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High End Manufacturer's New Take on Direct Sales

teddy_pardo said:
[...]With speakers it is even more difficult, most people would not buy speakers without listening first, no matter how good they are and what people say about them.

I'm not sure that direct sell is "the future", I believe that most people would prefer to buy from a dealer, even if it costs 2-3 times more (or you get much less for your budget) but listen before buy. In order to be able to sell directly you need to have excellent reputation and excellent offering so that people can't resist the temptation...
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Yes, but wouldn't the 'listening first' ideally take place in your own four walls anyway, instead of the dealer's showroom, which will inevitably be very different to your home?
 
Tony L said:
The problem with direct selling is the lack of any real comparison aside from your own existing system. You have the same financial hit of buying from a dealer (i.e. the thing is inevitably worth 20-30% less as soon as you’ve bought it as that is what you’d lose moving it on) but with no comparable new products at hand to contrast and compare against. In most cases it makes a lot of sense, I buy huge amounts of stuff online, but for something as subjective as audio if I was a new buyer (I’m not, I buy second hand to avoid the depreciation) I think I’d want to hear how it stacked up against competition at its price point.
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I agree, but in most cases, the main reference point is the system you already have - i.e. whatever you are getting needs to sound better than that.

Re the comparison, IME most dealers do not have a lot of different offerings in the same price bracket, making a comparison of, say, 3 speakers in the 5k - 7k price range difficult to arrange at the same dealer.
 
teddy_pardo said:
Our business is built from day one on direct sell, which allows us to sell at a much lower price, sometimes 1/4 of the price of equivalent products, but...
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I don't believe some of these excessively high margins for distributors and dealers. Accessories like cables have high margins but the main components have margins in line with other consumer goods of a similar type. Not sure about boutique audiophile products. As a product they have strong similarities with cables (i.e. cost of manufacture low compared to selling price but high marketing costs) and so might have high margins. Anyone?

If a manufacturer opts for direct sales the marketing costs go up, time and effort has to be invested in dealing with the customer directly, the cost of returns needs to be absorbed, some means of demonstrating the product has to be found, significant stock needs to be kept, etc... A 40% dealer margin doesn't look unreasonable in these circumstances.

teddy_pardo said:
I'm not sure that direct sell is "the future", I believe that most people would prefer to buy from a dealer, even if it costs 2-3 times more (or you get much less for your budget) but listen before buy.
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Apart from the 2-3 times cost which I don't believe is a reasonable estimate, I would agree that many people would prefer a modest increase in order to buy from a local dealer. The problem is that my closest dealer is over an hour away and I have to park-and-ride to get to the city centre. This is a remote dealer not a local dealer and they don't add much value for me.
 
Traditionally distributor and retailer would share a 60% (40/20) margin, usually with the bulk going to the retailer, Pro audio smaller margin usually around 25%.
Keith
 
Seems extraordinarily high to the point I find it hard to believe. Naim, Linn etc used to be around 30% to the dealer IIRC, and that factors a quick payment bonus (commission dropped a few points with late payment). No distributor as the company supplies its dealer network.
 
Tony L said:
The problem with direct selling is the lack of any real comparison aside from your own existing system. You have the same financial hit of buying from a dealer (i.e. the thing is inevitably worth 20-30% less as soon as you’ve bought it as that is what you’d lose moving it on) but with no comparable new products at hand to contrast and compare against. In most cases it makes a lot of sense, I buy huge amounts of stuff online, but for something as subjective as audio if I was a new buyer (I’m not, I buy second hand to avoid the depreciation) I think I’d want to hear how it stacked up against competition at its price point.

Back in the distant past when I did buy new I usually visited quite a few dealers to hear what was on offer from the different brands. I quite enjoyed that part of the purchasing process and kind of miss it now I’ve migrated into the vintage audio collector market. I’m also far from convnced by the “savings” of a lot of online-only kit and I’ve very seldom noticed any real correlation between price and performance. I can think of a fair bit (which I won’t name) which seems decidedly expensive compared to some of the big names when one looks at build quality, facilities and component costs. Ok, a lot of major UK brand kit is made in China these days (Quad, Audiolab etc), but even so that is the market the little direct seller guy has to compete against. Not an easy market at present so there is certainly plenty of room for different approaches though.
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so I find it very difficult to get a hang on the sound of equipment without having a dealer to try stuff from . they give you backup when things go wrong and are there for support . i would never in a million years tried grandinote amps if i had not visited to take my amp for repair . it was an education . and lots of other goodies on display to try

most recently i have been listening to kit at dealers and if possible i will try to buy there because in 5 years i want them still to be in business so i can demo more stuff .i recently visited a hi fi store in my city which started 10 years ago and seems extremely successful doing both direct and online sales and you can hear stuff there too

do you see NVA stuff or neodia at the Bristol show ? i think not , so dealers have a margin so they can exhibit at shows and make more sales and punters can hear stuff .
 
Hifinutt, I think you are right and wrong !

Agree that something which sounds good in a dem might be poor in the comfort of your own home. This is where direct selling really takes off. If you don't like it you can send it back for a full refund.

The absence of certain manufacturers at shows might be for reasons other than a connection to dealers. After all, if you offer a money back guarantee, what's the point of being at a show ?

