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Bose Tries To Grind Out Future After Store Closures

Bose is on the outer and the big US sound is now struggling to work out where they go to next as brands such as Sony, Bowers and Wilkins, Harman, Amazon and Google all strip share away from the privately held Company.

Recently the Company moved to close the Australian stores, now retailers are moving to push competitive brands because of margin squeeze and a major move by Bose to sell direct pocketing the margin they pay retailers.

One of the big winners is Sony with retailers such as JB Hi Fi increasing sales of the Japanese brands headphones. Questions are also being raised about the quality of the Companies products. The UK Guardian recently did a shootout of the new Bowers & Wilkins PX7 noise cancelling headphones, the headline said it all “Bowers & Wilkins PX7 review: Bose-beating noise-cancelling headphones”.

Once a desired brand of millennials and an older audience who had grown up believing that Bose gear was superior Bose is today being trounced by voice activated speakers from the likes of Google and Amazon. Sonos a onetime competitor in the speaker market is also under pressure from the same competitors causing grief for Bose.

Last month Bose moved to shut down its 119 retail locations in North America, Europe, Japan, and Australia in favour of selling online.

This has caused problems in the specialist audio channel with several now questioning their relationship with Bose.

In the past Bose has had tried to dictate terms to dealers even to the point of trying to force them to spend thousands upgrading their stores to sell a Bose product. This backfired with organisations such as Len Wallis Audio dumping the brand.

When the Framingham, Massachusetts-based company opened its first U.S. retail store in 1993, it was making home entertainment systems for watching DVDs and listening to CDs.

According to Colette Burke, Bose’s vice president of global sales, these first brick-and-mortar locations “gave people a way to experience, test, and talk to us” about Bose products. “At the time, it was a radical idea,” she says, “but we focused on what our customers needed and where they needed it”.

The problem for Bose is that consumers know what a networked speaker or a noise cancelling headphone is.

Consumers are more than happy to read a review in the likes of SmartHouse or SoundMag or search online for information and then make a purchase decision. They don’t necessarily need to visit a Bose store.

“Bose shuttering its retail outlets will not likely affect its sales very much and will likely improve its profitability,” says Mark A. Cohen, director of retail studies at Columbia University’s Graduate School of Business.

“Bose does not want to pay the likes of JB Hi Fi margin, or invest in instore marketing, they want to sell direct and pocket the profits that they have been giving away to retailers. Sonos is in the same position “said competitor.

“The problem they have is that JB Hi Fi who secured Bose products exclusively at one stage delivers scale and multiple locations where a product can be purchased. People go to JB Hi Fi because they trust the retailer and sell multiple brands. They offer choice and this is going to be a problem long tern for Company stores selling online. They have to be careful that they don’t try to screw the retailer because this channel is still vital for them”.

“Consumer preference for online buying is making the need for a Bose-branded retail partner less imperative which is why Bose is squeezing retailers when it comes to margin discussions” they added.

Anindya Ghose, Heinz Riehl Chair professor of business at NYU and director of the NYU Stern Master of Science in business analytics program, “My sense is that this decision by Bose to close to many offline stores is dictated by cost economics”.

“In the absence of its own online stores, Bose has to figure out an effective pricing strategy to combat its nearest competitors and expand the number of resellers.”

“It could also benefit more from customer acquisition through targeted digital advertising (by diverting some of its cost savings from store closings),” Ghose says. “Finally, it could try to leverage organic word-of-mouth from its existing loyal base of customers through nurturing online communities.”

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