Multiroom Audio Margins Trending Upward: Suppliers - Twice

Multiroom Audio Margins Trending Upward: Suppliers

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The influx of step-up brands in 2014 and 2015 helped maintain or improve dealer margins and ASPs in 2015, multiroom audio product suppliers said.

“It looks to me if ASPs have been consistent, maybe even trending up a bit due to the product mix trending up, especially since there has been only one major player in the market,” said Yamaha A/V division general manager Bob Goedken.“We have the impression that dealer margin hasn’t been negatively impacted, although dealers are not happy with the margin they are currently making overall to this point.”

For his part, Brendon Stead, senior VP of product development at Denon parent D+M, sees dealer margins and ASPs rising, thanks to the entry of “classic audio brands.”

Sonos dealers get from 19- to 30-point margins, depending on their volume, suppliers said, while step-up suppliers deliver 5 points more. The boost, however, still doesn’t match the 40- to 45-point margins of traditional audio components such as A/V receivers.

In search of margin, some dealers are stepping up consumers from Sonos to other brands, but many dealers still haven’t taken the leap, Stead noted. “Sonos is easy to sell because it works well and has low return rates,” he said. And “people interested in multiroom know the Sonos brand and buy it.” Upselling in the U.S. “is harder than in other countries,” he noted.

Though sales and margins might be up or holding steady, sales growth is down for several reasons.

One is that large U.S. retailers “have been conservative with shelf space to date,” said Gary Brotman, director of product management for Qualcomm Connected Experiences, which markets AllPlay wireless-multiroom technology to multiple brands, including Monster, Hitachi and Fon in the U.S.

On top of that, he said “mainstream consumers might still not understand the value of Wi-Fi versus Bluetooth,” including better sound quality and ability to transmit one or more sources simultaneously to multiple speakers throughout the house.

For that reason, many Wi-Fi speaker suppliers have added Bluetooth to their Wi-Fi speakers to leverage consumers’ greater familiarity with Bluetooth. Also for that reason, Qualcomm in May added a firmware upgrade to Monster and Hitachi AllPlay speakers, enabling them to retransmit a Bluetooth stream over Wi-Fi to multiple speakers at a time. Yamaha and Bluesound also offer this capability. This solution “leverages something they’re familiar with,” Brotman said. “It’s a pathway to learn about Wi-Fi’s advantages.”

More consumer education about Wi-Fi speakers is needed, agreed Ben Arnold, NPD’s executive director of industry analysis. Bluetooth dollar sales grew 37 percent during the 12 months ending July while more expensive Wi-Fi speakers grew by only 22 percent, he said. “While sales continue to increase, consumers are still learning about these products, specifically what they do differently than Bluetooth speakers.”

Fourth-quarter 2014 saw growth rates start to level off, he noted. “I personally expected higher growth rates. However, that may mean that brands need to conduct a larger education campaign to tell consumers what these products do and why they are different from a Bluetooth speaker.”

D+M’s Stead agreed that consumers are confused. Consumers were well aware of the differences between cassette and CD and Beta and VHS because the technologies were widely discussed in the consumer press, which hasn’t played up the differences between Bluetooth and Wi-Fi, he said.

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