The news rattles the industry as some of the better audiophile and videophile brands are sold there. In discussing the seismic shift in AV retail with an industry analyst - he pointed out the he thought the root cause was the fact that AV gear is too good. What!?! Too good, I retorted - have you ever hooked up an HDMI 1.4 system without handshake issues? He went on to say that the market share that once was owned by brick and mortar AV shops as well as regional chains is now dominated by big box and warehouse stores like Wal-Mart, Costco and the likes. They sell commodity products at rock bottom prices. They offer competitive return programs but little in the way of actual support or sales expertise. If you can't learn enough about the product from the outside of the box or a quick look on your smartphone then don't buy it. The salesman doesn't care because he's not a salesman - he's a minimum wage clerk who will never last more than 18 months with the store, which is just how the big box stores want it. They sell commodities, not specialty products.
My buddy made a strong argument when looking at a simple system. At a big box store you can buy a 55 inch HDTV that is brighter than a bug zapper, that can make one hell of a 1080p picture; add a $150 Blu-ray player going into a $500 soundbar, perhaps even with a subwoofer and all connected to your satellite TV and you have one hell of a system. It plays loudly and it looks pretty slick once installed. The 1080p video is good even if you don't get an ISF calibration (although it would last longer and look 20 percent better with the pro setup). The overall expense is maybe $4,000 or $5,000 total, which to today's price-savvy consumer is pretty compelling for an entire home theater. Hell, $5,000 barely bought you a 42 inch 1080i plasma seven or eight years ago - today you get the whole system that is vastly improved. Back then there were margins that supported professional salespeople learning and supporting such systems; today the big box stores rely on automated displays and pre-programmed kiosks to sell product over people mainly because trained people are expensive.
With 3D looming large in the future, specialty AV has yet another trick up its sleeve to woo consumers to pay more for another round of cool AV gear, but how long will specialty AV dealers be able to make it with the overhead of brick and mortar demos - the life's blood of high end audio and video - when Costco will work on less than 10 percent profit?
To survive, today more than ever, AV dealers need to provide more value for less money. They need to curb overhead and make the event of going to their store jaw-droppingly good every time someone walks in the front door. They need to be priced competitive but more importantly - they must offer more value. Longer warranties, professional calibration, low-cost in-home support, the top brands, awesome audio and even better video. Training of salespeople is a key differentiation, as firing the commissioned salespeople was the nail in the coffin for Circuit City years ago. Specialty AV dealers need to be able to sell AV products like a high end kitchen store sells Sub Zero or Gaggenau. People who buy a Sub-Zero likely never look at a Frigidaire. Many consumers want fine products in their life but nobody wants to waste money. If the AV business cannot more clearly illustrate why specialty audio is in fact special, then expect more stores and regional chains to fold in the coming months even as the economy improves, simply perhaps fueled by the fact that mainstream home theater gear is just too good. For anyone who loves and/or has experienced what specialty AV is all about - the idea that a soundbar and a Costco TV is what home theater is all about is a bit hard to swallow.
Photography by Robert Wright - Copyright 2010 Kipnis Studios