by Gerard Rejskind
(Reprinted from issue 57 of UHF Magazine. To purchase the issue, click here. Or click here to subscribe to UHF)
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I've been noticing a strange paradox. Owners of high end audio specialty shops keep complaining about the way they're being hurt by the "big box" stores, with their thousands of square meters of surface and their millions of dollars of floor stock. And at the same time the big box electronics store are hurting big time.
Around where we live, the huge Adventure Electronics chain went bankrupt last Spring, despite its diversification into dishwashers and fridges. The chain had been started by the same man who had earlier launched Atlantic Electronics, another chain which had gone bust. In the US, I've been reading about the troubles of CompUSA, a large surface chain specializing in computers.
Of course it's easy to figure out that it can't be easy paying out rent every month for a store that would accommodate a jumbo jet. Just getting the floor mopped down each night must cut into the budget. On the other hand there seem to be legions of people milling about, and they must be buying something.
And they are, but nobody's making much money at it. Mass market electronics is a cutthroat business, and the throats a lot of the people in the business are cutting are their own.
Consider this. Though the Compact Disc is finally getting into enough homes (about 65% in Canada) to qualify as a mass market item, the profits from selling CD players peaked years ago and then began falling. Why? Because the price of the players has been falling faster than unit sales have been rising. On the surface you may consider this a good thing--it must mean consumers are getting a bargain. But in fact the low prices have been achieved by the use of light plastics instead of metal, multipurpose large scale integrated circuits that cost pennies to make, and the presence of glue instead of screws...and who cares if it can't be repaired?
So the big box stores are selling more CD players, more VCR's, more speakers and more computers, but they're making less money at it...money they must use to keep the wolf from the door. Their suppliers are not making money at this either, but they are trapped by the cycle of competition. Toshiba drops its price $20, so Sanyo must do the same or lose market share and possibly its dealer network. Or eMachines brings out a $499 computer, so Compaq has to do the same. True, low-cost machines can't be very rugged, and they may be broken and unrepairable in eight months, but market forces are not something that can be ignored. Worst of all, the $499 computer will drive the (much better) $899 computer right off the market. So much for consumer choice.
Not long ago the manager of a mass-market electronics store explained to me why he was dropping video and Walkmans and was building listening rooms in which he now stocked conrad-johnson and Totem. "I used to work three hours to sell a big screen TV set," he said, "and when I finally made the sale I had a profit of $30. Even so, I had to load the set in the truck and deliver it."
From the consumer standpoint things are hardly rosier. Spend a few Saturday mornings touring garage sales, as I do (I'm mainly looking for LP's of course), and check out the sort of electronics most people own and are trying to unload: receivers that can't play at a whisper without massive distortion, speakers with cabinet backs made of Masonite, portable players with 2% speed wavers. And that was when they were new. This stuff isn't cheap! I've added up the busted junk electronics at a single garage sale and come up with a likely original selling price of well over $2000. Enough for a small but musical hi-fi system that would still be worth listening to.
Much of this pitiful stuff is broken and can't be fixed. It was never meant to be fixable. But you know what's really sad? They're getting rid of it because they have bought new products that are even worse!
So rejoice, hi-fi store owners! At least most of your suppliers really are trying to advance the state of the art, and are at the same time struggling to make it a little more affordable, to make your job easier.
And rejoice, audiophiles. Your down payment into this hobby may cost more than the price of a mini-system, but in cost per day of enjoyment you're getting an unmatched bargain. If the bean counters who run big corporations could learn to count like this, fewer of them would wind up in receivership.
Around where we live, the huge Adventure Electronics chain went bankrupt last Spring, despite its diversification into dishwashers and fridges. The chain had been started by the same man who had earlier launched Atlantic Electronics, another chain which had gone bust. In the US, I've been reading about the troubles of CompUSA, a large surface chain specializing in computers.
Of course it's easy to figure out that it can't be easy paying out rent every month for a store that would accommodate a jumbo jet. Just getting the floor mopped down each night must cut into the budget. On the other hand there seem to be legions of people milling about, and they must be buying something.
And they are, but nobody's making much money at it. Mass market electronics is a cutthroat business, and the throats a lot of the people in the business are cutting are their own.
Consider this. Though the Compact Disc is finally getting into enough homes (about 65% in Canada) to qualify as a mass market item, the profits from selling CD players peaked years ago and then began falling. Why? Because the price of the players has been falling faster than unit sales have been rising. On the surface you may consider this a good thing--it must mean consumers are getting a bargain. But in fact the low prices have been achieved by the use of light plastics instead of metal, multipurpose large scale integrated circuits that cost pennies to make, and the presence of glue instead of screws...and who cares if it can't be repaired?
So the big box stores are selling more CD players, more VCR's, more speakers and more computers, but they're making less money at it...money they must use to keep the wolf from the door. Their suppliers are not making money at this either, but they are trapped by the cycle of competition. Toshiba drops its price $20, so Sanyo must do the same or lose market share and possibly its dealer network. Or eMachines brings out a $499 computer, so Compaq has to do the same. True, low-cost machines can't be very rugged, and they may be broken and unrepairable in eight months, but market forces are not something that can be ignored. Worst of all, the $499 computer will drive the (much better) $899 computer right off the market. So much for consumer choice.
Not long ago the manager of a mass-market electronics store explained to me why he was dropping video and Walkmans and was building listening rooms in which he now stocked conrad-johnson and Totem. "I used to work three hours to sell a big screen TV set," he said, "and when I finally made the sale I had a profit of $30. Even so, I had to load the set in the truck and deliver it."
From the consumer standpoint things are hardly rosier. Spend a few Saturday mornings touring garage sales, as I do (I'm mainly looking for LP's of course), and check out the sort of electronics most people own and are trying to unload: receivers that can't play at a whisper without massive distortion, speakers with cabinet backs made of Masonite, portable players with 2% speed wavers. And that was when they were new. This stuff isn't cheap! I've added up the busted junk electronics at a single garage sale and come up with a likely original selling price of well over $2000. Enough for a small but musical hi-fi system that would still be worth listening to.
Much of this pitiful stuff is broken and can't be fixed. It was never meant to be fixable. But you know what's really sad? They're getting rid of it because they have bought new products that are even worse!
So rejoice, hi-fi store owners! At least most of your suppliers really are trying to advance the state of the art, and are at the same time struggling to make it a little more affordable, to make your job easier.
And rejoice, audiophiles. Your down payment into this hobby may cost more than the price of a mini-system, but in cost per day of enjoyment you're getting an unmatched bargain. If the bean counters who run big corporations could learn to count like this, fewer of them would wind up in receivership.
PARTIAL TEXT: The Music Revolution, A Fall Tuneup, Dynaudio Contour 1.3, Gershman X-1/SW-1, Coincident Super Triumph, Oskar Aulos, KR 18 BSI
FULL TEXT: Castle Inversion 15, Farewell Divx, State of the Art