Re-Tales #19: Old-school vs Internet

Selling hi-fi gear online is hardly new. If you count mail-order sales, which is much the same thing, it's been happening since before amazon.com was a discount bookstore. Long before.

At first, online sales were mainly for inexpensive and moderately priced items, but over time, people have grown comfortable buying higher-priced goods online: computers, cars, and yes, higher-end audio equipment. The pandemic has accelerated this trend.

Many hi-fi manufacturers and importers have remained true to the traditional sales model, and for many hi-fi products, especially the expensive ones, the model continues to work well. Yet, a growing number of hi-fi companies—manufacturers, distributors, and dealers—have noticed that ignoring internet sales means leaving money on the table.

Unfortunately, the two approaches have long seemed to be in conflict. The traditional model relies on close cooperation between dealers and manufacturers (or distributors), while the internet is a lawless Wild West where websites undercut prices and customers buy online after exploiting a brick-and-mortar (b&m) dealer for an in-person audition. What's an audio dealer to do?

Some brands that long sold through traditional channels are starting to pursue on-line sales while continuing to sell through dealers and working to find the right balance. "You have to explore [various] ways of getting the products to the customer," Stephen Daniels, CEO of Arlington, Texas–based The Sound Organisation, which imports audio equipment from the UK and distributes it in the US, told me in an interview. The goal is to put a system in place that exploits advantages of each approach without undermining the other.

Consider geography. Especially out west, territories are vast, customers are scattered, and few b&m dealerships exist. "Unlike Europe, where geography and the distances are so much less than in the [United] States, a lot of times, you're going to have to rely on some degree of internet-based retailers," Daniels said.

Consider service and support. A b&m dealer network offers major advantages when it comes to servicing products and supporting customers. But service and support are also essential for products bought online. What you don't want, Daniels said, is online dealers who say, "'It's nothing to do with us; talk to the manufacturer' or 'talk to the distributor.' If you're going to sell online, you really want the companies that can help the clients over a period of time." Daniels cited Music Direct and Audio Advice as examples of e-tailers that offer good online support.

Many hi-fi enthusiasts know Upscale Audio as an online audio dealer—which of course it is. But Upscale is also the online storefront for La Verne, California–based Upscale Distribution, which distributes seven brands—Cabasse, Feliks, Kiseki, Pathos, PrimaLuna, Sbooster, and Tannoy—to some 70 dealers. Upscaleaudio.com is the exclusive online dealer for five of those brands (footnote 1), Randy Bingham, Upscale's national sales manager, told me.

If you want to order a product from one of those five brands through the Upscale Audio website, you must indicate whether you've worked with a local dealer. If you're buying PrimaLuna, the website is especially emphatic: "Be sure to tell us if you spoke to a local dealer," says a note on the order page. "Failure to do so will delay processing of your order. We do not ship without this information."

Why is Upscale doing this? So that it can pay any commission due to that local dealer. It also keeps the dealer in the loop and encourages customers to form and maintain relationships with local dealers, which is likely to yield advantages for the customer, the dealer, and the brand over the long term. "Nothing beats those long-term relationships with their customers," Bingham says.

Do online sales undercut b&m dealers? Not necessarily. Jonathan Derda, vice president for sales and marketing at MoFi Distribution, told me that some MoFi brands have seen big increases in sales at b&m dealerships after starting to sell online. "You amplify the brand's visibility when you partner with the right dealers—'right' being the key word," he wrote in an email. "I find that if you do it right, online and B&M dealers actually support each other."

The challenge with online sales is the same as it is with traditional distribution models: to ensure sufficient coverage while avoiding oversaturation. "A brand that has a lot of consumer demand can support having multiple dealers in one city, as well as national online distribution, and at the same time be sold in Best Buy," Derda wrote. "If the demand is there, everyone is happy." The correct approach depends on the brand and the product. "The distributor's job is to understand the brand's place in the market, have a close relationship with every dealer they partner with, and know how to achieve the best balance for everyone involved," Derda said.

"Sometimes you want to have more exposure; you want to have more dealers promoting the brand and getting people excited," Wynn Wong of Wynn Audio, a distributor and dealer based in Toronto that focuses on niche European brands, told me on a call. Those European brands, though, require a more selective approach. "Once you have too many dealers in one area, it doesn't feel as exclusive anymore. That's a big thing we have to balance." Oversaturation can also lead to competitive discounting and pricing discrepancies. "Usually, we don't have any issues," he added.

As in almost every other industry, internet sales are rising. Everyone I spoke with for this story said that customers are spending more and buying more expensive equipment online, even products priced into the tens of thousands of dollars. They were equally adamant that traditional dealerships aren't going anywhere. "At the end of the day, the customer gets to choose what works best for them," Derda said


Footnote 1: Feliks Audio is also sold at headphones.com, and Kiseki isn't sold online.

COMMENTS
Jack L's picture

Hi

Why not?

If eBay is selling new & preowned HiFi since day one & Walmart.com is selling major home appliances for OEMs on top of small brandname tabletop appliances, sky is the limit for selling opportunity.

Jack L

Julie Mullins's picture

Hi Jack,

Thanks for reading and commenting. As I'm sure you noticed, that quote came from a distributor. As I discussed, much depends of the kind of product as to how and where it can (and will) sell best. Some kinds of gear is obviously well-suited to online selling. Other components warrant—and sell better with—more advising, set-up assistance, in-person auditioning, post-sales service care, etc. There are many factors to consider for online sales vs. dealerships vs. other outlets and how they might co-exist: pricing (and setting prices), availability/quantity, distribution, dealer coverage (or lack thereof), competition, etc. Who's the customer, and what does he or she want, need, and expect?

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