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In Reply to: RE: The answer in nearly every case, is significantly more than $20,000. posted by David S. on October 14, 2014 at 14:50:34
Thanks for your temperate response, and yes, OF COURSE, my numbers are on the low side. $10,000 is a number you can stay under by taking the smallest show-hotel display room, not selecting any options, staying in a cheaper hotel elsewhere, and never calling room service.
Take a 2-rooms-plus foyer suite (1 talking room, 1 listening room), stay in the show hotel, have catered snacks, have a cocktail reception on the press day (I did that once and the bar bill was $700) and if you are talking about The Golden Nugget in Las Vegas, the show will cost more like $20,000.
OK, enough of that.
I think that we need to refine some of the numbers here. Yes, there are exceptions in both directions, but, the way consumer-electronics distribution and pricing works for components (not cables or accessories like headphones) is that if a piece of gear costs $10,000, the dealer pays 60% of that plus freight.
Then in most cases, the manufacturer pays a 10% commission to the regional rep whose sale it was.
So now the manufacturer has to pay all his overhead expenses including employment taxes and worker's compensation insurance and legal and accounting, ad infinitum, non-recurring engineering expense, parts, labor, the box, the manuals, advertising, trade shows, and try to have a profit left over.
As a general target (manufacturers get clotheslined all the time), a $10,000 piece of gear should have no more than $2000 in parts, labor and NRE. That leave $3000, $2000 of which is overhead and $1000 of which is profit. Round figures, but the ones you usually hear.
People hear "5X parts and labor" and feel that they are at the mercy of pirates, but, that is what it has to cost to make the system work. Going direct is an option for $399/pr. computer speakers but not for $39,000 floorstander speakers that require white-glove delivery and expert setup.
So, if a show display is adding $10,000 to the overhead, the manufacturer has to sell 5 pairs of $10,000 speakers to break even. Or, 2 pairs of $25,000 speakers, or 1 pair of $50,000 speakers.
NOTE: Manufacturers almost always exhibit through local dealers, for several excellent reasons. One, the manufacturer usually does not have and does not want to get a Permit to Make Sales At Retail--a sales tax account number. Two, the manufacturer does not want to service the sale. Etc. So the manufacturer in the case of most show sales does not pocket anything extra, but he has paid a certain amount (say $5000 of a shared $10,000 room) to watch his dealer make a regular sale.
I have never heard of a $50,000 pair of loudspeakers having been bought off the hi-fi-show carpet. Only once, in a very long time in this industry, I heard of a $40,000 pair of speakers being sold at a show discount and with a stayover for in-home setup in the client's home at no extra charge. And staying over and changing flights cost a non-trivial amount.
People want more than one test drive before they buy a speaker costing more than $1000--of course there are exceptions. A rich guy in NYC who has owned Wilson Audio for 20 years can drop in on the NYC dealer, see and hear the latest, like what he sees and hears, and write the check.
So, even a name like Avalon, the numbers get dicey, IMHO. You hardly ever see Aerial Acoustics at shows. That does not tell me they are in trouble, it tells me that they are not spending money to impress a host of non-serious buyers.
To quote the King of Siam, it is a puzzlement.
ATB,
jm
Follow Ups:
Perhaps you are right.
One other thing I hadn't considered? Perhaps Avalon (and/or Aerial) have reached the level of production and sales that has shown to be the most efficient and profitable without greatly expanding their facilities. Growth is not always a good thing.
Years ago I read a business book by one of the founders of the Smith & Hawken garden-tools business that forcefully made the point that while sales growth comes in very small increments, capital expenditures and workforce growth come in uncomfortable lumps and not bite-sized nibbles.
There is also the fact that many businesses plateau because their owners are not chasing money as a means to keep score, but only for what it can add to your lives. If one has a satisfying life and a roof of one's own over one's head and cash in the bank and leisure time, perhaps not to feel the need to own a million-dollar yacht or a quarter-million-dollar car is a blessing.
So, I have no idea about Avalon, but for a mature business that is in the middle of a "node of profitability" and where the owners recognize that "getting to the next level" is going to involve both expense and risk, good enough is often good enough.
If I owned a small winery and it was fun to run it and it was profitable only 30 acres of Chardonnay grapes, I would not feel a huge need to get 100 acres and then 10,000.
And the post above about the profusion of hi-fi shows, and the exhaustion factor of businesses, is totally on point. If one did them all, including Munich and Italy, there goes $100,000 at least... .
Sorry to be snide, but, "real businesses" do not let marketing people exhibit at trade fairs just "because we have to." Or because people want to have drinks with their industry friends.
Real businesses want trade-show costs quantified (and benchmarked) up front, and, most importantly, they want the marketing people to put their jobs on the line with statements of what the payoff will be, and when.
There was a tremendous article in the magazine the US Postal Services sends to direct-mailing businesses a couple of years back about reining in marketing expenses that do not pay, and trade shows were #1.
Of course, USPS has a dog in that fight!!!
ATB,
JM
It's fine to want to quantify and benchmark trade show costs and seek measurable results, but the keys to marketing are consistency and focus.
