Hearne: Future of Audio/Video Retail Sketchy, Best Buy Slide Continues

sony-losses-4bnWith audio and video stores becoming scarcer and scarcer, the question is fast becoming, is there any future at all for retailers and manufacturers of higher end A/V gear?

“I don’t know, I’m concerned,” says John Kiefer, practically the last man standing out of what once were scores of Kansas City and Lawrence area electronics retailers. “Look at who lost money last year, Sony. For 60 some odd years Sony was profitable and they lost money last year. I’m questioning if there is a future.”

The problem in part being younger people no longer seem interested in pouring money into higher end audio equipment. They prefer gadgets.

“There’s no motive for manufacturers to build upscale audio,” Kiefer says. “The people who come in to buy upscale audio today are really rich people, but even they don’t want to spend that much money because they’ve been on the internet and seen lower prices. And in order to make the economy strong again, we have to to start taxing the internet.”

That’s where demise of audio, video and music stores started, Kiefer says.

computer-guy-stock“It all ended when the computer came along,” he says. “It made the average guy sitting there with his dummy machine think that he had all the answers. People come in now and tell us. We’ve become the best data collecting society that doesn’t know a damn thing about what they are talking about.

“A guy came in yesterday and said, ‘I want to buy a Yamaha soundbar.’ It wasn’t even out but he thinks it is and he said, ‘Oh no, it’s out.’ But you can’t buy something that doesn’t exist yet.”

As for the future, “There won’t be a future without profit,” Kiefer says. “I have a prediction, but I don’t know if I’m right. Here’s my prediction:

Picture-1“Take Yamaha. They make entry level products, mid level products, performance level products and high performance, state-of-the-art products. And those levels are all priced accordingly. It’s like grade school level basketball, high school level, college level and pros.

“And people will look at the high performance models but say, “I don’t want to pay that much’ and they rationalize buying the lower tier models. But they get what they paid for – they don’t get anything – they get just what they paid for.”

Now a little local A/V history…

Brandsmart put David Beatty Stereo out of business,” Kiefer says. Because it got lines like Yamaha that formerly were exclusive to Beatty. And Nebraska Furniture Mart and Ultimate put Brandsmart out of business. And it wasn’t just Yamaha – it was audio – because the Japanese wanted growth.

yamAventageHead_1“When Brandsmart got Yamaha – Beatty used to sell it at a 40 percent margin – I know, I was carrying Yamaha here in Lawrence then. Then Brandsmart set the margin at 28 percent and Beatty lost so much business that he switched to Denon. And Denon was good, it was as good as Yamaha. So then, what was the next line Brandsmart went after? Denon.

mc“Pretty soon Beatty was pretty much left only with McIntosh and B&O. But the more upscale you go, the lower the volume and there wasn’t enough volume to support the store so Beatty went out of business.”

Does anybody much today have any kind of desire for higher end audio?

“Yeah, they want it, but it can’t get above a certain price,” Kiefer says. “So here’s the question; how do you build something if you can’t sell it at a profit? Why would you? You won’t. You’ll stop building.”

With mid level A/V retailer Best Buy earnings down 20 to 25 percent – its frisky founder backing away from his recent attempts to buy back the company – Radio Shack hemorrhaging red ink bucks and Circuit City and Ultimate Electronics dead and buried, the outlook is beyond bleak.

Kiefer’s bottom line?

“There are roughly 18 million people in the New York area and there’s three retail stores like Kief’s,” he says. “I would say if there’s two million or more people in an area, there’ll be one real, upscale audio store. And if there’s four million people, there’ll be two.”

How about cities with populations of a half million to a million?

“Probably no one,” Kiefer says. “Maybe a midlevel store like us. Although we do have a few high end items and can order them.”

 

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38 Responses to Hearne: Future of Audio/Video Retail Sketchy, Best Buy Slide Continues

  1. Markus Aurelius says:

    Yeah, blame your failed business model on computers, the internet and the failure to impose sales tax on internet retailers who don’t maintain a physical presence in the state. What a complete crock.

    Hmmm, perhaps David Beatty Stereo went out of business because of economies of scale or because of greed (unwillingness to operate at a lower profit margin after bending customers over for years due to lack of meaningful competition).

