PDA

View Full Version : Audiophile retailing in the current economic gloom



Neil McCauley
08-10-2008, 09:36
It’s impossible, however hard I try, to remain immune to the financial crisis gripping the UK. Of course it’s tempting, and yes I have been sorely tempted, just to sit back in the comparative warmth and security of Stereonow, warm in both the physical and the financial sense, and try and let it pass me by. Not very responsible I know, but then again the survival instinct runs strong here.

Happily, and I hope not in the least smugly, I'm not owed money by anyone and I don’t owe any of my suppliers any money either. Certainly a fortunate situation to be in when compared to a few other audio retailers I guess. Interestingly, unlike the previous credit crisis a few years back, there are virtually no ‘Chinese whispers’ I'm hearing along the lines of “xyz's bounced a cheque” or “xyz’s laying off staff” – or unhelpful innuendo like that. Or maybe there are and I'm just too far under the radar to be included in the gossip.

I’d prefer to believe, possibly naively but hey – am I immune to naivety? – that this time around there is a greater sense of industry responsibility than hitherto. Less gloating, less schadenfreude if you like. It’s also tempting to believe that those retailers still around (far fewer than during the ‘Black Wednesday’ crisis years back are financial more robust than previously. I’ve no way of knowing and only time will tell.

Given all this, it strikes me I have 3 options. These are in no particular order of importance (a) do nothing, sit tight and ride out the storm like a cork on a troubled sea or (b) progressively sell slow moving items and turn that investment in demo and sales stock into cash and sit on it or (c) invest in additional demonstration items in the belief that a sensibly strategy is to spend money during a downturn.

I’ve opted for the latter, believe it or not. I'm doing this because of the twin commercial axioms (or proverbs if you prefer) that I live by. These are (a) ‘in every opportunity there is danger and in every danger there is opportunity’ – and (b) there is one indisputable common denominator that links the bad times and the good times – and that is that neither of them last forever!

I'm auditioning a few carefully considered additional product lines to supplement the ones I already proudly represent. These potential additions are very low profile lines. I'm not interested in acquiring new lines as a knee-jerk need to generate profit quickly. There’s no need and no desire here for that.

I’m taking a risk and of course with these new suppliers (if we choose to work together) and they are taking a risk with me too.

Tomorrow, in this occasional series of observations on the UK retail audiophile market against the background of economic gloom, I’ll be exploring the nature of that risk – from both sides and you'll be able to read it at http://blog.listencarefully.co.uk/

Meanwhile life and demonstrations go on as normal at Stereonow and I'm pleased to say, so do sales. As for the rest, and for most of the rest of us I guess, it's beyond our influence, let alone control.

For me, the joy of music - on virtually any system at any cost - has rarely been more therapeutic and essential.


---//---

barrie
09-10-2008, 09:32
Hiya Howard,
I think your comments are very valid, and I would add 1 more - maximise your opportunities, build relationships and show empathy - what do I mean ?
I am trying to get my first grown-up hi-fi, I have read a lot, visited many dealers and have only had 1 of them recontact me, and no-one offered home demo (my budget is @ 10,000 euro).
For me this is a fairly major investment and I also will add a TT and something like an HDX in the next year which I guess is another 10,000 euro. What I needed was a bit of hand holding through this, not talking down to, but spoken to in a way which made sense to me, I want to trust my potential dealer and I want to think that they would be interested in a long term business relationship and given the current circumstances (both for the dealer and the customer ) given a reasonable deal - however it seems that many dealers do not understand this and are happy to sit in their stores and wait for things to just come to them like magic, it's as if the economic downturn is something that is does not effect Hi-Fi stores :doh:.
I am a training manager but have also run business' and my old adage is when the job gets tough, just do the basic things better.
Be friends to your customers, be helpful, make a fair offer, follow up
I am not sure if you recognise any of these examples and I am sure you would not act in the ways I have described but I hope you find my comments helpful.
I still live in hope that I will get to buy my system, Supernait flatcap plus speakers, stand cables etc, but I have to say I am finding it damn hard to find someone I want to spend my money with:confused:.
Best regards and good luck
Barrie

Marco
09-10-2008, 14:35
Great subject this, chaps. I will go comment and go into detail later :)

Barrie, welcome to AOS, and great first post!

Marco.

dmckean
10-10-2008, 00:34
The in home demo thing really is a no brainer. If I audition something in my house and it's better than what it replaced I never want to give back up.

