The Hi-Fi Industry and Hobby

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Re: The Hi-Fi Industry and Hobby

Unread post by _D_S_J_R_ »

Frasernash wrote:
_D_S_J_R_ wrote:Big changes at AVI. Since Ash all but retired from the day to day running of the business last summer and the new majority owner took over, AVI have moved to the north western side of Gloucester and returned to totally retailing through dealers, I believe because the far eastern dealers they recently set up were uncomfortable with the online business model that was set up ten years ago. Prices have risen (43% in the case of the DM5 speaker, which is now £999, the DM10 £1999) to accommodate this. The one or two dealers that have continued over the last ten years have done so on a shoe-string until now I believe.

http://www.avihifi.co.uk/contact.html
interesting on the far eastern dealers being unhappy although would they be that bothered with a UK online site anyway the one or two dealers were probably not on a shoestring as they probably got a mark up.
If you're a member of HDD, you'll see in the private section the thread, my comments and Ashley's expected put-down of them and reasons for the decision given. I responded but haven't yet returned to see my total demolition over there - I used the Yamaha HS5 deliberately as a comparison (£499 from Thomann and with post 'Brexit' currency adjustments). The two or three small dealers in the UK over the last ten years really have worked on a tiny profit and I believe were retained for long-term loyalty more than anything else, as Ash hated dealers and was only too happy to ditch 'us' when they pulled out of the main separates market.
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Dr Bunsen Honeydew
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Re: The Hi-Fi Industry and Hobby

Unread post by Dr Bunsen Honeydew »

Retrograde step going back into the hands of dying retailers. They expect to get paid :roll: They expect UK customer to put up with nearly doubling of price :roll:

Fantasy land :roll: I can only think they (like many other UK companies) have given up on the UK and only want to develop export. To be honest with the pound as it is and with Brexit it is a logical business step.

For most UK hi-fi companies the UK market is insignificant and just provides credibility for the export market. Even though I am only selling through UK eBay I am selling much more export (especially Italy) than to the UK, it is the reason I am packed out with orders.

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Re: The Hi-Fi Industry and Hobby

Unread post by Daniel Quinn »

Roy Gandy in that Film posted confirmed upwards of 85% of sales were export and all of the growth as been export led .

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Re: The Hi-Fi Industry and Hobby

Unread post by Lindsayt »

_D_S_J_R_ wrote:Big changes at AVI. Since Ash all but retired from the day to day running of the business last summer and the new majority owner took over...
I'm just glad that Ashley James hasn't been making up lies and bullhsit about me and my speakers recently.

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Re: The Hi-Fi Industry and Hobby

Unread post by _D_S_J_R_ »

Give him a year or two and he'll feel just as out-on-a-limb as I do, as nobody will take any notice any more and he'll have no way to 'prove' what he says...
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Re: The Hi-Fi Industry and Hobby

Unread post by Dr Bunsen Honeydew »

Lindsayt wrote:My question was largely rhetorical.

On the simplicity front, I think that 4 way full sized corner horns are more complicated than slimline ported 2 ways.
You are missing my point, you are judging complexity with your eyes. In reality what you have is a very simple system but lots of it. Look at the example I gave. The man who designed these would look at that and laugh, and not understand more than half of what the man is going on about. The test gear back then was basic, even more inaccurate than now, no computer program design. His design process was simple he used his experience and his ears.

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Re: The Hi-Fi Industry and Hobby

Unread post by Lindsayt »

Yes, I think I am missing your point. I am judging complexity by the engineering content.

If a 4 way full sized corner horn is a simple system with a lot of it, then a 2 way ported speaker is a simple system with not much of it.

If the designer of a modern ported slimline 2 way speaker has used complex tools like computer modelling of the port to arrive at their design then I would see that as the equivalent of someone driving from Birmingham to London with the use of Sat-nav instead of using their memory or a road atlas.

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Re: The Hi-Fi Industry and Hobby

Unread post by Dr Bunsen Honeydew »

They have to do it to justify their jobs, just look at the series of posts I linked to. It is all bullshit.

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Re: The Hi-Fi Industry and Hobby

Unread post by Dr Bunsen Honeydew »

Stan Curtis has replied to my original article.