    Boo hoo. History is littered with companies that failed to adapt to changing technologies and changing business models. Perhaps David Beatty Stereo (or any of the other businesses mentioned above) should have jumped in feet first into online sales. Maybe they could have become the next B&H Photo or Fry’s or J&R or……

    • Irishguy says:

      “History is littered with companies that failed to adapt to changing technologies and changing business models.”

      Exactly. And let me add my tears to yours for the awful fate that befell David Beatty when he was no longer able to charge a 40 percent margin.

    • admin says:

      I do remember back when Beatty was peaking or shortly thereafter they got into computers. Trying to do exactly what you suggest.

      It was early though and they just didn’t seem to have the money and/or marketing clout to make the turn.

      They ended up in a snazzy new store around 107th and Metcalf and tried to make a game of it, but it was too little too late.

      But when I was a little boy, Beatty had the high end market sewn up. I remember my dad spent a fortune have Beatty custom install a kickass stereo system in our family room.

      You’re right though, only the strong (and smart) survive.

  2. chuck says:

    Interesting article.

    A couple of points to add.

    Today, I went to Pioneer Distribution to pick up a Yamaha for Sutera’s on Rainbow (Killer, I mean killer Lasagna.). Pioneer just moved last year to a bigger location and is now thinking of expanding because of demand. The barn is FULL of Yamha (Still a great product with a good bang for your buck.). Business is booming.

    Though my ever increasing senescence now leaves me flitting about on the edges of the industry gathering crumbs from a table where once sat that most tony of professionals (smirk) electronics retailer, I have with respect to the last man standing (Mr. K) a little different prediciton.

    The demand for electronics in the late 70’s and early 80’s dicated to Yamaha and all Japanese electronics manufacturers a fait accompli no choice decision, but to widen distribution in order to compete and survive.

    I would submit that Brandsmart was just another wave in the tsunami of changing business pratices dictated by market conditions and although the most salient cause to a cursory observor, just the wind in a gale force hurricane.

    The straight line reference from Brandsmart to David Beatty’s demise is only accurate on a superficail level in my opinion.

    The same can be said for Brandsmart’s inability (Actually, in my opinion, unwillingness.) to change their business model some 12 years ago.

    Throughout the last 30 years in electronics dramatic change, dicated by the nature of the business itself which is based on technology and electronics had unexpected tails wagging slow moving dogs every three of four years.

    The increasing speed of the variables in conjuction with ever changing business models left hidebound and aging proprietors, looking for consistancy in areas of personell, product and delivery eating the dust of younger and more energetic, multi-talented Installer/Owners who could and would crawl through an attic while closing deals on the newest cell phone.

    Egalitarian shoestring opportunity for all.

    For now, although I am not privy to all of the distribution numbers from the many distributers in town, I think electonics installation and sales will continue to improve for the future.

    Keifer makes some great points about the changing demographic and the changing attitude of customers with regard to product and delivery. Just last week I was in Sears and Target. Both of those stores exemplify the de-emphasis of electonics sales in thier stores. What used to be electronics in Target is now food, in Sears is now white goods.

    The future for those retailers that John Kiefer is talking about, those advent (Pun intended) retailers, those young energetic kids with the ability to apply recondite technical savy and blend it with the array of ever changing products is really excellent.

    The number of “Insallation Companies” in the market place has and will continue to supply consumers with electronics, computer, electrical, alarm, lighting etc etc.

    Higher end audio and video will fill the shelves again, of some type of bricks and mortar store when technology dictates.

    For example. In my opinion, 3D is very very crude, yet very very cool. The glasses, the stupidity of buying a 42″ 3D set, it all has the touch and feel of a 24″ color TV from 1965 for $1,000.00.

    That is just one example. The same is true in every well defined discipline in the Audio Video ship of state. The last three or four years to me, have been somewhat stagnate.

    In addition, everry thing is circular.

    When the manufacterers want, really want to increase sales again with respect to high end products, they will (They are not now.) push it, sell it, advertise it. They will make you want it, because it is cool again.

    Hats off to Kiefer for his longevity and persistance.

    If Adam Smith owned an electronics store, he would bust his azz to aquire what ever products he could, and then, he would discount them.

    It’s the natural order of things.

    • chuck says:

      I just saw what Markus wrote, +1

    • Irishguy says:

      “The last three or four years to me, have been somewhat stagnate.”

