Audiophile Sales Booming Online: One Entrepreneur's Tale

The recent success of online retailers---especially when launching initial public offerings---has been phenomenal. In the past two years, Internet shopping has taken off in a big way, and shows no indication of slowing down. Technology trendwatcher Forrester Research predicts that worldwide Internet commerce will hit the $3.2 trillion mark within four years, accounting for 5% of all commerce.

Music lovers long ago discovered the offerings of mainstream online music sellers like CDnow and audiophile specialists like MusicDirect; the latter not only offers a deep catalog of ultra-high-quality recordings, but also a nice selection of top-rung audio products and accessories.

Audio Advisor, a familiar name to Stereophile readers, runs a similar operation from a small town in Michigan. How does a small Internet startup grow to the stature of Audio Advisor? Here's the lowdown on how one entrepreneur did it. The following is excerpted from a Stereophile e-mail interview with Wayne Schuurman, AA's founder. According to a recent press release, AA's commerce site averages 100,000 daily "hits." Unique site visitors, the statement claimed, are "running between 6000 and 10,000 per day."---BW

Stereophile: First, a brief background sketch.
Wayne Schuurman: Audio Advisor was started in the spare bedroom of my apartment in 1980. I started by placing a small classified ad in the back of Stereo Review magazine. Although I could buy almost any type of Japanese mid-fi by mail, I couldn't buy higher-quality, "high-end" products I really wanted by mail. I reasoned that if I wanted to buy these items this way, others might also want to. It turned out I was right. Sales grew a compounded 80% for the first seven years.

I mailed my first catalog in 1984. It was a small 16-page black-and-white edition illustrated by a local comic-strip artist. In 1989 we launched our first four-color catalog. It started out a small size, then jumped to a full 8.375" by 10.875" in 1991. This full-size 64- to 116-page catalog has been the mainstay of our advertising for the past seven years.

Stereophile: When did you first go online?
Schuurman: We launched our first website in October 1996---basically an online version of our catalog. Customers could use this for research, but had to call us to actually order products. We launched our new "commerce" site on October 14, 1998. This site offers secure online ordering of over 1000 high-end audio and video products.

Stereophile: How about the long-term effect of Internet sales on your business? Will they grow to dominate telephone sales? Co-exist with them? Is this good, bad, or indifferent?
Schuurman: Our Internet business grew steadily for the first two years, but took a big jump when we launched a new site that allowed customers to order products directly online. About two-thirds of the orders generated by our website are online and one third are over the phone. We believe phone orders will continue to be a vital part of web sales. Some customers prefer to call in their orders. Some have technical questions about the products. Others feel more secure giving order information over the phone than over the Internet. Still others just like talking to a human rather than dealing strictly with a machine. Is online ordering better than phone orders? I'm not partial to either one. Any way a customer wants to send us their order is GREAT with me.

Stereophile: What about sales and growth online? Where do you expect it to go next year?
Schuurman: Over the past year, web sales have grown from 5% to 20% of our sales. That puts web sales in the six-figures-a-month range. We expect web sales to continue to grow as we add more products, and as more customers find our website. I'd guess online sales will comprise 50% of our business within three years. I'll be very disappointed if web sales do not at least double next year.

Stereophile: What lessons have you learned?
Schuurman: Audiophiles are everywhere. And I mean everywhere. We've gotten orders from all over the world, including Egypt, Thailand, Peru, Hong Kong, England, Norway, even Zimbabwe. Last week we got a bunch of orders from Atlanta, Georgia. Several every day. Why? We still don't know.

Stereophile: What about video products?
Schuurman: On our site, audio sales currently far outstrip video sales. As we include more superior video products in our mix, I think we'll see tremendous growth in that area.

Stereophile: Is this a problem for some manufacturers, or other distribution channels? Have you met any resistance from anyone in the supply side of the business?
Schuurman: Yes, some manufacturers restrict which countries we ship products to. We always respect that. What's frustrating are manufacturers who forbid us from advertising their products on the site at all. Pioneer is one example. We sell several of their hottest DVD players through our catalog---like the DV-414, which outputs 24-bit digital audio. Yet we can't advertise them on our site. Frustrating!

Stereophile: Which product categories are hot online, and which aren't?
Schuurman: Accessories are the hottest items purchased online. But the best-selling items on the web are different from the best-selling ones in our catalog. Big sellers in our catalog include AudioPrism CD Stoplight, Monster Cable X-Terminators, and Standesign "BB" series speaker stands. On the web, best-sellers include Magnum Dynalab ST-2 FM antenna, Sonex acoustic panels, and Kimber Kables.

Oh yes, one more weird thing. Monster Cable is our best-selling cable in the catalog. But online, we sell far more Kimber and Cardas. I would have predicted that, because the web reaches so many more people, Monster Cable--because it's a better known brand---would sell far better. But it hasn't.

Stereophile: Where do you hope this will go in 5 or 10 years?
Schuurman: We have big plans for the web. First, we want to get as much information and as many products as possible on the site. We want to include things like multiple product views, schematics, downloadable manuals, links to manufacturers, and links to magazine reviews. Some of this stuff is already on the site. More is coming.

Further in the future, I see more direct online correspondence and, eventually, conversations with customers. When the web is ready, it will be great to talk directly to customers in Japan, Hong Kong, and Africa. Current phone rates don't make that practical.