Why is it that European High-end Audio Manufacturers are Completely Clueless about the U.S. Marketplace?
I mean, many build good products but… well, let’s start at the beginning.
Contrary to most people’s desires, good distributors are experiencing financial problems while the slimy riffraff continue to exist, and are even picking up a few previously respectable European product lines.
Why do the dishonest distributors do better in a bad economy? Because, even in a good economy, they sell stock at or below dealer prices, directly to consumers. So if they need some money to cover some bills, they do what they always do and sell under the table, damaging their own dealer network [putting them out business eventually if the dealers are clueless – need a post about clueless dealers next], damaging the brand name to some extent forever, obliterating the resale value for people who already have the equipment and might want to sell someday, etc.
[They can almost always find someone to buy a component for an ‘unbelievably good price’ – problem is that the consumer does not realize that dozens of other people are getting the same, or even better, price from this guy, and that therefore that is all that the component is worth. And they can wait to see it on Audiogon at half that unbelievably good price as people learn that the brand does not have such a good rep after all – i.e. that it can be bought at ridiculously low prices.]
Good distributors do not do this, which is great in a good economy, because they build brand and are able to keep prices high enough so that they can make money and stay in business, so that a dealer network can exist and people can hear the equipment locally, and people can sell their used equipment when they are done with it for closer to what they bought it for. In general they grow the brand – slowly, but for the long term – and for bigger bucks in the end.
We figure Europeans just think we are one big WallMart, and that we are all dishonest and have no taste anyway 🙂 So, they tell themselves, why not allow it to be discounted heavily, why not let the dealer network wither away – we get ours which is the same amount of money as we would if a good distributor sold the product through a local dealer network, right? Wrong.
Wrong. And it is easy to see why.
First, if someone pays a pitance for something, they are going to sell it for 1/2 a pittance. Everyone in the world then sees what the resale value is on this brand – they ALL visit Audiogon and the other sites – word gets out.
Second, there is a long sales cycle for most of this stuff. If they can’t hear it at their dealer, if their dealer in fact slams it because they got burned by the current distributor, perhaps for a different brand entirely, but burned they are anyway – then this will hurt sales for 5 to 10 years in that dealer’s area and with the people everywhere that the dealer talks to.
Third, once a manufacturer reveals that they are willing to work with dishonest and slimy distributors, this reflects back upon the ethics and character of the manufacturer themselves. The become untrustworthy to good distributors. Who knows when they will ‘blip out’ again and switch to a dishonest distributor when the going gets tough? They are then stuck in the position as a second rate brand [at best]. Good distributors stay around for decades and decades. And they talk to each other. They even talk to us 🙂
Why do I call the bad distributors dishonest? Because they lie to the manufacturer and lie to the dealers. Their business model pretty much starts off with ‘sell into any dealers territory at any price – it is unlikely that they will catch me at it – and when they do, I’ll just set up a different dealer… they are so clueless they do not talk to each other about me, either because they want the other dealers to suffer the same fate, or because they are at war with each other’.
Why do I all them slimy? Because sometimes they sell things to consumers that they do not even distribute – lying to the consumer about support. Sometimes they sell things to dealers they do not even distribute [yes, dealers are sometime more clueless than manufacturers]. They lie just about everything, having a philosophy [as near as I can ascertain from trying to figure out how they can stand themselves] that all is fair when it comes to making a buck.
And so, calling European manufacturers clueless is being charitable, because eventually their lack of interest in the character of the people they deal with will reflect back on them – that they also think “all is fair when it comes to making a buck”. Including making inferior equipment.
Mike,
Your title is extremely broad and damning, while the body of the text addresses a much narrower flaw. (I’m not sure why Europeans are singled out in this behavior, either, but that’s another question.) Are you sure the title is appropriate, considering that nearly all blog viewers will see the title, but not nearly all will read the blog entry, and may well leave with a faulty impression of what you’re thinking?
Dave
Hi Dave,
The title, as now amended for English majors everywhere [who are rarely my fans anyway…:-)] is still somewhat broad but no more so than the New York Times [and I am being serious, though the NYT has been lowering the bar for some time now].
It is indeed somewhat stereotyping singles out Europeans – but the percentage is so very, very high that I feel it is warranted. Japan seems to take more care in their choice of distributor, and Canadians seem to know more about just how bad we can be down here. 😉
Take care,
Mike.
Let’s turn it around: How do distributors in EU countries treat US mfrs? Often they sign up mfrs in North America simply to “take them off the street” and eliminate competition with their EU brands. To beat these slimeballs at their own game, North American mfrs must indeed sell direct to customers.
Of course, it’s not all that black and white and I suspect you may know a US distributor of EU products in the US who does the same thing?
Best,
Mac
Hi Mac!
Wow, I never knew it was quite like that over there. Very interesting
Maybe someone else will know of this happening over here too, but I certainly don’t.
