Wednesday, October 21, 2009

Customers Vs. Retailers: Commentary on a Stereophile Letter

While reading the November 2009 issue of Stereophile, I came across a letter titled "Customers vs. Retailers" in the letters section. It stated the following:

"The behavior that I am referring to is what I call the consumer version of bait and switch. A guy visits a legitimate retailer (or retailers), gets hours of demonstrations, borrows trunkfulls of gear, gleans bookfulls of information, and, when he's made his decision, goes online and buys the item, used or at a significant discount, from and online seller who doesn't provide the types of service that he has stolen from the local store(s)."
First of all, this does exist, and I do agree with the writer of the above statement in part. There are unscrupulous customers, just like there are unscrupulous business people. When the two get together, nobody wins in the long term.

What I take issue to is:

  1. Inferring that anyone who is a high end audio retailer that sells product online "illegitimate". That is an ignorant statement, and that is putting it nicely.
  2. Assuming that customers don't take up my time, borrow trunk-fulls of gear, take all of my advice, then don't go somewhere else or buy used. It happens to me too, and it sucks. Shame on you as a customer if you have done this. It's wrong.

Let me educate the brick and mortar dealer. I spent several years, and thousands of hours building my business just as you. My overhead is slightly lower than yours, am I supposed to feel bad because 1) I wasn't wealthy enough to open a store and stock it will millions of dollars worth of inventory? 2) because I know how to build a web site and market my business? I don't apologize for either. It's a different way of doing business that is not going away. It serves a much needed niche, and can be done with integrity.

I do have a showroom. It is a dedicated room built in the basement of my home. It's not your multimillion dollar, five year lease building in the middle of downtown, but it works. for the most part, I rely on going to my prospect's home, allowing them to audition the gear they are interested in within their own system and listening environment. I think it works better, they do to. They appreciate the non-sales approach, and they can make a more informed decision. It pays off by getting the sale (most of the time) and making a friend that likes music as much as I do.

I as a web retailer am able to support customers who live in areas where their are no high end audio stores, or the brands that they are looking for aren't represented. I send them gear, communicate for hours on the phone, and via email. I give them all the support they ask for, and more. How can you, the local store 300 miles away, support them any differently? You can't.

I represent the brands I carry with the highest integrity. I play by the same rules that they set forth for everyone, brick & motar store AND online retailer. If you are getting undercut by an online retailer, if they aren't adhering to the guidelines for marketing and sales set forth by the manufacturer or distributor, you have every reason to report them and have their dealership revoked. If they are allowed to do this, and the manufacturer doesn't care, find another product line, or have a serious discussion about policy with them.

Manufacturers, take heed. Do not broad-brush all internet retailers as low-ballers and charlatans. Some of us can help you a great deal by offering your product to geographic locations that have no representation. We can do it with integrity, and uphold the brand name you have worked so hard to build. You are missing out in a big way by the "no internet dealers" policy. Trust me, your competition is kicking your ass in those locations, and you won't be competitive (or relevant) for too much longer.

I, like you, get cut out by consumers buying used gear. Often after spending time emailing and talking on the phone advising them. That is the world we live in, and actually I think in the long term it will help high end audio by making the entry level even more affordable. As a business owner you need to select brands that don't have a high turnover of current models on the used market. You need brands that are actively involved in monitoring the internet for rogue dealers. You need brands that innovate and consistently offer new product, and improvements to existing product.

Not to mention you need to cultivate relationships with your good customers. Not everyone who buys from you will be a good customer, but you will find enough of them over time.

Example: I was approached by a manufacturer that has a very well established brand. The problem was that they haven't come out with anything new for at least 3 years. Guess what? Their product was all over Audiogon for sale as used. Why in the world would anyone by their product new when they could get the same thing for less than half the price used? Can you blame a potential customer for buying used at that point? I can't. I also can't carry the manufacturer's product because I know I won't be able to sell it (manufacturers take note please).

You and I are more alike than we are different. We both love music, we both love the reaction of a client who has found what he is looking for in an audio product. We love making friends of our customers.

We both have the same enemy, inscrutable dealers who sell on heavy discounts, damaging brand names and hurting the industry as a whole. The solution is not in blaming customers or each other. The solution lies in manufacturers enforcing their selling and marketing policies, selecting dealers who will represent them with integrity, and making product that isn't flooding the used market. We as dealers need to police activities online, keeping each other honest, and customers need to respect our time and knowledge. If they are seeking a used product, or new at a deep discount, not to waste our time acting like they are interested in buying new product from us.

2 comments:

  1. Seems like this topic is as vibrant as it was in 1986, when this letter appeared in Stereophile:

    http://www.stereophile.com/thinkpieces/342/#
    "Legitimate Dealers Speak Out!"

    The letter was written 4 years before the writers closed their high end retail store forever.

    The following two paragraphs are worth consideration in the light of your, "...am I supposed to feel bad because 1) I wasn't wealthy enough to open a store and stock it will millions of dollars worth of inventory?" and "I do have a showroom.... It's not your multimillion dollar... building in the middle of downtown..."

    From the 1986 letter:

    "...do you know any rich audiophile-class retailers? We can think of only one in the entire United States."