Filterlab
10-10-2008, 07:51
Well the gloom deepens, the FTSE opened this morning 10% down (300 points). :(

Primalsea
10-10-2008, 19:52
I was told by a manufacturer/ seller that buyers of higher end equipment tend to have enough disposible income that things like credit crunches and seasonal periods don't really effect their purchasing habits. I would have thought the most important thing is there just not being enough buyers interested in high end hifi to sustain all of the retailers. Ultimately, eventually the retailers with crap customer focus would fade away leaving the good ones. I realise this might be a slightly utopian idea, If hifi is like anything else wankers tend to buy from other wankers while the good guys stick with the good guys.

Cotlake
10-10-2008, 22:33
Paul raises a great point for consideration. If you are selling high-end high priced products, is the customer demand constant regardless of the current economic climate? This view has also been suggested to me. IE, if you are selling Ferrari or Rolls Royce, you sell occasionally regardless of the finacial climate. Is that true? What do you think?

Togil
11-10-2008, 06:49
Porsche's sales have gone down 20%, apparently.

shane
11-10-2008, 07:44
It occurred to me the other day that in the six weeks since September 1st I've only seen one 58 reg car on the streets, so I'm not sure that it's only the Ferrari and Porsche dealers who are worrying!

Primalsea
11-10-2008, 08:01
In retrospect I think that it's maybe only partly true. With the recent string of banks going under it looks as if no ones safe except the people at the very top who have enough it doesn't really matter if they work or not.

Out of interest, where has all the money gone??? It doesn't just vanish, someone must have it!!

sastusbulbas
11-10-2008, 15:00
In retrospect I think that it's maybe only partly true. With the recent string of banks going under it looks as if no ones safe except the people at the very top who have enough it doesn't really matter if they work or not.

Out of interest, where has all the money gone??? It doesn't just vanish, someone must have it!!


There was no money in the first place, most of the population live on credit and swap debt between credit cards, the situation was inevitable with the amount of credit getting given out to home owners and students, and some blame is on the shoulders of those willing to pay ridiculous prices (with borrowed funds) for houses which led to the continued increase in prices and credit.

Togil
11-10-2008, 15:24
yes but the money borrowed on credit cards must have come from somewhere, either deposits or borrowed elsewhere - it's the latter which has dried up because banks are not prepared to lend their money cheaply any longer.
Remember up to about 1985 banks didn't do mortgages at all and you could go into a bank,ask for a loan and they would say : we'd love to give you one but at the moment we don't have any money to lend.

dmckean
11-10-2008, 21:42
Out of interest, where has all the money gone??? It doesn't just vanish, someone must have it!!

It was never money in the first place because the stock market just speculates how much companies are worth. Also, every time a bank issues credit new money is made and inflation happens.



Remember up to about 1985 banks didn't do mortgages at all and you could go into a bank,ask for a loan and they would say : we'd love to give you one but at the moment we don't have any money to lend.

To fix that problem they loosened the ratio at which banks can loan out money. It's something like 40:1 now when it used to be 9:1 during the 1960s.

nat8808
15-10-2008, 02:24
It occurred to me the other day that in the six weeks since September 1st I've only seen one 58 reg car on the streets, so I'm not sure that it's only the Ferrari and Porsche dealers who are worrying!

I've seen that previously reported to be to do with oil prices and also a house-market crash will effect a large Porsche-buying demographic in the UK like small property dealers and well-off builder types. I think I remember hearing about city bonuses being down on last year too, before the banking collapses - a Porsche Boxer is traditionally the city-boys first bonus purchase.. I would imagine the higher-end Porsche sales aren't effected.

The financial sector as a whole is pretty much all about speculation, not just stocks. As I understand it, groups of groups of (not a typo) individual debts are split and repackaged promising good long-term returns with the interest that is repaid on them. Financial institutions trade in these and speculate on these too and with a bouyant housing market for example these look like promising returns so their value rises. However, many banks etc have been repackaging and reselling them to an enthusiatic market knowing that there are many based on debts that they know are never going to be repaid by the consumer! The US housing market collapsing has shown much of these to be worthless and so the banks have lost a lot of their own trading currency into thin air..

Real money is caught up in this too as the potenial loss of a few billion in cash by many councils and TfL have shown with the icelandic banks although their demise is also down to other factors too like a large loss of flow of currency that used to flow into their banks from Japan - people borrowing from Japan at near zero interest rates and investing in iceland where rates were high. Japan raised their rates and the flow of cash stopped... They were their own icelandic-bank bubble.

