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November 2012 editorial

Will direct sales replace traditional HiFi stores? Part II

[PS Audio company]
PS Audio plants in Boulder, Colorado (USA)

Last May I published an article titled Will direct sales replace traditional HiFi stores?, an article motivated by the announcement, released by Cary Audio, they were going to launch a new factory direct sales program.
Less than 6 months later another US-based HiFi Company, PS Audio, decides to do the same, actually going back to their roots, if you consider they started selling online back in 1997. Indeed, their press release is titled PS Audio returns to retail. More precisely, quoting from their press release:

PS Audio Inc, a Boulder Colorado based specialty audio manufacturer for over 40 years, announced today that the company will again join the ranks of its many brick and mortar dealers as a retailer of its own products in the United States. Sales outside the United States will continue to be handled by its network of worldwide distribution partners.

CEO Paul McGowan made the announcement today. "We're now live with an exciting online retail outlet that will better serve our customers throughout the United States. This move is a return to our roots as an online retailer dating back to 1997.

As you can see, the prediction of my previous article wasn't 100% wrong. I believe more and more HiFi Companies will open their own online stores in the next years (months, perhaps?). This is really good news for audiophiles who experience hard time in finding the products they'd wish to audition and, eventually, purchase. A simple online store, with a good test before you buy policy is a safe way to purchase exactly what your system needs. What's better than testing HiFi gear directly at home, with your own HiFi system?
Excited by the good news I've decided to ask some question to Mr. Paul McGowan himself. I've found his reply extremely interesting...

LC Mr. McGowan, the pro's of purchasing online with a "test before you buy" formula are self-evident for HiFi customers. Which are, according to you, the pro's and con's, if any, for a Company?

Paul McGowan. It really depends on a lot of factors including pricing, the costs involved and the products themselves. Our products range from $5,000 down to under $100. Traditionally less expensive products are easy to sell online and harder as they get more expensive. Several years ago I would not have believed you could sell a $5,000 product online but today the situation is much different and people will spend that with a brand that they trust.

The expense of in home trial depends a lot on how you manage it. When we used to retail several years ago we required customers to pay the shipping costs both ways - which means they would have to purchase the product at retail, pay shipping costs to their door. Then they could try it out for 30 days and if they weren't happy, return it with the shipping being their own expense. This was the standard. Lately a few online retailers have gone to paying the shipping costs on the initial purchase but if you want to return the product it was your expense. In all these cases retailers made it a little more difficult for customers to return so if they had second thoughts they wouldn't perhaps return it. We are taking a different course, one established by successful retailers like Zappos and Amazon where we spend the money to make it as easy as possible for customers to get our equipment. The cost is on us through the entire process. This freedom allows customers to buy with the confidence that they have no risk whatsoever. The upside for us as a retailer is obvious, the downside is our expenses go up. However, we have enough confidence in our products that we know from experience the return rate will be low. It's a good bet for a company like us.

Lastly, the products themselves have to be something people really like when they get it home. If you have that with your products then the way we are handling this is a good idea because most people will want to keep the product when they get it, and we won't have the higher costs of return shipping.

LC: How's the situation of HiFi dealers in the US? Here in the Old Continent they are simply disappearing. Don't you think selling direct will make things even worse?

Paul McGowan. They are disappearing here as well which is one of the reasons we made this move so that our customers (who are not disappearing) have easy trusted access to our products. I don't think there's a relationship between us going retail and furthering the demise of the dealer - but I do think the opposite is true. The dealers of many years ago used to represent a value to the manufacturer that many do not provide any longer - and I believe those that do not continue to provide value are the ones disappearing. By value I mean that a dealer would advertise and market their store and their brands to gain access to customers. They would also give demonstrations, trusted advice and service. The customers benefited. Then along came the internet and customers began using the services of these dealers and then went out and bought the products online at a lower price - thus hurting the dealers. Some dealers reacted by eliminating their expenses such as advertising, staff and brands while others got stronger in these areas. The ones who weakened their positions and run their stores as simple order takers waiting for business to come through the door are the ones failing. Those that strengthened their models continue to have strong business.

As a manufacturer my job is to make sure we have access to customers who want our products and to maintain the value of those products both for existing customers as well as new customers. Dealers provide access and for this access we sell to them at a substantially reduced price. In effect, this reduction of price is our way of paying for access to customers and a reduction of the interaction and service needs customers require. If, in the end, the dealers are taking this money and spending it just on keeping their doors open and making the occasional walk in sale based on interest in the product we as a manufacturer generated then that doesn't make sense. If, on the other hand, the dealer is contacting his customers, making recommendations, holding seminars and gatherings and building trust with his clientele and we make a sale from that, then it's a good proposition for both companies. Those are the dealers we are sticking with and the others we are not.

LC. How does your "test before you buy" formula work exactly?

Paul McGowan. It's quite simple. You purchase a product from us either by phone or through the website. We ship it to your home free of any shipping expenses. You then have a full 30 days to play with it, let it burn in and work with it to make sure it's what you want. If it is not, simply call us or email us and we send out a call tag from FEDEX. This is a label you need place on the box the unit came in. FEDEX arrives at your door and, as soon as we get the product back, we issue a 100% refund for the purchase. Simple.

I'd like to thank Mr. McGowan for these insightful comments. It is very sad to see so many traditional stores disappearing, somehow it proves an era has come to an end...but we're happy new, much more convenient and customer-friendly purchasing formulas are being offered to audiophiles.
Out with the old, IN with the new!

Alley Life "Out With The Old, In with the new!"

© Copyright 2012 Lucio Cadeddu - editor@tnt-audio.com - www.tnt-audio.com

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