Re-Tales #28: A hi-fi market health check

How healthy is the hi-fi market? One widely reported silver lining of the pandemic was increased sales of anything to do with home entertainment, including hi-fi. Recently, though, inflation has broken out and the stock market tanked. Higher prices all around—from shipping and logistics to necessary parts and raw materials—added pressure from all sides.

How are these factors impacting hi-fi sales? Is the hi-fi buying binge over? To find out, I spoke with several industry folks, mainly dealers and manufacturers.

Among many diverse opinions, there was one thing everyone agreed on: Change is afoot. Elliot Fishkin, owner of Innovative Audio in New York City, put it this way: "It would be naïve to say nothing's happening."

There was some consensus on other points, too. All agreed that there has been no sudden, dramatic falloff in sales. "The stock market and inflation are problems to be sure, but they're not causing a hard stop by any means," Dave Nauber, CEO of T+A North America, wrote in emailed responses to my questions.

Why aren't things worse than they are? Inflation is high, the stock market low, and people are returning to work, right? Yes to the first two, but the third? Not entirely. The pandemic may have subsided (fingers crossed), but lifestyles haven't reverted—not completely. "People again are staying home," said Greg Hanson of Hanson Audio in Cincinnati, Ohio. "They might be reducing expenses in some areas, but they want their music, TV, to make them feel good instead of going out."

By many accounts, sales at the higher end are still rising or at least holding steady. "The high end has exceeded expectations; it's been selling for the most part," said Mick Survance, owner of suburban Chicago's Quintessence Audio. "Uncertainty in the market does add a headwind, but it's felt less at the extreme high end," Nauber added.

That makes sense: Customers with more disposable income tend to be more recession resistant. "They tend to spend more when the market is up," Arturo Manzano, owner of Los Angeles, California–based distribution company Axiss Audio, said. "But if they need and want to upgrade, they will."

Total sales volume has declined at New Jersey–based turntable and analog equipment manufacturer VPI, according to its CEO, Mat Weisfeld, especially at the lower end of their lineup, yet sales of reference-level products have increased. That's not the whole story of course. Weisfeld mentioned a customer who was planning to buy an $80,000 turntable but decided to buy a $36,000 model instead. Fishkin, too, has noticed some change in purchasing habits at the higher end: "I think there's some disturbance," he said. Some customers, he said, have postponed purchases. One customer bought a $330,000 pair of speakers but is holding off on buying other system components because he needed to put money into his business.

What about sales at lower price points? More than one dealer mentioned that a shrinking middle class is affecting hi-fi. Yet several sources who reported slowdowns have seen increased sales of lower-priced gear. Tweek Geek founder Michael Garner, who recently opened a brick-and-mortar location outside Austin, Texas (footnote 1), told me that his sales have been moving more toward tweaks and less expensive offerings. "When the economy is good, I sell more components than tweaks. And vice versa. [Lately] I've been selling more gear at lower price points." T+A's Nauber noted a general slowdown over the last six months compared to the same period a year ago but added that business remains steady at their higher end and at entry level—which for this German manufacturer starts around $5000. T+A sales are down in the middle.

Here's one way of understanding current trends: People with high incomes are still buying, and people who would have bought midpriced gear are saving money by buying cheaper stuff instead. The middle of the market has hollowed out.

Importantly, people in the industry view the changes as temporary. "With this tremendous hit, people are giving it a little time," Larry Marcus, president of Ann Arbor's Paragon Sight & Sound, said, referring to the recent stock market drops. "More people are taking a pause and seeing where things are at a little bit more than they did in the past."

Nauber added: "When things stabilize, even for a short period, business picks up, suggesting that it's more the uncertainty and less whether buyers can afford our products."

