable enough to "respond to" my questions to YOU ! You are more than welcome to call in your kissing cousins around here to help you out !

Anyway, "merry X'mas" YOU total HIFi ignore !!

Jack L

Glotz's picture
Submitted by Glotz on December 11, 2022 - 10:54pm

More mirth and merriment for everyone!

You're a gift that keeps giving!

My kissing cousins are here celebrating the holiday season with you!

Joy!

Mistletoe, Jack?? Wink wink, nudge nudge...

cognoscente's picture
Submitted by cognoscente on December 12, 2022 - 10:12am

The world is (of course) always in motion, things come, change and disappear again. Also needs, interests and trends. The same goes for the audio industry. People under 50 simply have no interest in paying for good sound, or for the music itself. If they have any money left over, they have other interests. That is the problem of the audio industry (a dying industry as we know it - the question is not how best to reach the customer, the customer is simply no longer there, or at least less and less) that tries, as the food and fashion industry, to compensate for the declining numbers with higher prices and margins. Take the British Unilever, they sold fewer numbers of food last quarter but made much more profit. How is that possible? Simple, by asking higher prices and calculating higher profit margins. But they have the advantage that people have to keep eating. Fashion has been doing that for years, just look at the prices on Farfetch. Ralph Lauren, Lacoste or Fred Perry, to name a few (perhaps expensive in the 80's and 90's but not anymore, at least comparatively) , retain my sympathy because they stay true to their prices / consumers. Brands like Burberry, LV, Balenciaga, Gucci, Prada and many others can no longer count on my sympathy. A trench coat from Burberry cost 800 euros 10 years ago, exactly the same now 2000 euros! Just like the audio industry is doing now. There are brands that stay true to their prices and margins (only adjusted for inflation) like Rega or Cambrigde Audio, but many don't like Lynn. They would rather sell 1 copy with a ridiculous margin than 10 copies with a reasonable margin. And that explains the often ridiculously unreasonable prices. And anger from many of their customers. A large part of the customers they might have had are now leaving as well, as everyone under 50 with no interest for good sound at all.

Jack L's picture
Submitted by Jack L on December 12, 2022 - 1:51pm

Hi

Now we are talking hi fashions ! Why not ?

I don't mind spending my easy money (ripped from the money markets) on hi fashions.

I got my LV leather pocket wallet (made-in-Paris, with serial number inside) which I love most, Gucci & Celine leather belts, Ralph Lauren sweater shirt, Valentino silk ties. Last but never the least: Lacoste t-shirts of rainbow colours & 4 pairs of Lacoste leather sneakers. Of course, a Burberry handbag & a platinum-gold wrist ROLEX watch for my darling wife.

Hi fashion is my weakness !!!!

God knows why I am such a cheapskate for audios! Maybe I know tooo much about it !

Listening is believing

Jack L

David Harper's picture
Submitted by David Harper on December 12, 2022 - 12:03pm

how people are so much braver and tougher in an internet forum than they would ever be face to face in real life.

MatthewT's picture
Submitted by MatthewT on December 12, 2022 - 2:21pm

nt

Glotz's picture
Submitted by Glotz on December 12, 2022 - 7:21pm

Delusions seem to have more freedom than normal. Lol.

It hammers home the contradictions and lies as well.

Allen Fant's picture
Submitted by Allen Fant on December 14, 2022 - 5:04pm

Thank You- JM.

The main point of interest here is NOT to support any Dealer/Retailer whom is business model driven. The best in the Industry are Music Lovers, first.
Our hobby is about accurate Musical reproduction at the highest fidelity.
Nothing more, nothing less.

misterears's picture
Submitted by misterears on December 29, 2022 - 1:16pm

I think the industry is moving toward boutique showrooms that display exotic gear and can arrange an audition but have no inventory of that gear. The gear gets dropped shipped and the boutique gets a commission for displaying and possibly arranging the.audition. I think the old days of the dealer steering customers to what the dealer prefers selling is a thing of the past. On-line reviews will serve that function. Makers can hire repair service providers or arrange returning the equipment through the boutique (who again gets a commission). That's where I think it's headed.

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