Dealership versus Distributorship
As we look at expanding Audio Federation’s footprint, we often think about whether to expand the distributorship side of the business or to expand the dealership side of the business. When we talk to people about this, everyone sure does seem to have figured it all out 🙂 but it is all in great fun and full of good-willed optimism and I thought I would try and share some of that here.
There are several goals here – financial, of course. And stability. Building the Audio Federation ‘Brand’. And also just the day-to-day, which is the most fun versus being somewhat boring or a royal pain-in-the-butt. Oh yeah, and which are we better at?
Essentially,: Which will we be more successful at, both in terms of earnings and personal enjoyment – an expanded dealership or an expanded import business?
First – being a dealer is WAY more fun. We get to meet a lot of nice people, play a lot of music, get to hear a lot of new music. I mean, in some sense, this is the ultimate can’t-really-be-a-job-can-it job. And Neli is really, really good at the customer interface thing – she is always so patient and understanding and helpful. But on the practical side [ick. HATE that side :-)] one has to look at the rise of the internet and the used gear racket and the decreasing loyalty people feel towards their dealers [less so for older folk, but still, it ain’t like the olden days]. Stability wise, I think dealers are able to hang onto a product line longer than distributors, on average [and as distributors, this is a perception we will have to fight all the time – we want to be the distributors for something, once we decide to take it on – for, like, forever].
Anyway, on the ‘this is fun and something we really want to do’ side of the equation, expanding the dealership wins [and we have some rather unique ideas, we think, to make it a heckuva lot more fun – for everybody – once we get down out of the mtns].
On the other hand – some people feel that being a distributor is the only way to be a success in this business [Actually, being a cable manufacturer has a much higher probability of financial success, but I digress…]. But, as one looks at successful distributors versus dealers, what does one see? Well, I do not know what people see, and there is not much actual data here that I am 100% sure of – but I see Sumiko on one hand, apparently successful importer [judging by by the number of their reps and success of the brands they carry, along with the premium they charge for importation] and I see Listen Up, apparently successful Colorado dealer [based on the number of their stores and large advertising budget -they also have strong pro and Home Theater arms of the business ].
So, I am not sure distributors do any better than dealers do in achieving financial success. Opening a recreational goods store would be a much better idea – in Money mag or somewhere they report that this is a quickly growing area of the economy and the average store makes about $500K in revenue [we do not do so bad here -thanks everybody! – but the average dealership makes way less than this].
OK. the $64M question: Is being a distributor any fun? No. It really ain’t. But it does have its satisfactions: Neli loves talking with and helping dealers a lot. We like helping products get into the U.S. and becoming more and more successful. We get a hand in helping way more audiophiles get their hands on high quality gear – albeit indirectly – and this is very rewarding [although we are very honored to be dealers for all of our lines, being the Audio Note importer/distributor is ultimately more rewarding, as the dealer network magnifies the impact of our efforts to get people to replace the Bad Sounding with the Good Sounding].
So where does that leave us?
Yes, we are going to expand.
Yes, we are going to move the store somewhere more appropriate [not sure when, but there are few places less appropriate than here in the foothills above Boulder].
Yes, we want to expand our showrooms [It’s where the most fun is. We had 4 large systems setup here before we decided to move – which is more than most large dealers. We would like to bump this up a notch or 2… and this time get a place with corners so we can also show off the Audio Note speakers to their best effect :-)].
Yes, we are going to have a magazine once again. Although Spintricity is currently mothballed, we will revisit this magazine idea…
Yes, we are going to… 🙂
[OK. Hope this non-audiophile business-centric post was not too darn boring. But it is a topic that has been on our minds a lot lately – and just thought I’d give you a peek behind the scenes here a little].
Always good to hear what’s actually going on behind the scenes of what always seems to look like a very simple business, despite the exravagant gear.
This all sounds very exciting……..I’ll be interested to see what the next iteration of AF is going to look and sound like!
*just hope its still in CO!
MIke
I think that your primary focus will dictate a number of other choices. A retail establishment to be successful probably requires visibility and accessability, whereas an import business might well be handled from a modern warehouse near an international airport with a loading dock. There is also the question of time. Given that there are only somany hours in a day, where do you want to focus your efforts? Focusing on a single business might yield more success with respect to that business, but perhaps not more enjoyment or satisfaction. The one thing that seems to be a given is that your current location in the mountains, while scenic, does not work well for eithert business. If you decide to focus on the import route, I would suggest that you identify at least two other lines which you can represent long term.