New York — Many retailers and installers have neglected performance-oriented stereo components in their frenzied pursuit of the home-theater and custom-installation markets. Some dealers have all but abandoned the two-channel component business.
Then there are the A/V specialists and installers who renewed their two-channel vows in recent years. They've
boosted stereo component revenues even though industrywide sales, by most suppliers' estimates, have remained robust but steady.
For these dealers, high-performance music systems account for only a small portion of sales, but at 40-point margins, they account for a larger share of profit.
“Retailers have focused on low-margin video for so long that they're coming back to the tried-and-true,” said Kevin Zarow, Marantz marketing and product-development VP. Marantz substantially expanded its selection of two-channel component audio during the past few years to fill a void left by companies retreating from the market.
“More of our members are attacking that area [stereo components], and their business is growing,” added Richard Glikes, executive director of the Home Theater Specialists of America buying group. “We held audio boot camps two and three years ago to get our members excited about two-channel audio again.”
Many retailers appear to have caught the bug, whether from the HTSA or others. “Dealers are paying more attention to two-channel music systems, although clearly it's still a niche,” said Doug Henderson, sales and marketing VP for Bowers & Wilkins. Added McIntosh president Charlie Randall, “A lot of our retailers say
two-channel audio components are spiking up for them,”
For his part, AVAD executive VP Wally Whinna said he is “seeing dealers go up-market in audio,” pointing out that “whenever the business gets challenging the goal is to up-sell.” The executive, however, isn't certain whether dedicated two-channel systems account for much of the trend because the alliance sells audio components that can be used for both home theater and two-channel audio systems.
Retailers who have ratcheted up their two-channel efforts in recent years include Sixth Avenue Electronics of New Jersey, HiFi House of Pennsylvania and Barrett's Home Theater of Illinois. Retailers who said two-channel has always been an important part of their merchandising include CSA Audio of Upper Montclair, N.J.; Audio Advice of Raleigh, N.C.; and Definitive Audio of Bellevue, Wash.
For its part, MyerEmco of Maryland is sorting more two-channel components and enjoying some gains in the low-volume category, but president Gary Yacoubian believes the gains might be attributable to a decline in the number of outlets selling two-channel audio in his trading areas.
Other specialty retailers, including CSA Audio, also attribute at least some of their two-channel growth to the more than decade-long reduction in specialty-A/V storefronts. In the past decade, many of these storefronts transitioned to a custom-install-only model with operations based in office parks or other non-retail locations, including residences. Many of these operations lack the ability to demonstrate high-performance stereo systems, said CSA co-owner Ralph Fonte.
For A/V retailers and demo-capable installers, renewing a high-performance two-channel commitment offers multiple opportunities, including:
- expanding a store's customer base to audio enthusiasts via direct mail, in-store events and demonstration systems;
- exposing affluent audio enthusiasts to other products, including multi-room audio and whole-house control systems, when they demo a two-channel system;
- selling stereo components to previous high-spending customers who bought custom-installed systems or other gear and who have expressed an interest in music; and
- selling a component in-room stereo system into a home office or dedicated listening room as part of a custom whole-house installation.
For Barrett's owner Joe Barrett, performance-oriented music components are a way to reach a new customer base of audio enthusiasts “who have shown a willingness to spend their disposable income.” Once in the store, these customers will be exposed to other products, including whole-house audio and control systems. “Our history is video, and we don't want to be pigeon-holed as a flat-panel TV dealer,” Barrett added.
For many dealers, high-performance in-room stereo components complement the sale of a multi-room audio or other installed home system. “In new construction, we make a statement that adults can have a listening room to retreat to and decompress,” said Jon Robbins, COO of the three-store Broomall, Pa.-based HiFi House.
More often than not, the adults using the music room are the husbands of the house, said HTSA's Glikes. “The theater room tends to be the family room, and the two-channel room tends to be the domain of the husband.”
The home office, however, is also a potential fit for a high-end two-channel music system, said Audio Advice owner Leon Shaw. “The home office is getting bigger, and a lot of people spend a lot of their time there,” he said. In the home office, in-room speakers and components can be controlled from a desktop controller that also controls whole-house systems, including a whole-house music server located in the central A/V stack of a distributed A/V system, he pointed out.
It takes a demo, however, to convince many purchasers of a custom-installed whole-house system to go old school. “If you do a solid demo, it's not that difficult to hear a difference,” said HiFi House's Robbins. Although some in-wall speakers sound “pretty good,” added Audio Advice's Shaw, “typically you get the best sound out of an in-room system.”
To tap the two-channel potential, Robbins expanded HiFi House's two-channel assortment during the past 12 to 18 months by bringing in Wilson Audio and additional higher-priced products from existing suppliers, including Krell, Sonus Faber, Air Acoustics, Transparent Audio and AudioQuest.
With the expansion, HiFi House tops out at $150,000 for a speaker pair, up from $40,000. Robbins has also hosted events with the principals of Krell and Wilson, and has used mailing lists to target potential two-channel buyers.
To give salespeople plenty of opportunities to demo these high-end systems, HiFi House's Jenkintown, Pa., store features three dedicated two-channel rooms and six two-channel areas on its two main floors. The store's four theater rooms are also equipped for two-channel demos.
With the changes, “we're up 20 to 25 percent year to date in higher end two-channel components,” Robbins said.
Barrett's two-channel evolution began about five years ago when the company stepped up its audio selection and, in its 14,000-square-foot Naperville, Ill., store, created a two-channel room with proper acoustical treatments and seating. The room replaced a component-switching room.
Barrett's evolved again six months ago with the creation of a Bowers & Wilkins gallery, which showcases B&W speakers driven by the electronics of sister brand Rotel. The gallery includes an on-wall collage explaining the B&W story, Barrett said. The room has become a destination, thanks to promotion on the Web, he added.
Two-channel sales had been rising since Barrett's boosted two-channel visibility, although sales have flattened with the economic downturn.
In the higher-volume Sixth Avenue Electronics chain, all stores feature two-channel displays, “but we let it go a little bit,” operations VP Tom Galanis admitted. Last year, however, the chain “decided to make a concerted effort” to freshen up the displays, which carry brands known for their two-channel products, he said. The brands include McIntosh, Marantz and KEF.
Another Jersey boy, CSA Audio, has enjoyed rising two-channel volume since it opened a 3,200-square-foot store several years ago to replace a 1,500-square-foot store. Year-to-date, however, two-channel sales have flattened because of the economy, co-owner Fonte said. Unlike many specialists who entered the installation market, he added, CSA maintained a retail storefront and demonstration capabilities to maintain a viable two-channel presence. “A lot of small guys took a stab at going custom-only, but they don't focus on two-channel,” he said.
Definitive Audio VP Craig Abplanalp agreed. “Two-channel has been something we've been consistent with since 1975,” the Bellevue, Wash.-based retailer/installer said. “A lot of dealer friends gave up on it, dismissing it as esoteric or tweako. But it has been profitable and consistent for us and growing, until six months ago.”
CEA does not break out audio component sales by two-channel or multichannel classifications, but it found factory-level component-CD player sales falling in 2006, 2007 and 2008. By last year shipments had fallen by 238,153 units, from 2005's 536,807 units.