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Comment: Why The Specialist Sound Channel Is Down On Its Knees

Our exposure, of Advance Audio Australia and their pricing policy, is not isolated to the KEF brand, several of their sound products are significantly more expensive in Australia than in several other Countries around the world including, Countries that collect double the consumption tax that what Australia does with their 10% GST.

See original story here.

It was Josef Riediger, the CEO of AAA who told SoundMag and ChannelNews last year that the sound retail industry was in a “sorry state” and that he had placed more specialist Hi Fi retailers on credit hold last year than in any previous year.

The reality is that the specialist Australian Hi Fi retailer is struggling primarily because they are not price competitive and they are failing to attract today’s millennial consumer who believes that the B all and end all of sound gear is what they buy at JB HI Fi.

This millennial audience is online savvy, and the likes of Advance Audio Australia are not making any friends in the sound channel by selling well known sound brands in Australia at up to 40 to 50% more expensive than what retailers overseas are selling the same product for.

Millennials can see right through their price gouging, because information and not advertising is what is important to them and most of the best information is coming from overseas web sites because the information on a lot of Australian Hi Fi retailer’s sites are presented in a manner that is not appealing to today’s web savvy millennial shopper.

Specialist sound retailers must become more competitive especially as Amazon who are tipped to launch in Australia is carrying many of the brands they sell at significantly lower prices.

The industry grew up selling to consumers who understood what an amplifier, pre-amp or power supply was all about. They were also able to sell systems that took up a lot of floor space if not complete rooms in a home.

Today most millennials, who have the money to spend on entertainment products are more interested in easy to manage networked audio products. Price is not the issue which is why JB Hi Fi is witnessing increased demand for premium headphones and systems like Sonos.

The millennials don’t have a clue about Hi Fi systems of old, while at the same time the audience that was once the backbone of the industry has retired and are not investing on their sound systems anymore.

The industry has also grown up with what are now tired old Hi Fi media publications, which like the industry itself has failed to take advantage of digital engagement. You would be lucky if Sound and Image or Australian Hi Fi combined could reach over 25,000 consumers and the recent advent of what has been labelled Hi Fi Shows are a joke as all they attract are tyre kickers made up of people who own Hi Fi gear but are no longer investing in new gear because of the high cost of aquisition in Australia.

The core millenial audience does not attend these events because the organisers such as StereoNet or The Chester Group do not not know how to reach this audience, who are flocking into JB Hi Fi stores in the millions every year. They see JB Hi Fi as an everyday Hi Fi show.
In today’s market, it is vital that a retailer has a seriously good web site that can engage with a millennial consumer when they go hunting for information. Some of the specialist dealer web sites are archaic and look like early online dinosaurs that have not been upgraded in a decade.

Several distributors have told me recently that consumers will accept a 20-25% margin to buy in Australia, but not the prices that Advance Audio Australia are asking retailers to pay for several of their products.

Another key factor that is set to impact both sound industry retailers and distributors in Australia, is Australia Post’s new ShopMate service that allows consumers to buy goods in the US and Canada and ship them to a US address for shipment to Australia. For example, the cost of shipping a pair of KEF speakers was $500, add the 5% duty and we still came out thousands of dollars in front of the price that retailers are selling the same product for in Australia.

Currently Australia Post is in discussions with Amazon regarding the shipment of goods Internationally and locally.

In Australia, retailers such as The Lifestyle store in Sydney, Digital Cinema, Rio Sound + Vision, Klapp Audio Visual along with the likes of West Coast Hi Fi  are already delivering appealing web sites because they have invested in the backend technology and web site design that delivers results, they are also working with brands to deliver a new level of instore experience.

More importantly they are investing in the capture of data that allows them to build a database of customers and potential customers.

Yamaha Display At West Coast Hi Fi

Unfortunately, there are others out there, that simply sit in their stores waiting for the next customer to walk through the door, the only problem is that those customers with money are walking through the doors of JB Hi Fi and not the specialist dealer who has done nothing to communicate with these customers for the simple reason that they don’t know how to.

What the Australian Hi Fi industry lacks is an Association or a voice to represent the industry. It’s been tried in the past and failed because as one distributor said “All a retailer wants is what’s in it for them, not the entire industry”.

During the past 24 hours, we received some excellent feedback about the Australian Hi Fi industry and the price gouging by AAA and KEF.

“Why is it that distributors like Advance Audio Australia cannot negotiate price parity with their vendors” was one common question.
“Maybe they do and they are not passing it on” said another retailer.

“Josef Riediger the CEO of Advance Audio Australia still believes that there are customers out there who have half a million dollars to spend on sound gear when the reality is that this customer is in an extreme minority today and there are not enough to go around”. Said one Hi Fi distributor.

Denise Riachi Marketing & Finance Director at INDI Imports a Melbourne based distributor of premium sound brands who also retailers of sound products via their Melbourne based RIO Sound and Vision Stores.

“I read your article regarding price parity here in Australia and KEF. We are so glad you wrote this piece! Finally, someone else is seeing exactly what we see!!!

Riachi added “We are fed with the industry hiking up prices unnecessarily and losing market share on key brands and profiles. Our strategy at INDI is to ensure the specialist market is protected from larger corporations heavily increasing price points and pricing brands totally out of the market in Australia. With the likes of Amazon coming to our shores we all have be much smarter and stay ahead of the game” she said.

“Our pricing in so much better than the brands have ever been here in Australia. Take CYRUS for example, the retail prices are in some cases the same as overseas or lower. The same applies to our Canton Brand”.

“What needs to happen is that Hi Fi has to become more affordable for everyday consumers while allowing the specialist dealers to make enough profit for them to continue”.

“Once this is happening consumers will stay with their local dealer Vs shopping overseas web sites”.

“We now buy container loads of stock at the right price which in turn we forward on to specialist retailers and end users.

“We do NOT inflate prices which is what totally pissed us off in the first place…. Hence the birth of INDI! The dealers are even telling us this… they say “finally now we move stock efficiently without being hit with OS price comparisons”.

Comparison chart of just a small selection, of KEF products being sold in Australia. Over 30 products were researched not one product was cheaper or parity priced with the US, UK or Canada.

Also, impacting the specialist sound channel is a move away from custom install to a new generation of networked technology in the home. What use to be a combination of Ethernet cables, servers and distributed products is today more about cloud based services Bluetooth or Wi Fi connected devices spanning security where a $1,000 investment in off the shelf security systems from the likes of Swann Communications, or Netgear delivers 4K and 8K resolution home security direct to a mobile phone or monitoring service.

The specialist audio channel is not going to survive in its current form unless there is immediate change.

Distributors like Advance Audio Australia are still operating the same way they did 20 years ago, a combination of high margins and exclusive brands, the only problem is that their customers are going broke and as for exclusivity the web has made just that part of their offer a redundant feature.

As for their suppliers, they are cuddling up to Amazon because they don’t have to deal with the likes of Advance Audio Australia, they don’t’ have to pay Co-Op dollars or rebates to dealers while at the same time they are raking in revenue from global markets.

All they have to do is make sure they have enough stock to refill Amazon orders that are being taken every minute of the day across 16 Countries.

Australia is set to become the 17th and when it does watch this space, because the impact could be significant on the sound industry.

If you have an opinion on this issue we would love to hear from you at [email protected]