      I agree with just about everything you said, Chuck, except this. Home entertainment electronics is continuing to change and evolve at at a staggeringly fast rate. Go check out what’s happening with “Smart” TVs, especially the price. You might also note that desktop computers are beginning to disappear as laptops and tablets become more powerful, more versatile, and even more lightweight and compact.

      And, as I noted to Smartman, go check out today’s home audio, including the home theater systems.

      All this while the price of electronics, as it has always done, drops like a rock in real dollars. Remember when those top-loading VCRs first came out? For around a cool grand? They were just the cat’s hiney back then, weren’t they?

      Well, go check out what’s out there now, while remembering even THAT technology’s days are numbered as TVs now are capable of directly streaming off services like Netflix that are available for $8 a month.

      • chuck says:

        Good points.

        I think the technology that relates to spatial enjoyment of entertainment (At leat until they put a chip in your cortex.) is the future.

        The audio, video, complete sensory involvement which will actually place you in the scene.

        It is coming and it should be pretty cool.

        Just my opinion.

        🙂

        • Irishguy says:

          Ah, yes. The Star Trek Holodeck! How far are we away from that? Maybe not as far as we might think.

          Things are just amazing, and will continue to get more so. For instance (without going into personal detail) we needed a paper copy of a document on paper from our daughter’s college that only she could get in person, showing her ID.

          They offered a copy to snail mail, but then were able to e-mail it to her iPhone on the spot in the office, which she then forwarded directly to our printer at home, 120 miles away — which was then printed before she hung up her phone.

  3. Jimmy Cliff says:

    I like it when Chuck gets all into a comment.

  4. smartman says:

    Gone is the ritual of bringing home some vinyl, plopping it on the platter, firing up the pre-amp, EQ, crossover network, amps and letting it rip through the A4-s or Quantum Reference Standard’s.
    Settling in your Lazy Boy, firing up a doobie and pouring a nice rich glass of Cabernet….you’re right in the middle of all the action, where you can hear every nuance and subtlety, the pick strumming the strings, the breathe before the next verse, the whirl of the B3 motors, the contact of the drumstick on the ride cymbal,the brushes on the snare drum, the percussive attack of fingers on a piano keyboard. You’re in the middle of an audio orgasm and your new girl is a squirter who wants to make love all night long.

    Today it’s been replaced with an iPod and Beats by Dre headphones.

    We’ve gone from seducing Raquel Welch and making love to her for two hours to jerking off on an inflatable doll. Thanks Steve Jobs.

    • Irishguy says:

      And how much did you spend to listen to all that analog-recorded music with all the hisses, pops and crackles of even the most carefuly handled vinyl on high-end component equipment in 1970s dollars, Smartman? $2,000? $5,000?

      You also ignore the greatest feature of the iPod — it’s portability and amazing storage capacity. A few years back, I bought the kid a 120-gig iPod Classic for Christmas for about 300 bucks. He’s still got it, and has plugged some 600 albums plus hundreds of individually purchased songs into it with plenty of capacity left.

      He can take that iPod and dock it into the highest quality system available on the market today. And believe me, you can get equipment today that is far more compact and sounds even better than the highest-end gear of our youths for a fraction of the cost.

      He can call up any album he owns instantly, or he can create his own playlist on the spot to suit his mood or the occasion (such as a hot date). And once he’s got it on his iPod, nothing is going to happen to it unless he drops the whole iPod into a swimming pool, which he has so far managed to avoid doing.

      Oh, and if you think you heard the whirr of the B-3 motors back then (geez, that really was good stuff you were smoking!) go out and buy one of the digitally remastered Beatles albums and listen to it on an iPod, or on a CD system today that sells for $500 or less, then pull out your old vinyl of the same album and put it on your 1970s style “high end” gear.

      • the dude says:

        You still have to pay good money today to get decent sound to equal the high end stuff of yesterday. You pay for quality.
        You would have to get into the thousands of bucks of today’s gear to get better sound than my Altec A7 VOTT or Klipsch with a Heathkit tube amp setup I have been building as of recent time.
        And anything that is on an Ipod is a watered down Apple ACC format- not much better than 128MP3.
        If you can get your Ipod to hold 24 bit 96KHz/192KHz HD tracks of original remastered Beatles or any tracks then we can begin to discuss competition between that and original pressing vinyl on a high end turntable.

