Published On: August 16, 2010

Will Private Label AV Brands Kill Off Specialty AV?

Published On: August 16, 2010

Will Private Label AV Brands Kill Off Specialty AV?

Back in the day all a specialty retailer had to do was open up a boutique shop, stock a few name brand products and be open a few minutes longer than then their local bank and sit back and watch the money flow. Nowadays, with the proliferation of brands like Vizio and their endless distribution chains that include Costco and Wal-Mart can the specialty AV retailer survive let alone compete.

PrivateLabel-AV.gifEasy money. I dream of easy money but it's so hard to find. Specialty AV manufacturers dream of easy money too, which means a $10,000,000 purchase offer from the likes of Best Buy, Costco or Wal-mart - but those easy dollars come with serious side effects. The big boys can pump cash into starved companies in ways that no Mom-and-Pop dealer (or 100 of them) can do. They also can just as easily totally wreck a distribution network.

New brands like Vizio made their mark selling large HDTVs for a fraction of the price of the more established brands via distribution channels like Costco and Wal-mart that sold value, value and more value until the consumer couldn't take it anymore. Now the likes of Sony, Samsung, Toshiba and Panasonic have to offer their lofty brands and often better technologies at competitive prices, leaving the retailer with uber-thin profit margins. These are the kind of margins that specialty AV dealers can sell enough volume of to keep the doors open with, and in many cases are killing specialty AV retailers.

Let's assume you ran a reputable AV brand and have opened a new distribution channel like Best Buy or Costco - or even looked at specialty channels like Audio Advisor, Amazon or Crutchfield. How would you protect your future as a specialty brand when your distribution is anything BUT special? You are in every website, catalog and wholesaler. The opening PO is nice but what comes next? Do these specialty companies spend more on marketing, PR and advertising to create more consumer demand? Not a chance. They take the easy money and prepare to fold within 12 to 18 months. Consumers can milk the best values from these once-profitable brands, but their long-term prognosis is bleak.

The big box retailers can buy anything that the specialty AV companies can make, cheaper and more effectively, and then brand these products with their house brand years later, thus leaving those speaking the easy money looking for a bankruptcy attorney mere months after taking the big PO from the big box boys.

Is it harder and more expensive to market to a shrinking group of AV dealers? Absolutely yes - but it's worth it in the long run. The big box retailers are willing, able and interested in using every ounce of value of specially AV brands to eek out profits in the now, while plotting to make comparable product from nameless Chinese factories at a fraction of the profit going forward. It's a ruthless business that I don't support. Nor should you.

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