[SoundStage!]The Y-Files
Back Issue Article
September 1999

The Successful Audio Dealer?!

So you want to become an audio dealer. Really? It’s not as thankless a job as you may suspect, what with turning a hobby into a business which entails finishing off the hobby part for good. Yes, there’s overhead and cash flow and other business buzz words to worry about, but these are minor concerns. Think about all the money you’ll rake in. And what about customers? Sometimes reasonable, sometimes not, you say? Not true!

Being an audio dealer is easier than you think. The following is a list of sure-fire principles on which you can build your successful audio empire. They are gleaned from existing dealerships as well as every psychology and business text known to man. No dealer to date has successfully implemented all of these principles, but all this means is that maximum profits will be yours if you do.

Twelve steps to becoming a successful audio dealer

Step 1: Location, location, location

Put your joint in a chi-chi part of town. Being in a strip mall adjacent to an adult video store does not guarantee quality foot traffic even though it makes for a convenient destination during lunch breaks. High-visibility storefronts in desirable neighborhoods are a better alternative. They tend to sport exorbitant per-foot rates and long-term leases. This does create a high-overhead operation and forces you to make some important choices to ensure your long-term survival, never mind success. Most ailing stores contribute the majority of their problems to poor foot traffic, so a prime location is a must. Think Manhattan, not your house.

Step 2: Concentrate on high-profile brands with heavy national advertising

If you have any brains (see step 10 below), this ought to be self-evident. Why turn down spoon-fed customers walking in, ad in hand, headed straight for the register demanding "I want this"? There may be other, newer and smaller brands with better performance at lower prices. But if it means having to work a sale rather than having it write itself, backed by reviews and reputation, why bother?

Step 3: Terms, terms, terms

This introduces you to the very meat of things. "Sell first, pay later" is the credo of most entrepreneurial retailers. It takes the risk out of carrying large inventories and allows display of high-ticket items. Of course, only the truly big players in the industry can afford to hand over 30/60/90 terms, year-end quantity rebates or, better yet, inventorying or flooring programs. Common in the retail car industry where inventories amount to multi-million-dollar liabilities, flooring programs involve long-term loans for up to one year. A participating bank pays the manufacturer within days of delivery of inventory and postpones its own billing to you by a very attractive time period. Of course, such programs don’t come free. The small print obligates the manufacturer to buy back whatever inventory the dealer defaults on financially. Remember that fine print when the going gets tough. Also, a percentage of the total invoice is charged to their account as interest. That again favors the big guys that can absorb this additional cost of doing business with their broader margin structures. I strongly recommend sticking with the established corporate brands for these reasons.

You can imagine how powerful terms and flooring programs are in the hands of a savvy, well-funded manufacturer. He can afford to purchase market penetration by temporarily giving away inventory! Go for it. Legalized bribes are a sure way to accelerate your success. I’ll give you an example. Let’s say there is a small upstart / start-up tube manufacturer with very high cost-to-performance-ratio products. Because of size constraints, he has to insist on cash-on-delivery terms to survive. His established competitor flashes his "no-payment-for-180-days" badge and proceeds to bring into your store a veritable plethora of display pieces that outnumber the other guy’s model count by a factor of five. Do you really care that the smaller guy’s products sound better and last longer? Remember that a successful dealer has very different priorities than his customers. You have a regular, high overhead to contend with and need all the financial padding and risk protection you can get. This becomes especially true if you think of discount-shopping, Web-surfing consumers who shop your store to finalize their decision-making process but don’t ever intend to leave their money with you.

Step 4: Insist on territory protection

A manufacturer of a high-profile brand once confided to me that he had opened one of the country’s most high-profile dealers. Because it was demanded, he agreed on an extensive exclusive for the dealer whose influence within the industry was legendary. When reorders past the initial opening order were painfully slow in coming, he decided on a personal visit. He unceremoniously discovered his products in the basement, with layers of dust proving they hadn’t been demo’d in months, if ever. His dealer -- whom he had graced with many a direct customer referral -- had in effect become a sales-prevention agent for the manufacturer. From the onset he only pursued one solitary agenda: to block this brand from selling to his competitors who would now have a highly viable product to take away sales from him. Smart!

Take this lesson to heart. Become a franchised dealer for everything under the sun and control your market. "Squash the competition" needs to become your rallying cry.