        • Irishguy says:

          To each his own, I suppose. But let’s be careful not to let nostalgia cloud our judgment. After all, the Sealtest ice cream we had as kids tasted so much better than even Ben & Jerry’s does today. Right?

          I have a friend who was a fellow audiophile back in the day. We spent a good portion of our paychecks on all the high-end components. Maybe not the highest of high-end, but well into the four figures — in 1970s dollars.

          I held out of the CD revolution as long as I could, not wanting to give up all that stuff I had spent so much on and loved so dearly. But finally, when vinyl became next to impossible to buy, I broke down and popped for a $500 CD system.

          I was amazed by the difference as I heard nuances and individual sounds on digitally recorded music that I never heard before, especially on Miles Davis’ classic “Kind of Blue.” It was like truly hearing it for the first time.

        • chuck says:

          I think dude has a point.

          A planet earth, as I understand it, gigantic caps and heat sinks with a bottom end that requires quality speaker arrays are still relevant.

          Sound is air movement as percived by your tympanic membrane in conjunction with your brain.

          I am ok with really cool headphones etc etc, but I think that comparing the two venues, which probably relate to customer logistics and need is counterproductive.

          Those big Crown Amps, still kick some azz.

  5. paulwilsonkc says:

    What a pleasure this is to read now! When someone finally takes the collective trash to the curbside, it’s funny how the quality of the comments sky rocket!
    Thanks to all. I think I’m going to write a couple of stories now!

  6. smartman says:

    Sorry Irishguy but I’ve done A/B comparisons between digital and analog on my system and others costing substantially more. There is a difference I can hear and appreciate and am willing to pay for. Digital music has no “soul”.

    And yeah, listen to the ending of many Santana songs and you can hear the B3 “motors” on my system stoned or sober.

    I’m all about portability and have multiple I-thingy’s but when I’m at home I don’t need portability. I need sonic “excellence”. I wanna hear what the producer and engineer heard when they were recording and mixing those great albums like Machine Head, Dark Side of the Moon or Giant Steps.

    I had about $2000.00 in my system in 1979. Used Crown amps bought from Superior Sound. Preamp-EQ-Active Crossover Kits from SWTPC and Radio Shack that I built with the help of a friend who was an electronics nerd. Built my first set of A4 Voice of the Theater speakers with plans and components from McGee Radio.

    I worked my ass off while in high school and burned most paychecks at McGee Radio, David Beatty, CMC and Bernstein Applebee.

    My gear has been upgraded substantially since high school. Although I still have the Crown DCA 300-150-60 amps. The A4’s have been replaced with 3-Way Canton’s and an active 15″ sub. I can peel paint and shatter windows if necessary.

    Not everyone sees, hears, tatstes, smells and touches with the same ability. So while you or your son may be perfectly happy with your set up it just doesn’t cut it for me. But on the flip side I can’t tell much difference between foie gras and hummus or Irish and Italian assholes.

    • chuck says:

      Well said smarty.

      Harvey at McGee is one of my favorite guys.

      What a hoot!

      🙂

      He was out at Henshaws the last time I saw him.

      • Super Dave says:

        Bernstein Applebee man is that name ever a walk down memory lane. Use to be one on 75th just east of Metcalf (built just after Metcalf was at last a paved road) and I remember going in there as a very young lad with my grandfather to buy all kinds of goodies. I’m sorry Radio Shack isn’t and never will be what Bernstein Applebee use to be.

      • smartman says:

        Chuck, you’re right about Harvey Sime. An absolute peach of a guy. Learned a lot from him.

    • the dude says:

      Damn Smarty,

      I would have liked to listened to that set of A4s, with the right tube equipment the VOTTS get a lot of things right. Like Irish said something like that will probably not be everyone’s cup o’ tea. I could only imagine the room you had those in, they would take up half my damn basement. The A7s already take up a good chunk or real estate and I might be looking for some JBL 4645 10cuft subs to help out on the low end. Wifey would not like it if I get those too. She made me dump a pair of Magnepans because she complained the basement was turning into an audio storage space. Women.

      • smartman says:

        The A4’s were in the basement. Turntable sat on a 24″ by 24″ by 4″ thick block of granite that hung from chain and springs j-bolted into the floor joists.