On a different note; nice avatar !
 
Things seem to be moving in this direction as the market shrinks and traditional routes to market are becoming obsolete. The world of hi fi is a very conservative (yes small "c"!) one and the change towards small companies and direct selling will take a long time I reckon. There are still many audiophiles who believe that only a big company with glossy ads in the mags and a big dealer presence can possibly be clever or resourceful or well financed enough to be able to build genuinely fantastic products for a start. Many others will only buy from companies such as the above as they believe it will guarantee an easy re-sale for top dollar.

In the case of high tech wi-fi multi room HD digital etc etc they would probably be right about the big wealthy company. With more traditional analogue components they would be very wrong!
 
The first sale is hard, but as more buyers enter more people know someone with a bit of gear. By the time you've got one bit of hifi every fifty square miles chances are it's as well known as any dealer supported product. The more technical the market and more educated the buyer the easier this is.

I worked for a kitesurfing manufacturer, we were the only direct selling brand. Once we'd seeded yhe market with a couple of kites to responsive and vocal kiters at each beach they sold themselves. We had a very good sales density model that showed when you could turn down the promo budget in any territory based on existing units in the field.

This stuff is easy, most hifi sellers are just crap at real marketing. Really crap.
 
Stemcor said:
Agree that something which sounds good in a dem might be poor in the comfort of your own home. This is where direct selling really takes off. If you don't like it you can send it back for a full refund.
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But if you're looking at four pairs of speakers at £3k/pair, have you got £12k spare to order all four to try out? And are you willing to pay the costs involved to get the other three pairs (or maybe even four if you like none of them) back to the manufacturer, bearing in mind that shipping isn't cheap nowadays, particularly when you'll have to fully insure them seeing as you're responsible for them until they get back to the factory? Once one length of a box is over 1m, prices are based on volumetric weight, which starts bumping up the price...

The absence of certain manufacturers at shows might be for reasons other than a connection to dealers. After all, if you offer a money back guarantee, what's the point of being at a show ?
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There may be "fresh meat" at hi-fi shows - you might want to get your brand out there for more people to see. Also, there may be people who don't like your brand for whatever reason, or are under the impression your brand doesn't sound good, or is far from the sound you're looking for - a show may change some people's views if you can make a great sound in a space that may not necessarily be ideal.
 
littleaudioco said:
It all depends if the manufacturer has the infrastructure to deal direct with their customers. It’s probably not too bad if they don’t sell much product, but if they sell a certain number of products on a regular basis, they’ll need to take on staff to deal with sales/packing/shipping/returns/support etc. This is one of the reasons why manufacturers have dealers!
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They must already have the staff to deal with packing and shipping as otherwise how does it get delivered to the dealer or distributor?
 
Manufacturers tend to ship to anywhere between 5 and 200 dealers - that’s a little different to dealing with thousands of customers. That’s an increased number of individually dispatched packages, costing them more money. Plus, they won’t want to be dealing with claims of “non delivered” items and an increased number of shipping related issues. Then there’s more staff needed for more support, as customers will be ringing them not the non existent dealers. That’s just the surface, there’s a lot more where that came from. The bigger the manufacturer, the more it’ll cost them. It’s probably ok for these tiny little companies that sell direct as they’re dealing wi5 a few people a week, but the more they sell, the more time and staff required for support etc.
 
Are you saying that delivery logistics are a barrier to direct sales? Trust me they aren't, twenty million quids worth of bikes and accessories from the place I work for would imply otherwise. And bicycles are every bit a 'must try' purchase as hifi is.
 
I wish manufacturers had there own reduced factory shop.
Like factory seconds - where you could buy an amp with a tiny mark on it and get it real cheap!

That to me would be a good marketing strategy.
 
Not surprised.

In the US dealer margins on mainstream Hi-Fi are typically ca. 40% of list price, more on cables and interconnects. Add in a reasonable margin for the importer/ distributor and it is easy to see that removal of one or, even both, layers of the the distribution chain could result in lower prices to the buyer. Of course, the manufacturer could elect not to pass on all the savings to the consumer, thus improving his own bottom line.
 
PS:- interesting to note that Emotiva, a maker of A/v products which until recently was selling direct to end users is now signing up dealers.
 
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The trend in the States, as more and more dealers are dropping like flies, is for hfii manufacturers/brands to sell through established online HiFi only retail sites:

Audio Advisor = audioadvisor.com
Music Direct = musicdirect.com
Needle Doctor = needledoctor.com
Turntable Lab = turntablelab.com
Crutchfield = crutchfield.com
Sound Stage Direct = soundstagedirect.com

Take a look at the varied brands stocked/carried by these sites. The sites do a bang-up business and for a good portion of the United States without hifi shops in proximity this has become for enthusiasts to make their purchases.

In the instances above the dealer gets bypassed.

Some go 100% direct bypassing the distributor and dealer altogether and in these instances it becomes paramount that hifi enthusiasts in the States make to at least one of the major US HiFi shows to see in person what's on offer.

From my interactions with numerous distributors and manufacturers, distribution has become more and more about expanding from domestic to international markets, where the distributor acts as the representative for that product(s) in the target country.
 
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