In the end it is basic stupid stuff - like pyramid selling - and the people at the bottom realise they've been had and lost their money. The people at the bottom in the housing market are those indiviuals who borrowed more than they could afford because they went allong with the my-house-will-keep-going-up-in-value pyramid scheme (and all those businesses based around it). The banks that have been caught out like Northen rock were caught in the These-repackaged-debts-will-increase-in-value Pyramid scheme whilst also lending their money to the latter. The investers in Icelandic banks were at the bottom of another pyramid scheme .. Haha! All very laughable from a distance.. Meanwhile, many individual bankers, traders etc in control at the top get very rich indeed and will be buying your £300,000 Audio Note amps very soon!

Still, my reckoning is that the secondhand audiophile market will fair well for a while as people with spare cash become weary of the depreciation of new gear and perhaps also as people start to go for best value per soundquality and get out of the must-have-new lifestyle. With an increase in demand and also a lot of secondhand debutants who are used to new prices on the scene, values may increase, especially for well known brands.

What do people reckon on that last bit?

Neil McCauley
15-10-2008, 07:19
Still, my reckoning is that the secondhand audiophile market will fair well for a while as people with spare cash become weary of the depreciation of new gear and perhaps also as people start to go for best value per soundquality and get out of the must-have-new lifestyle. With an increase in demand and also a lot of secondhand debutants who are used to new prices on the scene, values may increase, especially for well known brands.

This is certainly my view. This isn't just because of the current economic situation though. The UK has a surplus of very good used equipment due to (a) over supply and (b} a contracting market. Realistically there are fewer sensible (objective ? rational?) reasons for changing a piece of equipment that's currently working well.

Some makers already had seen the writing on the wall and with careful planning had put their 'customers as walking wallets' campaigns into action. What they had not counted on though was increasing consumer cynicism that had and has looked at so called upgrades as the ‘smoke and mirrors’ nonsense they are.

With some success, they preyed on buyer ignorance that promoted the concept that any difference was – per se – and improvement. Of course improvements must by their very nature be different from the norm – but a difference is not axiomatically an improvement.

It is this precise piece of ignorance that has in my view fuelled audiophile sales growth during the past 3 decades. And the net result is that used equipment is, for buyers at least, the intelligent way to go and for some retailers, a desperate and much need financial lifeboat.

Finally – it’s my belief that many sectors of the industry (and I include the audio magazines in this) will use the UK financial crisis as camouflage or indeed scapegoat for what was and remains an inadequate business model.


---//---

Marco
15-10-2008, 10:39
Hi Howard,

I like your idea for this thread and just have to find the time to contribute something poignant and thought-provoking... Until that happens, here's something for you to chew on, although I don't think this applies to you.

Many hi-fi dealers are simply too narrow-minded and absolutist in their views and stubbornly think there is only one true path to 'audio nirvana': effectively their way or the highway. Some attempt to 'groom' or 'lock' you into their mindset as a result of financial or egotistical motives, and this is just pure bullshit, and ultimately, bad business.

The fact is there is no utopian ideal in hi-fi simply because there are many ways to skin a cat. People have different priorities with hi-fi equipment and derive different emotional feelings from music, so there can never be the one 'best' approach to assembling a hi-fi system.

Dealers (and manufacturers such as AVI) who adopt the inflexible policy I've described above would do well to think long and hard that for every 'disciple' they succeed to create, they're in turn alienating a far bigger percentage of free-thinkers who simply won't accept their blinkered methodology and become one of their nodding puppets...

To trade most effectively in the current economic gloom the key most important thing is to relate to your customers on their level and not simply use them as a model in which to impose your beliefs.

Marco.

StanleyB
15-10-2008, 11:21
To trade most effectively in the current economic gloom the key most important thing is to relate to your customers on their level and not simply use them as a model in which to impose your beliefs.

Marco.
Very true. My main gripe is that dealers put the wrong value on things in order to create an impression of superiority of the product compared to something cheaper. This in turn limits sales, which limits production. That then results with fewer employees in a job.

sastusbulbas
18-10-2008, 21:53
I think current trends in the market, and the recent trends with Hi Fi Forums may well kick many manufacturers in the ass. Fingers crossed because I feel many have been getting away with ripping customers off with fraudulent claims and shit coated in sugar. Then again many customers are more interesting in owning it due to value and reputation, most high end kit is bought on credit, and a bit like houses most of it gets more £££'s than its worth due to people willing to spend more than an items value.

dmckean
18-10-2008, 23:29
I think the industry should be marketing more towards young people instead of trying to get the same buyers to upgrade over and over again.