Clearly, the rise of e-commerce has had a huge impact on the state of brick-and-mortar AV retail. That’s the case whether one is talking about national big-box stores, regional dealers, or independent local retailers. The continued growth of Amazon and e-commerce in general, combined with the recent deaths of retailers including hhgregg and Toys “R” Us, along with ongoing store closures by retailers including Sears/Kmart (which just filed for Chapter 11 bankruptcy protection), has led at least some consumers to believe it’s only a matter of time before all brick-and-mortar dealers close their doors altogether. Based on comments by a small number of HomeTheaterReview.com readers about recent AV retail stories I wrote, consumers with that perception include at least a few of our readers.
But that gloomy prediction for brick-and-mortar retailing isn’t shared by me or any of the analysts and retailers I recently interviewed. Here are 10 reasons why brick-and-mortar AV retailers aren’t going anywhere… at least for the foreseeable future:
1. Shoppers Still Love Seeing the Product Before Buying
The most obvious advantage that brick-and-mortar dealers have over online-only retailers when it comes to AV products is that a physical store provides consumers with the ability to see a TV or hear a speaker before they shell out hundreds or even thousands of dollars.
Online shopping is very convenient, but “people are going to want to see and hear these products,” said Steve Koenig, vice president of research at the Consumer Technology Association (CTA). “Some people may” be open to buying a home theater system online, he said. “But I think the preponderance of people are going to want to listen” and see the products in person before buying them–“at least the people who really care,” he added.
“The same argument could be made for cars or anything” else that “people may want to actually look at and feel and touch prior to purchasing,” according to Michael Perlman, president and CEO of BrandsMart USA, which has six stores plus a clearance center in Florida and two stores in the Atlanta area. “People want to hear the difference between speakers and hear the difference between televisions and see the different picture” quality of each model, he said.
People will also often say an AV product is “good enough,” said Bjorn Dybdahl, CEO and president of Bjorn’s Audio Video in San Antonio. But “how do they know when it’s good enough when they have no reference?” he asked rhetorically, noting retail stores can show consumers all the possibilities available to them.
2. Post-Sale Services and Support Are Iffy Online
Online sales are nice. After all, who doesn’t like the ability to buy something you need while in your pajamas at 2 A.M. without having to leave the house? But online AV sales don’t always come with expert installation and ongoing, responsive support.
Although that might not make much of a difference if a consumer is buying a cheap pair of headphones, it makes a difference to many consumers buying larger, more expensive products, including big-screen TVs that they want mounted on their wall. And it also can make a big difference when a consumer is looking to connect that TV to an audio system.
While many consumers are perfectly happy buying a TV online and having it delivered to their front doors, and then mount it on the wall and hook it up to their speakers and other devices themselves, that is still not the case for a significant number of consumers.
Amazon.com is one major online seller of TVs that will send a professional installer to your home to mount your TV and hook it up to other devices. But there are at least some consumers who would feel more comfortable letting an installer into their home from a local retail store where they have an established relationship with at least one human being.
Cutting right to the point, Alan Guyes, AV buyer and principal at Virginia AV retailer Audiotronics, asked: “Who is going to hook it up, explain the operation, and deal with questions and potential service issues on the backside” if a consumer buys a TV or other AV product online from most websites? Some consumers who buy TVs or other AV products online wind up with “buyer’s remorse because the product maybe is damaged in shipment,” CTA’s Koenig said. If they had bought the product at a local AV dealer and taken advantage of its “white-glove” delivery service that likely wouldn’t have happened, he noted.
Also saying there are still many people who won’t buy certain home theater products online was NPD analyst Stephen Baker, who said: “These are products that have been notoriously difficult to sell online” for reasons that include issues with getting large-screen TVs to the customer.
Also, “some customers–and I think there’s a good number of them out there–they want support after the sale,” Dybdahl said. Although Amazon provides service, it’s just “not the same kind of service–at least at this point,” he said.