US manufacturers have been facing challenges, contending with parts shortages and high shipping costs. One problem: Products cost a certain amount when they were sold, but by the time the orders are filled, the products cost more to produce, so margins are thinner or even negative. A handful of hi-fi companies have reported layoffs, including Premium Audio Company, parent of Energy, Heco, Klipsch, and the recently acquired Onkyo and Pioneer. In September, Premium announced that it was "right-sizing," as Jill Escol, the company's VP of communications, put it in an interview with Sources confirmed that other companies are doing the same.

"Things are tough at the moment," VPI's Weisfeld said, citing higher and less predictable parts pricing and delays. Still, he has forged ahead, buying parts and making 'tables. "I swelled up on supplies. We're trying to buy as much as we can. ... We need to be ready for the orders when they do come in," he told me.

Quintessence Audio's Survance has been in business for more than four decades; he has weathered downturns before, he told me: "I suppose something prolonged will have to have some bearing on the industry. These cycles are 18 to 24 months, usually." But he acknowledged things could be different this time: "We're in uncharted territory."

It's too soon to gauge the full impact of the economic downturn of course. "We don't know yet," Fishkin said. "It's forces beyond us." Still, some people, including Garner, seem optimistic. "I think audio is really on the upswing, and times are going to be good the next few years."

Footnote 1: See the January 2023 issue's Industry Update (p.15) for more on the new Tweek Geek store.

cognoscente's picture

Didn't we had this discussion here very recently?

The British Unilever (food) made significantly more profit in the past quarter, while it sold less volume / numbers. How? Simple, by raising prices. Or more specific; by calculating more profit margin and this on top of the inflation correction!. And the consumer, who is already having a hard time due to normal inflation, is therefore facing extreme price increases. And what Unilever also does, it sells the same canned soup in "handy" (disposable) bags, Different name, perhaps slightly better taste but with a price more than double than the regular (and already good) canned soup. Unilever is lucky that people have to keep eating, however more and more consumers are now forced to buy cheaper brands, making Unilver…yes indeed!

Same with audio. Only then it is called "high-end". Strongly declining turnover (in terms of volume / numbers) are (over)compensated by so-called "high end" prices (and profit marge). 300K for speakers and 10K for a power strip? Is this for real? (What does this say about the (psyche of the) buyer?)

Audio as we know it is dying a slow death. Ask and conclude yourself; how old is the average visitor of an audio fair (audio only)? How old is the average buyer of "better" audio equipment? 20+ 30+ 40+ or 50+? 50+! And probably today already 60+. And they, like me, will all be dead in 20 to 30 years or so old & sick that they really have other concerns and interests than audio music gear. Young people, if they have purchasing power at all, are usually extroverted and only interested in displaying, ehm .. sharing their lives (all happy shining people) on social media on the latest new iPhone on which they also play games and binge watch series. People under 50 simply have lost interest in "better" audio. Wireless in-ears on-the-move are good enough or a mono Sonos at home, if not already too expensive. (official figures on spending patterns and trends of families show this, in the seventies a large part of the family disposable income went to audio / video equipment, then from the nineties to interactive and mobile communication (computer / internet & smart phones and tables) and to travel, eating & drinking outdoors and buying cheap junk from China (that has made us all slaves of China, but that's another discussion).

I don't like to conclude this, I am a (50+ and yes ... male) introverted / autistic audiophile who started to have interested in "better" audio equipment since 14yo but the flight to (the extreme) "high-end" (prices / margin of profit only to compensate the declining sales numbers) makes the audio industry not sympathetic and I can only see it as the industry's last convulsion. Instead of upgrading my audio gear I am expanding my music collection (which it should really be all about, the music, but I admit I use the music to listen to my audio equipment rather than the other way around) by adding more music to my collection. And I buy (downloading, I am against the "sharing economy" (including streaming), an economy where only the platform, the facilitator makes profits and not the creator / musician / owner. Besides the sound quality argument).

Things come and go. Trends/interests come and go. The world as we know it will no longer exist tomorrow. Is that bad? No, movement creates progress (and chaos creates beautiful things). Either way, the one who adapts survives. Survival of the fittest. It has always been that way and it always will be.

