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Car Audio Industry In Upbeat Mood

3/08/2006 02:47:00 PM Eastern

Louisville, Ky. — Car audio industry members gathered here this month at the MERA (Mobile Enhancement Retailers Association) KnowledgeFest in a relatively upbeat mood, claiming the car audio industry is finally poised to compete in a new volatile marketplace.

The $2.2 billion industry has faced declines for several years, due to slowing sales of CD players and newer cars that are “unfriendly” to after-market products.

Last year, retailer attendance was down at the annual KnowledgeFest, only to rebound this year, up by 30 percent to about 700 car stereo specialists, setting a record high, said executive director Rick Mathies.

Retailers, who seemed angry in the past at losing business to Internet sellers and to “unfriendly cars,” this year, seemed ready to do battle. Mathies declared, “The mood is awesome … I haven’t heard any ‘Woe is me,’ or ‘We’re dying.’ The industry is making a turn … Manufacturers are stepping up with OEM integration solutions.”

These integration solutions are expected to help boost sales for the sluggish aftermarket.

One supplier said it was telling that the Alpine show car on the exhibit floor did not include a head unit. Instead, it featured a new OEM integration device to serve as the hub of an A/V system.

MERA, which is the trade association for 12-volt specialty retailers, also announced two initiatives to help promote OEM integration. It recently began selling new MERA Integration Excellence software, which updates, in real time, when any new OEM integration device becomes available.

The data base includes the hundreds of third-party OEM integration devices that come on the market to accommodate each new vehicle (a new MP3 adapter for a 2006 Escalade or a new iPod adapter for 2006 Honda Civic). Retailers have trouble keeping track of which adapters are available for which cars, so the software, now offers a unified, real-time database.

MERA also released the first of what will be quarterly research reports, outlining industry trends and suggested strategies for 12-volt specialists. The first report, issued here, stated that the biggest challenge facing 12-volt retailers is “learning to deal with OEM integration,” and it encouraged retailers to take steps to reduce salesmen turnover and train salesmen to “professionalize the industry.”

This new call to professionalism was evident throughout KnowledgeFest as suppliers asked retailers to become knowledgeable car integrators if they hope to survive. One seminar said retailers must become “automotive technology stores,” where every dealer knows the top 20 cars in his market and is able to sell all the accessories for those vehicles.

JL Audio marketing VP Manville Smith said those who don’t become experts in vehicle integration won’t survive. Conversely, those who do will prosper as the market changes. “I foresee a retail shakeout for those who cling to the old head unit model. The industry is becoming more of a profession.” He called on every shop owner to provide installers with an RTA (real time analyzer) and an oscilloscope.

On the plus side, the new name-brand integration devices are more profitable than the typical $150 head unit, with the newer devices offering 45- or 50-point margins compared to 15 points on a CD receiver, he said.

Chris Cook strategic business director for Peripheral Electronics explained if a Ford 150 truck is popular in your area, “You should be able to tell [the customer] everything that can be done with that car. We can add USB, MP3, iPod, Bluetooth kit [and] a CAN interface,” among other options.

Cook claimed that the first question retailers should ask a customer when they walk in the door is “What kind of car do you drive?” Then you tell him what fits.

“If you sell the product first and then find out what car it goes into, you are setting yourself up for a problem and each year, it will become more of a problem. It’s like selling products that are out of stock,” he said. He recommends buying data from Wards or other sources to determine the top 20 cars in a retailer’s market.

MERA’s Mathies said the days of relying on soundrooms for selling are over. Now retailers must learn to display smartphones, MP3 players, iPods and portable navigation. Many of these are products that the 12-volt specialist does not sell himself, which is causing some hesitation by the retailers.

Peripheral VP/COO Ron Freeman said at MERA that his company is launching an initiative to help make MP3 players available as sale items for car audio specialists. He said store owners who set up displays are finding that customers want to buy the MP3 player on display, as well as the integration kit. Freeman said one retailer is buying MP3 players regularly off the Internet to stock the store.

Freeman said Peripheral is also buying OEM radios to offer to retailers for their integration displays. Further, the company is offering new promotional displays to get OEM integration devices out of the back room. It launched a display at MERA with charts that tell consumers what products can work in what car.

MERA’s Mathies noted, “Sometimes it takes a two-by-four upside the head to get [retailers] to understand.” He said the new MERA quarterly report “is the first two-by-four.”