Component Audio’s Distribution Challenges

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Can the component-audio industry survive without nationwide retail chains and online stores?

By their actions in recent weeks, many component-audio suppliers think not.

Thiel opened up Amazon.com, its third online retailer to date. Bowers & Wilkins struck a deal with Best Buy to sell select products through freestanding Magnolia Audio Video stores well as through the Magnolia Design Centers and Magnolia Home Theater outlets within Best Buy stores. Onkyo, Sony and other suppliers have authorized sales of select audio components through Walmart.com, although not in Walmart’s brick-and-mortar stores. Walmart began selling components online about a year ago, although at least one supplier whose products have appeared on the site said it didn’t authorize their sale.

Now, Marantz is expanding distribution of select components to Magnolia Home Theater outlets, having previously sold through Magnolia AV stores and Magnolia Design Centers.

The independent dealers that have survived the industry shakeout and economic collapse are moaning about these developments.

If history is any guide, however, the moaning will pass, though it might take some time. Take a look at the evolution of the autosound aftermarket. During the 80s and 90s, independent aftermarket dealers faced twin challenges. Superstores encroached on their territory, and sophisticated OEM sound systems proliferated as standard and optional equipment. Independents railed against aftermarket suppliers that opened up distribution to large chains and became OEM partners with the automakers. The aftermarket even filed a failed lawsuit against Chrysler to guarantee that consumers could order vehicles from the factory with a hole in the dash for their favorite aftermarket head unit.

As a result, the aftermarket shrank. Many independent dealers closed shop. And those that remained eventually stopped moaning and hunkered down to cope as best they could with the new reality.

I suspect the same will happen with component audio’s distribution shifts.

Continued shrinkage in the independent A/V dealer base, driven by a jobless recovery, no doubt was a major factor in recent decisions by suppliers to seek new distribution. But the distribution shift has been coming for more than a decade. Only 10 to 15 years ago, midsize cities hosted three to four specialists. Before that, there were many more. Now you might find one.

One challenge for independent specialists has been staying visible in an era when national and large regional retailers flood the market with advertising and promotion, driving huge amounts of traffic into their stores and capturing consumers’ mind share.

As specialists’ store traffic dropped off in the wake of aggressive advertising by major chains, many specialists cut back their advertising budgets, further reducing traffic and creating a vicious circle that further eroded their audio share.

With stores unable to drive traffic like they did before, many specialists turned to custom home installation to build sales, in many cases by closing their retail locations and moving into office parks to focus their efforts on marketing to home builders, interior designers, and architects. To their credit and to the industry’s benefit, most of these dealers kept their businesses alive — until the collapse of the new-home construction market. Now, many of the custom-install outlets for component audio are gone or struggling.

Competition from other technologies is also challenging component-audio sales. Computers, video-streaming flat-panel TVs, smartphones, and new product categories such as iPads are sucking up disposable income and stealing mind share. And harried lifestyles leave less time for serious, stationary music listening through a component audio system.

Is there any wonder that component-audio suppliers that have survived to date are turning to new distribution channels to remain viable? Could they remain focused on independent specialists and generate enough revenue to invest in R&D and remain competitive?

What say you?

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