CR45 STAN

Stan’s Safari No37

STAN ASKS SOME PERTINENT QUESTIONS ABOUT ‘HIGH END’ PRICING

High-End audio equipment is, by definition, expensive. And whilst it is true that many readers really enjoy reading about the Lamborghinis of audio while buying a Ford Focus, it has always been the case that a significant number have read the reviews; gone for an audition and eventually made the purchase. That is until recent years; years in which the definition of High-End has started to move into territory unaffordable except to that exclusive ‘upper 1% of the population’ club.
Consider a few numbers. In 1975 hi-fi was a ‘must have’ consumer product and looking at my old reference books I’ve put together one of the most expensive systems of the era (Garrard 401 with SME arm and the ubiquitous Shure V15 cartridge; Amcron pre-amp and DC300A power amplifier; and finally a pair of large JBL loudspeakers); the sum total comes to about £1,600. Fast forward to 1995 and the choice of gear has expanded rapidly, and I could have easily spent £60,000 on putting together a record playing system. (I’m staying with vinyl for consistency and because it represents true high-end to most people.) But today with some loudspeakers costing £1m a pair and amplifiers in £100k territory it is fairly easy to put together a million pound system.
Converting these figures into 2017 pounds by factoring in the comparative earnings figure gives us price tags of £18,000; £132,000 and £1 million. There’s a pattern here, as the price tag rises almost exponentially.
To explain fully what’s going on and why is beyond a short article, but let’s start by looking at where all this money is going. Well in the UK we need to take off the 20% VAT. Next comes the dealer’s margin, which varies from manufacturer to manufacturer; if the brand is protected by limited retail distribution we’ll settle on a typical 55% figure. What’s left is the manufacturer’s gross margin; in this example around £400.
Apply this calculation to a £25,000 amplifier and the manufacturer gets around £10,000 which seems like a very healthy return for a product that may have been built from a stack of parts costing less than £4,000. But what the manufacturer actually makes (the net profit) is this figure less the manufacturing costs (parts & labour) and less all the overheads including salaries & sales commissions; the buildings & their associated costs; all the marketing costs; and the costs of R&D and product design. This last cost can now be appreciable and a major factor in the cost of a product.
Back in the day I could work through the weekend and have a new amplifier design ready for Rotel by Monday morning. Add three months for some tooling and fine-tuning and we’d be ready to go. These days the design cycle has the added complications of software writing and debugging, and all the regulatory standards to be met and validated. Tie up a bunch of five guys for 18 months with all their overheads and you could be looking at a design cost of £700k, which has to be spread over the total production run. So if the plan is to sell a thousand pieces of this new amplifier then the build cost will have to include £700 just to cover the design cost.
In deciding how to depreciate this R&D cost over a defined number of units, how can the manufacturer estimate the future sales? This aspect of business often causes new entrants to fail. Such would-be success stories often start by estimating that annual sales of, say, all £20,000 amplifiers is 4000 pieces. Naturally this model is ‘the best’, and has already garnered some good reviews, so can reasonably expect to take 5% of the market, giving an annual income of £1.5m. One reason this normally fails to happen is that established manufacturers have got distribution chains securely in place, leaving no room for more than one or two newcomers.
The well-run manufacturer will already have invested years of support in a distributor, who in turn has a chain of retailers many of whom are personal friends. Such retailers will have built up a loyal following of customers and will know the preferences and buying patterns of those customers. So when the manufacturer decides to launch a new product, the distributor talks to retailers who can usually say exactly which customers are likely to buy. In this way the manufacturer gets a very accurate estimate of future sales, can finalise costs, give each distributor an allocation, and so plan production for the next couple of years. And nothing helps sales along better than a backlog which sort of confirms that the customer has chosen a desirable product.
If buyers are willing to pay higher and higher prices for their audio systems we should consider what it is that drives those buying decisions. The first, seemingly obvious, differentiator is the performance. Here we start from a point where virtually all high-end equipment sounds good. Different models may sound different to each other and such differences are subjective and often down to personal preferences. I may prefer to listen to rock music through a system which has great dynamics and impact albeit with a few minor rough edges. You may wish to listen to opera through a system which is uncoloured and smooth in delivery. Neither of us is wrong and to an extent the choice is analogous to a preference between excellent Italian or French cuisine.
