Bloodied and almost defeated, audio-component suppliers and retailers are staging a counterattack that has begun to recapture marketing territory seized by legions of low-margin home-theater in a box (HTiB) systems.
Audio/video retailers across the country have stepped up their commitment to merchandising and demonstrating audio components as part of their home theater strategy. Many of them, shell-shocked by declining video-display prices and margins, are creating and displaying their own “home theater in a crate” systems, which consist of audio components and video displays sold at a single package price.
For their part, select audio-component suppliers contend they’ve been stressing the component-system approach in their dealer training and, to expand components’ appeal, making their products simpler to use and set up. In one case, specialty-A/V supplier Marantz is creating monthly specials to promote the combined purchase of audio and video equipment.
The efforts, though still in their infancy, seem to be having an impact, suppliers said. A resurgent economy and strong custom-installation growth, however, are also buoying component-audio sales, they said.
For five months during the six-month November-April period, factory-level component-audio sales rose following a disastrous full-year 2003 decline of 18.4 percent, CEA statistics show. For the year through April, component sales rose 29.8 percent to $344.6 million, and April sales expanded 41.9 percent to a four-year high of $86.9 million
HTiB sales are also rising. Through April, factory-level unit sales jumped 101 percent to 1.37 million units, although dollar sales rose a comparatively minuscule 13 percent to $259 million.
“Retailers are very much pushing their sales staffs to give customers the whole home theater experience,” said Yamaha sales VP Steve Caldero. Most major retailers have raised commissions on audio components and reduced them on video, he said. That trend started about a year ago but has become more visible in the past six to eight months, he said.
On noncommissioned sales floors where home theater demonstrations are automated, retailers “are having some degree of success,” Caldero noted. The best results, however, occur when a live salesperson, commissioned or noncommissioned, explains and demonstrates a component-audio-based home theater system, he said.
Added Marantz product and marketing director Kevin Zarow, “Dealers are just taking more time to demonstrate and merchandise complete home theater systems [using component audio].” One of those retailers, Myer-Emco, is training salespeople in performing an engaging demo and then requiring salespeople to demonstrate what they’ve learned to top management, said Yamaha’s Caldero.
Caldero believes suppliers are also doing their part to boost component audio’s fortunes by simplifying product setup and use by, for example, automating speaker-level and speaker–distance calibration and room equalization.
Perhaps the most radical strategy adopted by specialty dealers is the packaging of video and component audio into single-price home theater systems. Burned by declining video-display prices and margins, retailers such as Tweeter, Ultimate and Good Guys are displaying more component-audio-based home theater systems, then pricing the audio and video together in a package, suppliers said. The A/V packages take some of the price pressure off the video displays while ensuring a 100-percent attachment rate of high-margin component audio.
Good Guys launched its program last year. Ultimate and Tweeter began bundling component audio and video earlier this year in select stores and are rolling it out to additional stores, suppliers said. Sixth Avenue and Harvey have been doing so since January, said Steve Howcott, JVC’s GM for component audio.
Changing products and changing retail mindsets could continue to buoy component-audio sales, but as Caldero said, “It’s not going to change overnight.”