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B&W Signs Magnolia, Rules Out Online Sales

7/19/2010 04:12:00 PM Eastern

North Reading, Mass. -
Bowers & Wilkins had to open up sales of its high-end home speakers to
Magnolia Home Theater, Magnolia Design Center and Magnolia Audio Video outlets
to compensate for the shrinking base of A/V specialty dealers, but the brand
won't look to online merchants to boost home-speaker sales, B&W Group chairman
Joe Atkins told TWICE.

In
expanding on the brand's distribution plans, Atkins also said not all B&W
speakers will go to all Magnolia
outlets
. The company, for example,
will not sell its custom-install speakers through the more than 350 Magnolia
Home Theater (MHT) stores within Best Buy stores, but those speakers will be
available to the eight larger Magnolia Design Centers within Best Buy stores as
well as to the seven standalone flagship Magnolia Audio Video outlets in
Washington state, California and the Chicago area.

 The MHT stores will offer the 600 series of
freestanding vinyl-clad speakers priced up to $2,000/pair, the CM series of
freestanding wood-cabinet speakers priced up to $3,000/pair, and the M1 sound bar.

The
Magnolia Design Centers and the freestanding Magnolia A/V stores will add the
top-end Diamond 800 series of freestanding speakers priced up to $25,000/pair,
Atkins said. The $31,000-each Nautilus speaker won't be on display at any of the
Magnolia outlets, but the Design Centers and freestanding A/V stores will have
access to them, he noted.

Products
will appear in the Magnolia outlets in the fall.

"We are
confident that the ongoing development of Magnolia's national brick and mortar
retail model and their commitment to enhance the presentation of traditional
premium audio creates a unique and exciting opportunity for Bowers &
Wilkins," said Atkins.

"Going online,
however, is definitely not part of our evolving distribution strategy," Atkins
said, although competing high-end speaker companies such as Thiel have done so.
"Our brand needs to be presented to the consumer. The more that consumers want
to make a qualitative assessment, they clearly want to do so at a retail
store." For that reason, he explained, the brand turned to the Magnolia outlets
to fill in the geographic gaps left by a shrinking dealer base. "Consumers need
to hear most of our products before spending, and they're not going to drive
four hours to the next large urban center to listen," Atkins said.

"The
industry was impacted very heavily starting in mid-2008, and it became more
acute in 2009," said Atkins of the events leading to the distribution shift.
"We had all hoped the economy would improve quickly, with dealers recovering in
2010, but the opposite is true. Since the beginning of the year, we've seen a
significant number of dealers go away, including MyerEmco." Many other dealers
are reducing their store counts, and "quite a few A/V specialists" have closed
their retail outlets to open up appointment-only custom-install shops, Atkins
added. The number of independent A/V specialists seems likely to continue
shrinking during the remainder of the year and beyond, he continued.

In the past
12 months, the brand's own dealer base has fallen from about 230 retail outlets
to about 180 outlets operated by about 145 dealers, Atkins said. The number of
custom installers selling the company's speakers has remained stable at about
70.

Although
the more than 365 Magnolia outlets selling Bowers & Wilkins speakers will
outnumber the brand's other home-speaker outlets, "we're certainly not giving
up on independent A/V specialists," Atkins contended. "We're working harder
than ever to help them meet their challenges." At the same time, he added, "we
are also confident that the increased brand exposure will benefit our existing
dealer partners and enhance their ability to continue to drive profitable and
sustainable retail revenue."

Atkins
acknowledged, however, that some current dealers may choose to drop the brand,
but he said he "doesn't expect a wholesale loss of support."

 The distribution changes do not apply to the
Classe and Rotel audio electronics brands owned by The B&W Group.

 In 2009, in a separate strategy to expand
sales, Bowers & Wilkins announced plans to expand into the stereo headphone
and PC-speaker markets. That announcement followed the 2007 launch of the
brand's first iPod-docking speaker system. These products are available through
Apple stores as well as through online retailers, including Crutchfield.

In recent
years, specialty-oriented audio suppliers have expanded distribution to new
channels to compensate for declining sales through specialty-A/V and custom
outlets. In recent weeks, Onkyo announced plans to sell select A/V receivers
and home theater in a box systems through Walmart.com, and high-end speaker
supplier Thiel added its third online retailer, Amazon.com.

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