For one, from what I have heard, there is a huge markup on U.S. gear there, as well as a mystique that makes people want to buy U.S. even though it is often inferior.
However, on this side of the pond – there is no mystique about European audio gear – no one cares where they are from as far as I can tell. On the other hand, autos, There is some mystique there – but then again, they are actually ‘better’ cars as well in some respects (well engineered, but hard to repair German cars and great handling, easy to break Italian cars, and finally boring but never break Japanese cars. Big honkin’ heavy metal cars? Those are ours :-)).
In any case – it is hard for me, as a capitalist, to understand why keep something off the street if there is money to be made. Now, at the govt. level, one manufacturer might lobby to have a foreign import tariffed into non-competitiveness. But this happens in steel and memory chips – not in our itty bitty industry.
There ARE tarrifs/duties on imports from the E.U. – it is so stupid, they even have a separate schedule for each type of audio gear. And I imagine that the E.U. probably does the same thing to our gear – in a tit-for-tat kind of game that boys like to play – to kind of give the home teams a little advantage.
Perhaps the profit margin is not so good on U.S. gear there? But then why do they not just raise the prices until the profit margin makes sense and they can sell the gear they are importing. Perhaps the process of importing gear is so laborious that they just do not want to deal with it – and so focus on selling local gear? Perhaps they are friends with the local manufacturers, and they are in cahoots together to drive more sales to each other? [Is this what you are suggesting?] even though on the face of it it costs the dealer/distributor money?
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In any case, I know there is some translation issues between what dealers and distributors are. But I have no problem with E.U. MFRS selling direct to consumers in the U.S. – as long as they do not have a distributor or dealers to whom they have promised not to do this.
Just a reminder to all our readers, in the U.S. the flow of components is:
EU MFR -> distributor -> lots of dealers -> consumers (hopefully lots)
US MFR -> lots of dealers – >consumers (tons and tons)
but as I understand it in the E.U. it is more often:
US MFR -> distributor/dealer -> consumers where the distributor is often the major dealer, and perhaps the only dealer, when the counties are small enough
And these posts have been about someone skipping a step or two in the chain and selling direct to consumers AT A REDUCED PRICE. We have a few MFRs that sell direct at the advertised price (Two off the top of my head are Pranawire and Rix Rax who is now 100% direct). The fact that they would sell direct at 100% of retail actually helps us, I think, because consumers can see and understand that the MFR respects and values their own products.
And that is the core issue: does the MFR respect and value their own products, and if they do, they had better choose distributors that represent them who also respects and values their products. No one is going to respect and value their products if they and their business partners do not. And I guess that goes both ways, for MFRs there selling here, or MFRS here selling there.
Take care, Mac,
Mike
First of all, yes, take dealer cost + shipping + Tax on dealer cost + shipping + Duty on dealer cost + local transportation + normal markup on all these costs. But still, EU gear costs (except for the UK) is generally so expensive that this does not automatically knock North American gear out of the market. Add anti-competitive industry practices + warranty repair problems and my experience is that not much North American gear gets sold here.
But I still don’t have a good answer to your question, why, if there’s a profit to be made from selling this gear people don’t leap at it? My reply: the anti-competitive spirit of social democracy. Costs are high and businessmen and union workers are used to not only being protected from competition by their national governments, but also to joining together in cartels to prevent internal competition as well.
Ask Peter about the good old days of Social Democracy in Denmark. He has also studied economics, so he may well have a better answer than I do.
Remember what John Travolta said, “It’s the little differences that are important…”
Best,
Mac
Hey Mac,
Ohhh, bad time to dis social democracy, when 10% [really about 16+ if include contractors and those that have given up looking for work] are out of work here and millions are losing their homes, health care, credit rating, chance at college, etc.
>> Remember what John Travolta said, “It’s the little differences that are important…”
In what movie did he say that? In reference to what, I wonder? 🙂 Get Shorty is my favorite movie of his, though I am sure Saturday Night Fever is what most people remember him for [or Barbarino :-)].
Shipping, duty etc. We have all those too.
Perhaps the answer is that, in the U.S., where it is ‘dog eat dog’ and a ‘biggest asshole wins’ mentality, jobs suck SO MUCH that there are people who will dedicate themselves to selling gear from everywhere and anywhere – hoping to keep some of their self-respect and eak out some kind of living, rather than work for some jerk who will abuse them and pay them barely enough to live off of. In both cases they can afford only basic health care and can’t send their kids to college – but one job is fun and one isn’t.
So we have access to a lot of different components, and even though the people selling it are barely getting by, they prefer it to the alternative.
Take care,
Mike
I have to agree with you pretty much: America is more entrepreneurial and competitive. However, our taxes and import duties are considerably higher than in the US and can approach 35-40% on top of the dealer cost. Also our right is the left of your left in many cases.
Best,
Mac