CoolAudio.com plans to spend $8 million to $10 million on marketing and promotion during the next year to create a nationwide consumer following for its e-commerce site, which is building a base of 400 to 450 dealers that will set up the home theater products that it sells.
Such setup service, said chairman Raj Bhatia, is "unique for an online company."
The company also plans to sign up 200 to 250 retailers and installers to display and demonstrate the high-end audio brands for which it is the sole distributor in North and South American.
Online shoppers who would prefer to demo these brands before they buy will be referred to the dealers. The brands are Audes, Chord, BC Acoustique, Roksan and Wilson Benesch.
Dealers who demonstrate these brands would be able to purchase models online as needed and earn commissions equivalent to a 40-point margin, said CoolAudio.com president Marco Protano.
CoolAudio.com is also the authorized exclusive online source for Wharfedale and Quad audio products, and it refers purchasers to existing Wharfedale and Quad dealers for setup. In addition, the site sells such products as front-projection systems and direct-view TVs from Aiwa, Harman Kardon, Parasound, JBL, JVC, ProScan, Samsung and Toshiba.
"We are in talks with five or six more fairly well-known brands" for exclusive U.S. distribution or exclusive online distribution, said Bhatia.
CoolAudio.com is about one-quarter of the way toward its goal of creating a dealer and installer base of 400 to 450 accounts. That number excludes existing Quad and Wharfedale dealers, Protano said.
The site's business plan, he said, gives small dealers "an opportunity for visibility that they couldn't achieve on their own."
That opportunity will result in part from the fall launch of an advertising campaign that includes buff books, mainstream consumer magazines such as shelter books, and affiliate web sites bearing links to CoolAudio's site. Grey Advertising, which is developing the campaign, is also considering radio and TV ads.
Additional visibility will come from e-commerce sites that will operate as "virtual dealers," marketing and selling CoolAudio's brands, ordering through CoolAudio.com, and referring consumers to dealers for setup. CoolAudio.com has commitments from 30 such sites and hopes to expand that to 40 or 50 sites in six to 12 months, Bhatia said.
All sites must have a knowledgeable support staff available by phone 16 hours a day, every day of the week.
To support its brick & mortar partners, CoolAudio will pay installers and dealers a pre-negotiated hourly rate to set up products when a consumer's purchase reaches $1,500. Once inside a house, dealers have the chance to sell products that might not be on CoolAudio's web site. If such a sale is made, the dealer will pay CoolAudio a referral fee.
CoolAudio.com will also set up select dealers with Sound Lounges that will carry the site's North and South American exclusives. About two dozen dealers have signed on so far for this part of the program. These dealers get signs and banners from CoolAudio.com. In the next year, CoolAudio.com plans to provide its top dealers or installers with minivans.
The site itself determines a customer's needs by asking such questions as room size and budget.
Consumers will be able to chat live with a PC customer service rep for advice, make an appointment to talk over the phone with a rep, or ask for a dealer or installer to be sent to the house for consultations. CoolAudio.com's customer support people will be available 16 hours a day, every day of the week.
Outside of its North and South American exclusive brands, the site gets two-thirds of the brands it sells from distributors, with the other third coming direct from the manufacturers.
But "we would like to move direct in the next 12 months," Bhatia said.
CoolAudio.com has raised $4 million through investment banker Blackstone Group, and the company expects to close on another $15 million in financing around the end of October.
Next year, it plans an IPO to raise another $40 million to $50 million.