    "If we say, 'Running a first-class audiophile- and service-oriented hi-fi store is a labor of love,' does it sound funny? People seem to think of dealers as 'Capitalist-Pigs-Getting-Rich-Off-My-Hobby.' They expect to have lots of time to audition the equipment in the store, maybe even at home. They expect unlimited advice from a knowledgeable audiophile, with no unseemly pressure to come to a hasty decision. They know we're available to install and care for what we sell. That's all expected—there are days when one feels like a natural resource."

    I note that YOU want the customers to act ethically toward you just the same as those with conventional showrooms wish to be treated fairly.

    Can't you see that the bottom-feeder mentality goes all the way down to the bottom? Buyers who will stiff a retailer with a store to deal with you because your prices are lower will just as merrily stiff you too.

    And you want manufacturers to protect you from the same kind of competition that hurts you as well as other more conventional dealers (i.e. those with the higher overhead of actual stores).

    You say you refuse to sell equipment from manufacturers who sell indiscriminately. You are basically saying that your integrity is compromised by your financial self-interest away from brands that might be the best choices for potential buyers. Do you really want to be saying this? Don't buy from me, or you'll be getting brands I have selected for their profitabiliby?

    You mention the good deals available on used equipment at Audiogon. Hmmmm. Audiogon. Lets go over there....

    You know, basically, retail really really sucks.

    So now lets hear from the MANUFACTURERS who have to make the decisions you are complaining about, selling to various tiers of resellers you might not want to share a line with. The manufacturers have to think about their ability to sell enough stuff to survive.

    And you are telling us you don't want to buy from a manufacturer who fails to bring out new products oftener than once in 3 years? You want them to replace their designs with new improved ones, at great expense in R&D and tooling, so you won't have to compete with used merchandise?

    But by turning over old product for new, aren't they creating the desire to shed older versions of products for newer ones, driving the 3-year-old equipment into the used market? The new-model-driven manufacturer creates change for the sake of change at the expense of their customers. And yours too, if you have any inventory in stock to become automatically obsolescent.

    Are you sure you've got this figured out the right way?

    And there's the integrity question again. You just told us you won't buy from someone who fails to (gratuitously or not) engage in expensive retooling as often as possible. Wow.

    Amazing.

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  2. Michael,

    Thank you for your comments and insight. You brought up some really good points.

    I do want to correct your interpretation of a few things I wrote. Your words are quoted below, with my responses following.

    "Can't you see that the bottom-feeder mentality goes all the way down to the bottom? Buyers who will stiff a retailer with a store to deal with you because your prices are lower will just as merrily stiff you too."

    Michael, my prices aren't lower than a brick and mortar store. Why did you assume that after I spent most of the article emphasizing adherance to manufacturer pricing and advertising guidelines?

    "You know, basically, retail really really sucks."

    That's a pretty harsh judgement. Retail dealers have a ton of knowledge and experience with many different brands and products. They can save one a lot of time and money by offering advice and demos of product to customers who may not know everything there is to know about audio.

    They also insulate a manufacturer from the time consuming process of customer service, and marketing.


    "So now lets hear from the MANUFACTURERS who have to make the decisions you are complaining about, selling to various tiers of resellers you might not want to share a line with. The manufacturers have to think about their ability to sell enough stuff to survive."

    Good point. Manufacturers have to make money too. I don't think the "let everyone become a dealer" mentality I was talking about is a good long term strategy. The audio industry is a small world, we dealers know each other, and we know what each other does as far as business practices. If you, as a manufacturer allow a dealer in your network who is known to work by shady business practices, word will get out, and you may actually lose opportunity to work with some quality dealers who may move more product, and be less trouble in the long run.

    "And you are telling us you don't want to buy from a manufacturer who fails to bring out new products oftener than once in 3 years? You want them to replace their designs with new improved ones, at great expense in R&D and tooling, so you won't have to compete with used merchandise?"

    Yes. Unless his product is so exceptional and state of the art that improvements just cannot be made at that pace. That is extremely rare, and never permanent.

    "The new-model-driven manufacturer creates change for the sake of change at the expense of their customers."

    That might be true in some rare instances, but again in the small world of audio, word of these practices gets out pretty quickly. The manufacturers I represent are extremely passionate about audio, and driven to innovation in their quest for better sound. It is my opinion that 90% of high end audio manufacturers are of this mindset. Yuu are raising the false argument that we are all rich fat cats in search of the next way to bilk customers out of thousands of dollars.

    If I wanted to be a rich, fat cat, I would have used my web skills to make a porn site, or sell bongs online. I do this because I love music, and making the experience of listening to music as engaging, exciting and therapeutic as possible.


    "And there's the integrity question again. You just told us you won't buy from someone who fails to (gratuitously or not) engage in expensive retooling as often as possible. Wow."

    Why is this an issue of integrity? My decision comes directly from business experience. I am looking for the innovators, the manufacturers who are constantly pushing the envelope. I do not want to represent someone who is complacent and not doing any development. I simply don't think that is a good long-term strategy for survival. This industry is competetive like any other industry. Innovate, improve, or die.

    Thank you for your response Michael, this is how we all grow and improve. Peace.

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