Too many businesses (especially small businesses) turn marketing on an off like a kitchen faucet, because their health insurance premiums went up or they want a new boat or something. Marketing isn't a fixed cost, so it serves as a kind of balance wheel.
The High End is riddled with this sort of short-term thinking
Years ago there was a sort of association formed to market high-end audio collectively. It was headed by Kathy Gornik of Thiel, who has since sold the company. I think the concept died for lack of support.
Hi-
I think that you are mixing together two things. Kathy Gornik, on behalf of CES, headed a committee of CES members to focus on what CES could do to make membership in CES more attractive to high-performance audio companies of all kinds--domestic and foreign, startup and mature.
Whether because of that or for other reasons, in that time frame, CES did at least two things that arguably met that goal: The began showcasing high-performance audio products in the lobbies and public areas of the show hotels, and they made sure that HPA companies were represented in the Innovations in Design and Technology awards; one year, I was a judge for those.
Unfortunately, some people reacted to that as though CES were going in to squash an upstart rival, Ted Lindblad's A5 (American Association for the Advancement of Audio Arts or some such). I was at an organizational meeting of A5 and I participated in literally hundreds of email exchanges with dozens of people. A few people understood what I was trying to get across as far as the STRUCTURAL problems of an industry association for NON-FUNGIBLE products. Some apparently could not grasp the concepts, and some were simply in denial.
A5 never got off the ground and CES to my knowledge didn't do much more than the things I mentioned.
(I think you might have mixed up Cathy Gornik's official CES efforts with the decades-earlier TAS-supported (editorially, not financially as far as I know) independent trade group run by Cara Kallen of The Tweak Shop. In my humble opinion, that group had promise but did not achieve what it might have because too many people (not Cara) were going at it in terms of utilizing their own ego functions. Too much time holding fancy dinners and giving each other awards, and not enough time figuring out what the industry really was about and preparing for inevitable change.)
The problem is not "lack of support." The problem is that people are reluctant to support all but the best-established and effective such organizations because of the twin problems of free riding and non-fungible products.
When you have an organizational meeting for a new industry group, there are two unstated dynamics at work. One, the industry big shots want to assess the threat and determine if it makes sense to take the lead so that their same-tier Doppelganger competitor cannot. Two, industry new entrants are hanging on by their fingernails and hoping they can benefit from ad money spent by larger companies.
When you launch a campaign with the tagline "Say 'G'Day!' to Aussie Wines!" there is a prayer that that campaign can work and the organization survive, because that tagline and the media and the in-store dimensionals are supporting an entire industry that makes an essentially fungible product: All Australian wine tastes like WINE; it is mostly distinguished by price and quality. Such a campaign can help the maker of a $10 Chardonnay and it can help the maker of a $50 Shiraz.
High-Performance Audio is not a fungible product. It does not all taste like wine at different price points. LPs, tubes, and panel speakers "taste" different from CDs, solid-state, and dynamic speakers.
Ted Lindblad was very enthused by the speakers he imported, and I gather they had had some exposure in a TV series, and so I think he wanted his speakers to be the "face" of an ad campaign--paid for by others. Why would Mark Levinson Inc's corporate sibling Revel pitch in for that?
As far as I am concerned, the problem was not lack of support, but that the enterprise was unsustainable because of inherent conflicts of interest and the impossibility of one coherent real-world mission statement rather than a bunch of jargon laced with platitudes.
I charted out a very modest alternative proposal that was universally ignored. Not sexy enough.
So cooperation has not, in the modern era, been able to stay afloat for more than a few meetings.
Ironically enough, in the 1950s, when the hi-fi manufacturers banded together to determine what was hi-fi and what was not (keeping it semi-legit by asking the FTC to enact it--they were staying within the First Amendment and so not violating antitrust laws) the only thing they could agree on was that if the amp (mono) could not put out 10 Watts, the set was not hi-fi. This, IIRC, was at the behest of RCA. Except that regally annoyed some big retailers, some of whom had 8 Watt house brands...
Adam Smith once wrote (I paraphrase from memory) "Men of the same profession seldom gather together except for the purpose of a conspiracy against the public."
Amen.
JM
No, I think the idea was to promote the High End to consumers, like the Milk Board or the California Raisin producers. Anyway, it didn't work.
You do not.
Based on what you posted.
Did you really read my post, or did you console yourself with the delusion that you had read my post??????
Do you have a clue about the distinction between fungible and non-fungible products, which was my entire point?????
Milk is fungible.
Hi-Fi is not.
Please stop posting before reading and thinking.
JM
JM-
long-winded? These hi-fi companies has a duty to tour these audio shows displaying their wares for us consumers- simple.
The loss or failure of retail outlets is one reason why loudspeaker salesmen are having such a tough time. Even if every hifi manufacturer displayed at every trade show regularly, that would not be enough to generate widespread public interest and sales.Without retail outlets the general public cannot hear, touch, and see. Loudspeaker hifi cannot be expected to succeed this way. Besides, loudspeaker hifi is not the "must have" sort of thing that it once was. When it comes to music, it's now all about "small and portable" rather than "statuesque and majestic".
