Re-Tales #2: Dealerships forge ahead during the pandemic

The sense of hope I've been feeling may have started with those Sinatra swells, the on-hold music I heard when I called to interview the first audio dealer I talked to for this story. I wanted to know what's been happening with their businesses during the pandemic. Are there reasons for at least cautious optimism?

The economic news is discouraging. Most people don't have a lot of disposable income right now, and many who do are saving it. For those who have hit on COVID hard times, luxury items are out of reach.

On the other hand, people are spending more time at home, whether because they've lost their jobs, are working from home, or—well, where else are they gonna go? In big swaths of the US, live music is shuttered. There's never been a better time to listen to music on the home system or watch movies—so why not optimize the experience? Not everyone is down to their last dime.

How are US audio dealers faring? The handful I spoke to are faring okay, better than expected, actually, at least in some cases.

Compared to the 2008 financial crisis, COVID hit fast and hard. For a while, many dealerships were closed completely. Larry Marcus, the president of Ann Arbor, Michigan's Paragon Sight & Sound ever since acquiring the 45-year-old business 23 years ago, was forced to close for 6 weeks with just 5 hours' notice. It was a scramble to cancel appointments and previously scheduled installations. Yet, very few orders were canceled. "People still wanted their products," he told me.

Even so, in those early days, he was worried about the long term. "We were concerned for the very existence of things. You didn't know how people were going to respond."

Apparently, some audiophiles have responded by improving their audio systems. "Customers are buying and getting back into things, because they're chilling in their houses again," says Sunil Merchant, owner of Sunny's Components, which has been in Covina, California, since 2003. There have been changes. "It's been good in the über, ultra-high-end stuff, like CH Precision and Stenheim. They're selling very, very well," he told me.

The critical middle is struggling, though. "The middle of the road, which is where the enthusiasts live, those kinds of people that you desperately need in a business every day"—that business has gotten "very, very slow."

"They are the bread and butter....You need to eat bread every day. You can eat cake once in a while."

Long-established changes have accelerated. Marcus mentioned a recent CNBC program that claimed that everything expected to happen in retail over the next 5–10 years will be compressed into the next 6–18 months. A big part of that is the continued shift to online commerce. "So, companies that were positioned well for this new way of shopping should continue to do well," Marcus said, "and the ones that aren't able to reach people electronically are going to struggle. ... Things have been changing for the last 20 years, and now I think [the pandemic] has just sped things up massively."

Merchant started to develop Sunny's e-commerce site well before the pandemic hit. During the months since, they've been adding more products to the site, hoping to multiply the loaves. He is also developing a line of loudspeakers.

Have there been any surprises? Merchant mentioned the $1200 Technics 1500C turntable. "We used to sell one in six months. Now we're selling five or six in a row," he said.

All the dealers I spoke with stressed the importance of maintaining the balance between online and offline sales and the need to educate customers about what kinds of audio products should and should not be bought online. They also spoke about service. The same expression kept coming up: "We're not a supermarket."

Stores need offline customers, returning and new. "We all need to figure out a way to drive more customers to come back into custom brick-and-mortar stores," Merchant said. "Otherwise, none of us will exist."

Brick-and-mortar business is harder now. Many showrooms that have reopened are open only by appointment, though others welcome walk-ins. Stores must comply with public-health mandates, and some dealers are going beyond because many of their customers are older and more vulnerable to the coronavirus. At Sunny's, the social-distancing requirement is 10'. Masks are required indoors, including in listening rooms. At Paragon, employee temps are taken every morning. Showrooms are deep-cleaned on a regular schedule. Dealers have also resumed providing in-home installation services after purchase, which carries its own set of risks and PPE costs.

Yet Marcus remains optimistic. He compared his dealership's current, steady business to Michigan's tough winters, when people tend to stay inside—and buy more. "I think when people are home more, we do better," he said. Even now, in the midst of a pandemic, he's seeing renewed interest at all levels and across all segments.

Both Merchant and Marcus report an increase in sales related to streaming audio. Perhaps it's because people are working from home and children are taking classes over Zoom: There's more focus on robust home networks, which can be used for high-resolution digital music. The custom-install business is also expanding, Marcus, Merchant, and other dealers told me.

"Good God, there are many new people coming into this business!" Merchant exclaimed. "I've sold quite a few pieces to people who don't have high-end audio. That's been a beautiful thing in these COVID times." Here's hoping the industry keeps evolving, growing, and thriving. Sing it, Frank!

Allen Fant's picture

Excellent report -JM.
Indeed, there are reasons for optimism.