Customers also want to get “reassurance that they’ve done the right thing” after buying a big-screen TV or other AV product, Dybdahl noted, adding customers like the fact that when they buy from him, after the purchase, they have “the ability to pick up the phone and call the salesman” they have built a relationship with to ask a question, rather than speak to somebody they don’t know in the service department.
3. Buying from a Human Being Still Holds Appeal
No matter how appealing and convenient buying online is, at the end of the day “many people (consumers) prefer to buy from people [and] an online shopping cart is decidedly not a person,” said Guyes of Audiotronics.
Combining reasons No. 1 and No. 3, David Wasserman, owner of AV retail store Stereo Exchange in New York City, said: “There will always be consumers who want a live demonstration and conversation with a knowledgeable salesperson. Amazon cannot do that.”
Talking face-to-face with an expert at a store provides customers with reassurance, especially if they believe that salesperson has the concerns of the customer in mind, according to Dybdahl.
Many customers want to get educated on how a product works, especially when they’re planning to make a major purchase, such as a big-screen TV or their first audio system, said Kevin Hollister, Bjorn’s general manager.
Salespeople can also go one step further by going to a customer’s home to get a better idea of what products will be best for each customer, Hollister noted. Salespeople can also show the customer what is possible in the state of the art of AV, as well as set the bar for what is aspirational. Not everyone who sees an 85-inch 4K TV or a pair of $10,000 MartinLogan speakers pops for them the first time they see them. Some people need to set goals, save up and, when they are ready, they buy.
4. Salespeople Can Sweeten the Deal
That salesperson also gives a brick-and-mortar store the ability to do something that no website can do: Add on incentives of some sort to close a sale. A salesperson can tell a customer, for instance: “We’re definitely willing to price match if you find a better deal on this unit,” CTA’s Koenig noted. Although a salesperson might not be able to match every Internet price, he or she can maybe offer a “free year extended warranty [or] some other sweeteners maybe to entice people,” he said.
On the other hand, aside from pushing a live customer support person on you (which I almost always turn down), there is really very little that a website can do to offer any enticements to help close a sale. All it can really do to add an incentive is, if it has your email address, send you an offer to buy a product you were looking at for a lower price. But that email typically comes at least a day or two after you were looking at the site. And, by then, you may have already bought the product at a store or another website.
5. Instant Gratification Is a Heck of a Drug
Although Amazon keeps finding new ways to make it faster to deliver products to consumers, there is still no way for it to provide the same level of instant gratification to a customer as a physical retail store. On the other hand, assuming the brick-and-mortar AV store you’re visiting has the TV you want in stock, you can immediately take that TV home, set it up, and start watching it within an hour.
Sure, most consumers don’t require instant gratification when buying most AV products. But some consumers do–especially with certain purchases. For example, let’s say your big-screen TV goes kablooey two hours before the Super Bowl. Or today is your husband’s or wife’s birthday and you forgot all about it and know that the only thing he or she wants is a 65-inch Samsung 4K TV. And you’d rather actually give the TV to your spouse today rather than a receipt showing you just ordered it online.
That still doesn’t represent a huge segment of the consumer base. But, let’s not forget that every time a store makes a customer happy with a purchase, that customer is more likely to return for future purchases. A brick-and-mortar dealer can also sometimes deliver that TV to the customer’s home quickly if necessary, Dybdahl said.
Although a full system installation might require a two-to-three-week wait, if a customer wants Bjorn’s to just mount a TV on the wall and hook it up to a soundbar, “we can probably set it up within the next day,” Hollister said. That wasn’t always the case, he told me, noting Bjorn’s had to adapt after realizing some customers would only buy a TV if they could have it set up quickly.
6. Pricing Isn’t the Major Issue It Used to Be
Once upon a time, back when Amazon first started selling TVs and other electronics, it was selling at least some AV products at prices lower than suggested retail pricing and lower than brick-and-mortar retailers could afford to match.
