B&W Puts Pressure on Transshippers

The practice of "Transshipping"---selling a product outside one's designated territory---is widespread in the audio industry. It's commonplace for dealers to sell not only to walk-in customers, but also over the telephone or Internet to customers in other dealers' territories, usually at discounted prices. While not problematic on a small scale, the practice favors large-volume dealers over smaller ones, and is almost always a violation of a dealer's agreement with a manufacturer.

British loudspeaker company B&W, one of the most popular brands on the market, is aggressively pursuing violators. Mail-order dealers, as well as retailers, who ship outside their areas will feel the heat from B&W. Obvious violators will meet the company in court. "From now on, we'll sue every dealer that transships. They won't only lose the line," said B&W president Peter Wellikoff, "they will incur legal expenses. The only gray area is the level of damages."

The crackdown has resulted in a decrease in the number of B&W dealers, which is down to 200 from 225 this time last year. A total of 80 dealers were cut loose, and a number of new ones added, in the company's move to gain better control of its distribution. "We're getting a lot tougher to ensure the best and cleanest line with the highest level of support," Wellikoff said.

Prolonged discounting and transshipping can erode a product's value. Customers often find that products purchased this way don't carry a valid warranty, or that there is no technical support once the sale is complete.

B&W is also recalling inventory from "stocking reps," or representatives who keep products on hand for quick supply to dealers on credit hold, or to those who need items immediately, such as custom installers. Wellikoff mentioned that transshipping by B&W's reps hasn't been a problem, but the new policy would help to prevent it. B&W has three full warehouses in North America and can provide any product in any finish within 24 hours, he mentioned.

Annually, B&W does approximately $100 million in business worldwide. A third of that takes place in the US, where sales have risen 20% to 25% in each of the past five years. The company has recently expanded its offerings at both ends of the price spectrum, has moved into home-theater products, and has certified about 30 custom-installation dealers. Another 60 are expected to be certified by the end of the year.

Both America Online and Audible Artistry, an online mail-order operation, have been threatened with lawsuits if Audible Artistry doesn't stop selling B&W products. June 9 is the deadline for them to respond to B&W's request to "cease and desist." The "gray market" and transshipping phenomena were examined in detail in "Invaded by the Grays," a feature story in the June 1996 Stereophile.