Step 5: Demand margins

More meat to put on the bones. While consumers shop for performance and price, dealers should shop for profit. The inexperienced manufacturer finds himself between a rock and a hard place trying to serve two customers -- the end user who’ll own and use his products, and the dealer who pays his bills. He is an ideal target for abuse until eventual experience will force you to find a new victim.

Higher margins can mean different things to different people. They can mean affordable product with compromised performance. They can mean overpriced product with good performance. Or they require an operation so huge that the heavy up-front R&D costs to engineer high-performance products with both high margins and attractive retails can get amortized by tremendous volume sales based on a tight, global retail infrastructure. Pity the small-time manufacturer who aims to please both the music lover with fair pricing and his retailer with fat margins. Sucker! He might as well decide right now to live off his wife’s income.

There are other twists to this margin issue. Let’s say that a lower-margin product does have strong intrinsic dealer appeal. Maybe it has an excellent reputation and enjoys tremendous insider buzz in the industry. You might decide to park it in your store like an exotic attraction, to increase your reputation and solicit out-of-town traffic. Don’t ever actively promote it though. To sell against it should be your mission from day one. Only tolerate a sale of this product if you absolutely can’t prevent it because a customer is stubborn.

Of course, eventually the manufacturer will question the poor sales performance. Now it’s time to turn sophisticated. In a chummy confidential tone of voice, let the manufacturer in on a secret: you and your golden-eared customers have determined that the components under discussion suffer from a mild dynamic compression in the upper midrange. That’s why they don’t sell. If the manufacturer could just attend to this design flaw, sales would improve, guaranteed. Really, you oughta charge for this kind of advice, but you’re feeling swell today so the manufacturer can make it up at the next CES with a dinner on the house somewhere in the new Venetian. If the manufacturer still doesn’t swallow the bait, turn specific -- "on such an such a disc, particularly on track seven, two minutes into where the harpsichord hits the B-flat chord sotta voce and the piccolo flute takes off…"

Step 6: Sell what’s in inventory

The best is whatever happens to be in the stock room today. Make that your sales crew’s credo. Move boxes, boxes and more boxes. The chain stores that were never fond of special orders invented this concept, but we have appropriated it for your own ends.

Step 7: Demo suggestively

This one’s idiot-proof. Prime the customer in advance by telling him exactly what you want him to hear and when he should here it. Then interrupt the demo at the requisite moment and ask excitedly "Did you hear that?" If the customer shakes his head, follow up with, "Are you deaf?"

Step 8: Sell up

Pretend concern and helpfulness when you ask the customer about his budget. Then assemble the worst-sounding system at his price point, demo briefly and volunteer a comment along the lines of "not half bad for the price." The next step is obvious. Play him a finely optimized system that will be a financial stretch but possibly just within the realm of -- compromised -- reason. Your astuteness about his true liquidity -- or his willingness to indebt himself -- is a key element in maximizing the upsell. If done correctly, even his insistent wife who reminds her hubby about more important obligations won’t be able to undo the damage you just inflicted because this customer has conclusively established that quality doesn’t exist at his original target price. Brilliant!

Step 9: Sell down

This is the same tactic in reverse, setting the customer up for disillusionment by playing "his" less expensive system second. Both approaches yield the same result -- they instill lust and disappointment simultaneously. The customer will now gladly take your advice to escape the pain of settling for less and satisfy his lust for the better.

Step 10: Intimidate the customer

This is a main ingredient for any specialist audio boutique’s ultimate success and easy to learn. Make the customer feel under-educated, misinformed, of bad taste and even poorer hearing. Then reinvent him according to your own needs and sell him whatever you want.

Step 11: Undermine the competitors

Talk disparagingly about them, their store and their products. Even better, buy a model of a brand they carry, do a little operation to handicap it and A/B against it openly with the claim a customer of theirs traded it in against something you carry. Sweet!

Step 12: Advertise nationally

Even though your vendors insist on walk-in sales only, national ads open the doors to a lucrative side venture of hush-hush trans-shipping and mail-order discount sales. You need to be discreet lest you loose some franchises. A proven tactic is to concentrate on younger and foreign manufacturers who haven’t learned the ropes yet and suffer from poor distribution. Even if you have established a bad reputation as a mail-order discount outfit, manufacturers will be too excited about your opening order to care, and the foreign ones don’t even know about your reputation. By the time they catch up, you simply dump their line and pick up another one. New manufacturers are a dime a dozen.

Ah, such a pragmatic idealist I am. But with six planets in Aquarius, what else do you expect? Happy tunes….

...Srajan Ebaen
srajan@soundstage.com

 

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