Modern headphone hifi is doing pretty well nowadays, in large part because of size and space considerations.
Edits: 10/22/14
Yeah, I read it, and I know what fungible means. I also know you went to law school, and it made you more than a touch pompous.
Fungible schmungible, marketing is marketing. Think tangible/intangible instead. Audio gear is a tangible product.
"expert setup"?
Is expert setup within one's home of high-end loudspeakers a concept you have never heard of?
As far as I know, Wilson Audio Specialties REQUIRES that their dealers set up all the speakers they sell in the customers' homes. At no charge unless there are extraordinary circumstances, such as a vacation home more than a half-day drive from the dealer's store. If there is an exception, there had better be a good reason.
In a real sense, that policy of Wilson Audio's sets the bar for other high-end loudspeaker companies. It's one thing to drop new speakers where the old ones were; it's another thing to go through a process other than trial and error to make sure that the all-important midrange is not being muddied up by room nodes in the upper bass.
When people buy $20,000 loudspeakers, they should not accept anything less than expert setup.
This should not be a controversial issue, but I noted in an AWSI in Stereophile 10 years ago that dealers were complacent and were not in all cases going the extra mile to deliver full service, and, look what happened. The stores that ignored me went out of business.
Tee hee.
JM
Is not making a mountain out of a mole hill a concept you have never heard of?
You make having a pair of speakers installed in a room into such a big deal.
For any audiophile worth his salt it's not that much of a challenge.
Now if any given speaker has a built-in equalizer or controls requiring some set-up tools why not provide them for the price of admission?
I understand that there are many bourgeois out there who require a lot of hand holding in many important phases of their high-end consumer life, like a professional to hang a simple picture frame on their wall and, trust me, I feel for them.
If they think that speakers have to be tuned like a piano and are stressed out at the mere thought, certainly they should get a highly qualified person from the dealership to come over for at least half a day, but they should also consider following up such trauma with a day at the spa to be kneaded like bread dough or a bottle of expensive wine to get over their bourgeois anguish, probably both.
I agree for the most part. If the dealer is coming to move speakers a little bit but isn't bringing room treatments and some measuring equipment the visit is just part of the buying fancy %*$# experience. Moving speakers around a room can certainly make a difference but when you compare it to what can be accomplished with some room treatments it doesn't amount to much.
Imagine how boring the internet would be if folks were as civil here as they are in person.
Not only are some of these speakers big and heavy but the purchase price includes the cost of free setup. You'd be wasting both time and money if you refused their "free" help in setup. Even if Wilson were to allow for DIY setup (which Wilson is understandably reluctant to allow), you'd be unwise to DIY.
Edits: 10/15/14
Usually a couple of thousand reasons each worth about a dollar on serious enough models.
Back in the day, John Atkinson stood on the sidelines as the experts from Wilson laboriously moved Watt3/Puppy2s in small increments on a grid of masking tape laid on his floor. You can research that.
So, I guess in your estimation, JA is not an audiophile.
Sorry about your economic envy.
I know a lot about some things, but I don't have any problem at all deferring to genuinely superior expertise.
Ciao,
jm
It doesn't feel a little contrived? Was it the most laborious thing you've ever seen? I'm sure it's a sight to behold but do I really need to experience this? I find it about 5% more believable than brilliant pebbles.
JA is, of course, stuck entertaining this nonsense.
Imagine how boring the internet would be if folks were as civil here as they are in person.
I have no trouble believing that Wilson is good at setting up Wilson speakers. I also have no trouble believing that the "free" setup Wilson provides might benefit Wilson as much as it does the buyer.
How many companies would pass up the chance to walk into our living rooms to make sure that their own products are set up properly, if they possibly could? Long term customer satisfaction might be the primary goal but it's possible that other aspects of self-interest will come into consideration as well. No matter though, it's mostly a "win-win" situation as far as I can tell.
I think the whole dang world is full of audiophiles and I respect them all.
Tell me how Wilson uses those spikes or whatever they are called to tune speakers. I understand that it takes professionals to work that magic.
Is installation of the requisite green plants around speakers best left to pros?
Much ado...
If you don't hire a professional horticulturist who is trained in acoustics you'll never get the most out of your stereo.
another possible reason for "expert setup" is that as speakers get more expensive and especially in the over $20,000.00 catagory, they start to generally get much larger in most dimensions and heavier. They also come in massive shipping crates. a case in point, eggleston andras. they don't appear to big to look at, but i had personal experience moving these 225 lb. granite speakers. they ship in a coffin size crate that adds another 50 lbs of wood and packing. this is only a reason of practicality. if i am a dealer and i have a client who can lay out that kind of jack, then i want to be at his house helping him set up. this is a person that i want to maintain a regular relationship with. when his friends come by, i want my client to be so excited about the treatment he received that the friends would not go elsewhere. finally, why should you just not buy online if you receive no additional service? you want that well off guy to answer his friends when they ask why he didn't buy online and save a few dollars to tell them that the extra service from the dealer was worth the difference in price.
food for thought.
Tom Collins
You don't like being quoted? You are too humble.
You crack me up!
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