        Also had my 5 pc Ludwig drum kit down there. It was heaven for a teenage kid.

        My current wish is for a pair of Meyer Sound Labs X-10’s. The 15″ woofer has an insane 4″ of excursion. Starting at $30,000.00 a pair, they ain’t cheap.

  7. Super Dave says:

    Sound systems can be like cars, everyone thinks what they have is either the best or as good as the next guy has.

    I have a great Yamaha system I bought several years ago and paid good money for and my friends drool over it. Weird part about that is I as well have a high end digital music set up with multiple speakers and can set it up to many different sounds and even to only using two of the seven speaker set up for it just as we had back in the old days. Guess what I use the computer ran system I bet fifty to one now over the Yamaha system just due to the ease of setting up a song and being able to play with the sound output I can get. Sure when I want to flood the house with sound the Yamaha system wins hands down but for the most part when in just the music room or the office I am playing all digital music.

    So as for sound systems and who has the best for the most part it’s simple, they are all good some just a bit better than others depending upon ones personal taste.

    • Irishguy says:

      “So as for sound systems and who has the best for the most part it’s simple, they are all good some just a bit better than others depending upon ones personal taste.”

      And there you have pretty much nailed it. It does boil down to personal taste.

      Perhaps, one day my son will be a crotchedy old fart moaning about whatever it is and however it becomes that kids are listening to and through at that future time, while lamenting how great things were in HIS day.

      • the dude says:

        And how much you are willing to spend to not get too far on the point of diminishing returns where you are spending bookoo bucks to get that extra 1-2% better sound. Depends on how much you want to spend.

        The people that complain about how crappy LPs sounded back in the day were usually playing them on cheap, crappy turntables with LPs that never got cleaned with a cleaning machine. A clean LP on a good turntable and decent cartridge can be a transcendent event for some. It was for me.

        • Irishguy says:

          Sure, but at the same time, even with the most high end equipment, every time you set that needle down on those grooves, it takes a toll. No matter how well you cared for vinyl, they were never designed to last forever. (Nor, for that matter are CDs.)

          I also want to clarify that I do NOT think that vinyl sounded “crappy.” It’s just that I prefer the clarity of digital music.

          Others disagree, and that’s fine.

  8. chuck says:

    Another adjunct with my apologies. Hearne and Kiefer have triggered a few memories.

    A hundred years ago (1980), Lloyd and Ted from David Beatty, Dave from Audio West, Jaun from World Radio and 2 other dealers I think, all kicked in some cash to do a stupid promo that I dreamed up called, “Stereo Wars”. I know, I know, corny as hell.

    In Hearne’s article, the competative nature of the electronics business (As in any business) is mentioned.

    We all made some major bank that weekend out at the Glenwood Manor and laughed our fu*kin azzes off.

    In spite of the competition, I really enjoyed those guys (They were all to a man far more versed in retailing and technology than I was, no false humility.). I am still friends today with some of those guys (Some, many actually have died-what can I tell ya?) and I think that even with the competition for customer dollars, there was, at least back then a comaraderie between the many reps, sales guys, media folks and concomitant personalities who worked in electronics retailing in those days.

    A lot of laughs with some pretty great folks.

    🙂

  9. Nice says:

    I only have to say that this is MUCH MUCH better website Hearne you keep this atmostphere you’ll do much better.

  10. mark smith says:

    I’ve still got an 8 track of Uriah Heap with a matchbook wedged under it to keep it from dragging. So I’m a little behind on all of this newfangled tech stuff. Anyone know where I can take my Supertuner for repair?

    • chuck says:

      I’m bettin Mark has some “40 Star Surveys” with Don Armstrong on the front under his 8 Track.

      • mark smith says:

        I’d like to pretend I didnt know what you were talking about, but seems like WHB put those out? I was more of a Beaker Street type. By the way Chuck, if you are of a mind, Beaker Street has streaming audio from back in the day. Waaaaay back.

        • chuck says:

          Yes they did (WHB World’s Happiest Broadcasters) put out the “40 Star Survey”.

          Don Armstrong, I think, was one of the first DJs in America to lock himself in the studio and play music his Program Director told him not to, I think.

          Anyway, he got fired.

          I am so old, that when I went to school, there were no history classes.

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