But “I don’t think the pricing thing is what it once was,” Dybdahl said, adding that, “today, with the things that we carry, we’re pretty competitive.” The implementation of unilateral minimum advertised pricing policies by some CE manufacturers–requiring authorized retailers to not advertise any prices below a certain cost–is one of the reasons why that’s happened, especially on higher-end products.
7. Exclusivity is Brick-and-Mortar’s Specialty
There is, of course, one sure way for brick-and-mortar retailers to not have to worry about online competition: selling products that cannot be bought online. Indeed, there’s long been certain makers of higher-end AV devices that refuse to allow their products to be sold online or at anything other than select specialty AV stores.
Stereo Exchange’s Wasserman said: “Many of the sought-after high-end brands are not sold online, so there will always be a need for someone to display these products.”
8. Operating Costs Can Be Kept Lower Today
Brick-and-mortar retailers don’t necessarily need to spend a lot of money for a huge amount of retail store space anymore, according to Dybdahl. Although he has a 15,000-square-foot retail store, “in today’s market, you may not need that kind of space anymore,” he said.
Today, many independent specialty AV retailers focus on a few high-margin products from a small selection of manufacturers and are doing quite well with that. There’s no need for them to make space for low-end commodity products they can’t make any profit on, and customers looking for such cheap products know to just go to a national retailer or Amazon.
Some AV dealers are in locations where real estate costs aren’t too expensive, and that also helps. Dealers who have embraced custom installation alone or a combination of custom and traditional AV retailing have also benefited from the post-2009 national real estate boom.
Stereo Exchange’s Wasserman recently closed the large store he had on Broadway in Manhattan and opened a new showroom in a 1,500-square-foot loft space overlooking Union Square, he pointed out, telling me: “So far, it is working very well. My old customers and new customers are coming to the showroom.” Retail rent must be affordable and rents in NYC are especially high and “do not lend to the success of smaller retail operations,” he said.
9. Only the Strongest Have Survived
Dybdahl isn’t sure there will be fewer AV retailers in the future for one simple reason, he said: “I think we’ve had the attrition already.” There are many specialty AV retailers who have “found a niche and, as long as they keep up with change, they’re going to be here,” he said.
But that’s “assuming the economy doesn’t tank–if the economy tanks,” more retailers in the space will be forced out of business, he predicted.
“Since we’ve had a [reduction] in the number of stores in most markets,” between Sears closing many stores and hhgregg going out of business altogether, “the remaining retailers are actually relatively healthy now,” said BrandsMart’s Perlman, adding: “We were just over-stored.”
NPD’s Baker pointed to the way Best Buy and other retailers have adapted to the changing market. Many AV retailers, for example, have expanded their product selections to include new categories, including home automation. “Everything is evolving,” Baker said, pointing as an example to Best Buy continuing to “move towards more of a hybrid big box/service model that incorporates online, that incorporates in-home service, that offers higher-end products and more entry-level products.” He predicted that this evolving will continue.
Clearly, a lot of AV retailers have gone out of business, but “most of what you have left are pretty good, pretty strong players who understand what they have to do to be successful and are willing to keep moving as targets move as well,” he said.
10. Multi-Channel is the Future
And I am not talking about sixteen-channel AV receivers here. I am talking about multi-channel marketing–something Bose has led the industry in for years and years, taking them to never-before-seen profits the likes that other speaker companies could never match. If online-only retailing represented the future of retailing for AV or most other major product categories, it seems highly unlikely Amazon would be trying as hard as it is to boost its presence in physical retailing via book stores, Amazon Go, and Whole Foods. There are, after all, just certain products that many consumers will always want to see, buy and take home–or, in the case of food, deposit into their mouths–immediately. The future of retailing is effective multi-channel retailing.
Some of the most successful new-school AV retailers like ABT in the Chicago area and Star-Power in Dallas and other locations in the southwest sell far more than traditional AV gear. When building or redoing a house, it’s not uncommon to also see these multi-channel marketers also sell game rooms or pizza ovens or even drapes. They can do it all and they are armed with the tools they need to be successful in the future.