AV Manufacturers Need To "Floor" High-End AV Gear for Dealers as Part of an AV Stimulus Plan

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Getting a loan anywhere these days is pretty damn hard. If you are looking to buy a bargain-priced home and need a jumbo loan, expect to have upwards of 50 percent of the money you need up front for a down payment. If you are a company with orders looking to buy the parts and pay for the labor needed to make actual sales, most banks (even ones that have been bailed out with our own tax money) will often tell you to go pound sand when you call looking for credit. Well-qualified consumers with 700-plus FICO scores looking for a little more room on their equity loan or credit cards can expect to hear a dial tone when captains of outsourcing from Pakistan or New Delhi such as "Jennifer" or "Tony" physically hang up on them. Never before has an Eldorado-driving paisan named Vinnie or Scott-o seem like such a reasonable option when you need cash and you need it fast. And hell, they deliver you the cash in a nifty brown paper bag, which can be convenient.

Even in a mildly recovering economy, the luxury market is in desperate trouble today, as people spend less, have less access to credit and smartly pay down their consumer debt. This national trend is absolutely killing high-end audio salons. Even for those who make a solid six-figure living, the real fear of unemployment and/or the options with other deeply discounted luxury goods (not to mention stocks, bonds, real estate and beyond) have people with money shying away from the overly inflated audiophile and videophile products that grace the racks and listening rooms of today's high-end AV stores. Exciting and well-priced products from brands like Cary Audio, Wadia, Benchmark, Peachtree Audio and NuForce are selling. LED HDTVs are selling nicely. Affordable SKUs from the AV and audiophile big boys are selling in today's economy, as are direct to the consumer brands like Emotive, Orb Audio and others. What's not moving is the very high end, for a number of good reasons.

To say people don't want high-end audiophile products would be dead wrong. Baby boomers still truly love audiophile products, while iPod-savvy Generation Xers are just learning the pleasure that comes from better AV gear. However, the issue isn't completely consumer demand - it's the dealers themselves. Stereotypically, AV dealers sell high-end audio products that are flush with profit margins, yet invest very little into marketing these lines. They want to take orders more than actually do the work to make the sales, but today the issue goes deeper, as many high-end audio/video dealers have needed to actually liquidate their audio and home theater rooms to generate desperately needed cash. While installers, programmers and AV salespeople are joining the millions of American unemployed, audiophile rooms are threadbare when it comes to the big-ticket items. This downward spiral needs to end if the ultra-high-end audiophile and videophile market is to survive at any level in this country.

Dealers bitch about the Internet, direct resellers and catalog retailers, but it's these dealers who are reaching the customers, often at significant expense. If every audiophile sale was made on Audiogon.com, there would be no need for a store anywhere in the country. Before any consumer in his right mind buys a $5,000-to-$10,000-plus specialty AV component, he should hear and see it somewhere. A dealer friend of mine will sell big ticket products at below 20 percent discounts if clients will pay up front, but he is quick to say that these types of transactions aren't the typical, organic audiophile or videophile sale. It's just an order - nothing more and nothing less. But an order makes money and liquid cash goes a long way these days.

I can't fault a dealer for whoring out a pre-paid sale and/or selling off demo products right about now, but this prolonged, horrendous recession is showing signs of ending, with the Dow up significantly in 2009, high-end real estate selling for the first time in a long time and foreign economies bouncing back from disaster a little faster than we are here in the States. But if there is to be true recovery in the world of the big-dollar audiophile and videophile products, dealers need to get back to demoing the physical products. Nearly everyone who read my recent "Art of the Demo" story agreed with its general points. However, with no gear to demo, there is little to discuss.

Specialty AV dealers stereotypically don't have the kind of financial backing to allow them lines of credit to bring in the hundreds of thousands of dollars of products needed to sell the big ticket systems and to keep stores looking fresh, high-tech and relevant. At the same time, AV manufacturers are short on cash but they often need access to and use lines of credit to build products. Audiophile and videophile companies, today more than ever, need to use, expand and exploit any available access to credit to help dealers with flooring product. Nine out of 10 dealers around the country aren't going to have the cash needed to floor a $35,000 projector, but 10 out of 10 of those dealers won't sell one without anyone ever seeing what such a projector can do. One large electronics company isn't offering a floor plan, but they are offering upwards of the full value of their 65-inch HDTV sets back as co-op marketing money as soon as the dealer sells the first set and orders another. Now, this is an economic stimulus plan for the AV business that makes some sense.

Nobody really needs ultra-level audiophile and videophile gear. Sales are made more on emotion and lust, feelings that come from the all-important demo. Even Ferrari sent out one $220,000 drop-top California to each of its dealers for test drives that they weren't allowed to sell right away. You'll note that Ferrari of Beverly Hills closed a deal with my friend, who took me for the test drive at retail price, so the idea of getting well-qualified people in to drive exotic cars works. It will work with audiophile and videophile gear, too, if AV companies or well-funded dealers have the wherewithal to use credit to create top-of-the-line, new-economy high-end demos of the best AV systems. Will audiophile consumers still cross-shop these big ticket AV deals out of state and/or on Audiogon, eBay and or even Google? Absolutely. To combat this reality, dealers need to make sure that new products are sold with enough added-value service, set-up, support and warranties, so that used items aren't as tempting. In the end, while I didn't buy a Ferrari California during their demo program, my friend did. Yet I have been talking about the test drive of this true daily-driver Prancing Horse ever since I tested out its zero to 60 in 3.8 seconds on Burton Way over by the Four Seasons in Beverly Hills. If AV companies can muster their own economic stimulus plan for the dealers, including both flooring the gear and mandatory marketing money, people could talk about an audiophile event or a huge 1080p video experience with the same desperate desire and enthusiasm I do about the newest Ferrari.


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