Thank you (audio industry, I enjoyed your gear a lot and I still do).

mrounds's picture

Though I've never been into the true high-end, I've appreciated decent sound since very early years. I'm now 70+, with deteriorated hearing, and not really interested in spending tons of money on audio any more. Though - what I have was decent-commodity when purchased (even if used at times), probably low-mid-grade, and I'd like to keep it working. Which leads to a second problem: repairs. Very few places are still around that do repairs, so I'm back to DIY in many cases. And the parts needed are near-unobtainium. So I suppose the gear will gradually die, and I only hope that it will survive long enough to be useful to me.

(Un?) Happy New Year. I was depressed anyway. Pass it around.

For a glimmer of hope: I do see more people using over-the-ear headphones (BT or wired) and higher-qualify 'buds with their "devices." In some cases, at a high enough volume that everybody else can hear what they're listening to. So if they don't progress rapidly to deafness, there might be a market for better sound in the future, still, as they reach a point where they want sound in the room, not just their ears. Don't write off the whole business, IOW. There may still be a niche for decent sound, at the low-middle end. And associated with TVs - there have been marked improvements in packaged HT sound in recent years.

More hope: there have been marked improvements in technology and sources of music: with apologies to the vinyl fanatics (and I do have a large library of it, both mine and inherited), we don't just listen to records anymore. Class D amps have changed the power landscape, and don't have to be expensive to sound very, very good. Perhaps Stereophile could do a (tongue-in-cheek?) episode of "Cheap Stereophile" exploring how to assemble a really nice-sounding system for <<$1K, total. I think it could be done, with a mid-powered Class D amp, some decent small (or rebuilt old) speakers, and internet music sources (doesn't everybody have some kind of laptop or phone these days?), and perhaps visiting thrift stores for some used gear for other formats. IOW, how to extract Good Sound from the Very Low End. Might be fun, but certainly would require some work, and I'm sure the advertisers would not be amused if you succeeded.

Jazzlistener's picture

you are clearly disconnected from the pulse of this industry. Is audio an expensive hobby, absolutely. For those who are more interested in “statement” audio, the prices on gear can be astronomical. However, for the rest of us, there are tons of entry and mid-fi gear that sounds fantastic. In fact, I’d argue that we are absolutely spoiled for choice these days. We also have access to a large number of online resources to help us put together a banger of a system. With careful research and purchasing decisions, you can assemble a fantastic system for reasonable $, one that actually punches well above its weight. I am also very optimistic about audio’s future. Why? First of all, the music. The music industry has never been so dynamic and alive, especially as it emerges from the pandemic. There is a ton of great music being made in so many different genres and sub-genres by a very diverse group of musicians young and old. Today’s youth are still in love with music and although many do listen to it through earbuds or headphones, many of them are investing in lifestyle systems that are pretty fantastic in their own right. The technology keeps getting better and better. And for those of us who still prefer formats like vinyl, it’s never been a better time to be a vinyl enthusiast! The future is indeed very bright.

Glotz's picture

Every bit well put.

jond's picture

I was struck recently at CAF by the large number of show-goers in their 20s/30s/40s. Whereas frequenting audio forums online the majority of folks seem to be at least 60+. So perhaps retail sales are not so imperiled by an aging clientele as we believe? 53 here so bucking the online trend!

ok's picture

to be rich.

Glotz's picture

Garner's comments are excellent as well. Tweaks during the downturns, vs components during upturns in the economy. Tweaks are totally valid ways to improve and refine our existing components' performance, obviously.

It points to a smart dealer strategy, of which some of my local dealers don't exactly subscribe heavily. Perhaps they should! It would address the natural cycle of audiophiles' purchasing habits as well as educate and spark conversation and creativity for music lovers. There's a lot phonophiles need and the market is ripe for experimentation.

ok's picture

hifi was a necessity, now it's a hobby; music itself no less for better or worse.

barfle's picture

If that’s an upgrade, what’s your customer doing with the previous set?

Asking for a friend.