OK, here is an idea that some smart guy presented to us during the show.
The high-end audio marketplace is splintering into two main product delivery categories.
In the bottom tier, the product (brand) is sold on the internet or through second tier dealers at a discount. Service and support is minimal, and there is lots of used cheap product on the net at an even steeper discount.
In the upper tier, the product (brand) is sold through first tier dealers at little or no discount. Service and support is extremely high, and there is rarely used product on the net and when there is, is at high enough of a percentage of the new price that it tempts people to pay extra to buy new to get the service and support.
Of course, we see this happening all over the place.
A corollary to all this is that brands rarely straddle the two tiers and dealers who carry brands from both tiers will be forced to choose between carrying either exclusively top or exclusively bottom tier products.
It is unclear where music direct and acoustic sounds fits into all this. They offer high price and minimal service. A profitable business model if it is sustainable.
Orthogonal to this is brands moving rapidly through new versions as the manufacturer struggles to stay alive by encouraging people to ‘upgrade’.
One can certainly point to a number of brands that do this all the time, and bottom tier brands with so much product available on the net at such large discounts, what else can they do. [ignoring digital, where the optimal cycle is like two weeks these days of rapid innovation].
Transitioning from the bottom tier to the upper tier takes several years, several years of little or no sales as the supply of cheap product drys up and people stop expecting to being able to buy it at steep discounts.
Anyway, if it isn’t obvious, we are very much a top tier dealer. It will be interesting to see how this all plays out.
