Are hi-fi retailers too cliquey and elitist? Have they been too slow to move with the times and embrace the smart home? Are they a dying breed or are there things they can do to adapt to this rapidly changing marketplace? Ben Timberley of Convert Technologies gives his view
Retailers in hi-fi and audio are struggling to break through. But there are plenty of other independent retailers who are absolutely flying and couldn’t be happier.
All of the retailers and distributors I have spoken to agree that market conditions for hi-fi retailing are challenging. Many blame online sales. Several point to Brexit and other macroeconomic factors.
Some, however, have looked at their own businesses and found issues they believe are to blame. Retailing faces growing threats from all kinds of directions. Choked cashflow is one. But the biggest challenges come from ‘industry pressure’ to conform to restrictive supply contracts.
In hi-fi retail, supply contracts can be a real headache. ‘Sell-out and buy-in’ clauses to always hold ‘non-demo’ saleable stock. Merchandising tie-ins with expensive displays that take up space, and that retailers are expected to pay for. New product commitments if stocking a ‘range’. These reduce the vital flexibility for a small business and are too often used to command loyalty. One of the biggest complaints is the sheer quantity of products on display in hi-fi retailers. The ranges are too big, the conditions cramped, the customer confused and put off. Are these supplier contracts contributing to the problem?
I know how difficult it is to promote a business effectively. As a consultant, I worked to help develop several small retailers. A trait common to most of them being the idea of “build it and the customers will come”.
Far too many hi-fi retailers suffer from this dream – with digital tools like websites, SEO, videos and social media all too often being ignored or, worse, frowned upon. Crucially, the effort and outlay required to obtain new customers seems to be beyond many small hi-fi retailers, meaning that the customer pool for the hi-fi sector is continually getting smaller – to the value of three to five per cent year on year, according to my research.
Then there is the ‘partisan culture’ of hi-fi. Visit any online hi-fi forum and you’ll notice the cliques promoting their way of doing things and decrying anyone else’s. For retailers, it presents a minefield of hidden pitfalls and ‘politics’.
This culture has turned much of the hi-fi industry into a money-throwing contest, where richer brands succeed simply due to spending power – and popularity of product is often tied to the vocal volume or ‘bullishness’ of its cheerleaders. Rightfully, the integrity of a system that promotes this behaviour has been widely questioned.
I believe there are three key factors that have contributed to making life difficult for hi-fi retailers: runaway premium products and commoditisation; dumbing down, and learning barriers.
At the top end, very high-priced products are multiplying. They might have a high price tag, but whether or not they deserve it is another question. Many customers are simply not able to understand nuances of such purchasing decisions. Economists would describe the high-end hi-fi as a market-distorting bubble – but how long before it bursts?
Similarly grim observations can be made at the lower end of the market. The entry of Sonos disrupted everything. With the ‘dumbing down’ of consumer knowledge and a muted response from the hi-fi sector to the app-driven mobile convenience culture, Sonos has had a huge impact. So independent hi-fi retailers lost the bottom end of the market to more savvy online retailers and the big multiples.
The advent of portable devices, like the Apple iPhone, has meant that headphones and ‘on-the-go’ enjoyment of music has taken priority. In these situations, volume, amplification and the engineering of superior sound have all been put aside in pursuit of convenience. Customers need to be educated, cajoled, cared for and introduced warmly into hi-fi. All of which takes time, patience, a gentle caring manner and in-depth knowledge. Traits that too many independent hi-fi retail outlets sadly find difficult to demonstrate.
New entrants joining the world of hi-fi are subjected to a dizzying array of propaganda, mixed messages, abuse and outright untruths.
The smart home is ‘here’ now. Speaking to much of the independent hi-fi retailing sector, you wouldn’t know this. And given that their customer base was a closed loop, with very little new blood, it was assumed that people’s tastes wouldn’t change either.
Manufacturers missed the change. Distributors missed it. Retailers missed it, too. But custom installers didn’t. This is why the share of who sells audio equipment has quietly moved out of the traditional hi-fi retailing space and into the custom installers and distributor space.
Independent hi-fi retailers are not typically ready to sell connected smart-home technology. Many do not understand or see the value behind the technology. This failure to adapt is possibly the single biggest reason that the independent hi-fi retailing sector, and the independent electrical retailing sector, is suffering a distinct malaise.