Cosmetic design and brand image are often and wrongly underrated. If a new product looks a million dollars and comes from a ‘hot’ brand that is currently producing winning products, the emotional pull to purchase can be overwhelming. In contrast, build quality and a reputation for reliability still count with many people, although in practice this often works the other way round, buyers avoiding a product with a ‘flaky’ reputation no matter how good it sounds.
Brand loyalty is very important. Once a customer makes a sizeable investment in equipment from one brand, there’s an equivalent investment in the belief that they have made the right choice. After that the manufacturer really has to screw up in order to lose that customer. Similarly the relationship with the retailer is also vital. Many buyers rely upon the retailer to do the listening and product selection and to present them with an easy choice. If the retailer provides good after sales support with regular coffee (and a shoulder to cry on); then offers part exchange and a bit off the price then he could be rewarded with a customer for life. Self-actualisation, where the buyer seeks the approval of his or her peers in the audio community, should also not be ignored. Some enthusiasts feel less comfortable telling like-minded souls that they’ve bought an unheard of product from Acme Audio when everybody else in the room has bought, say, Naim.
The strongest driver in today’s high-end market is perhaps best described as conspicuous consumption. This is the sector that has seen major growth over the past twenty years. Originally it was driven by rich professionals (doctors, lawyers, bankers etc.) in the US, who wanted an audio system where cost and brand profile would impress friends and clients. Since that time this trend has really grown in Asia, fuelled by customers who would almost prefer the price tags to be left on the equipment for all to see. This growth has turned some established high-end manufacturers into valuable commodities, so we have seen them bought by investors who have then consolidated their investments. In some respects we’re heading in the same direction as the luxury watch market, where any difference in time keeping is negligible and irrelevant. What is important is the technology, the manufacturing precision and (most of all) the brand image of the manufacturer.
So where does this leave us simple souls in the future? After all we just want to listen to our music, and few of us can afford to spend the (inflated) price of a semi-detached house in southern England. Fortunately Nature abhors a vacuum and those same manufacturers know they have to offer similar technology at a much lower price or someone else will. So the chances are we’ll still be able to enjoy the sort of performance we crave but at a more affordable price. In reality, the difference between an amplifier costing £5,000 & one costing £40,000 from the same manufacturer is not that great. The real problem will occur when these manufacturers incorporate technology; materials and components that are simply dazzling but in truth make no real difference to the prime function of music reproduction. (Some would say that some manufacturers have already crossed that line……)
I’ll end by wondering where the industry could be going. The current consolidation, as investors buy the better established brands, only makes financial sense if they leverage higher sales and higher profits out of what is currently a small customer base. I suspect innovation may not be too far way. Imagine if, for example, the industry followed the lead of the motor manufacturers and offered a £100k system on four year lease terms with a 10% deposit; 0% finance over four years and a 30% residual value. At around £1200 per month I know a lot of people could be tempted – but then I know a lot of people who might be equally tempted by a new Bentley.

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Dr Bunsen Honeydew
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Re: The Hi-Fi Industry and Hobby

Unread post by Dr Bunsen Honeydew »

This is the final article as will appear in Hi-Fi Critic, with a daft response at the end from someone :roll:

Heresy?

RICHARD DUNN (NVA) AND PAUL MESSENGER EXAMINE THE EVOLUTION OF THE HI-FI BUSINESS, AND SPECULATE ON WHERE WE MIGHT BE HEADING NOW…..

Hi-fi effectively began with the production of stereo LPs in the mid-1950s. Mainstream music reproduction was record players and radiograms, but a small number of electronics enthusiasts had learned the technical aspects during the war and wanted to play. So a small DIY enthusiast market emerged in the UK, mainly using Government surplus components sold out of scruffy shops in London’s Edgware Road and Lisle St.

From these people a small industry emerged. Magazines like Wireless World supplied new projects and helped to influence relatively new companies like Quad, Rogers and Leak that have subsequently become legendary, to produce products of a higher musical standard than the radiogram of the day. There was also a pro market, whereby products from companies like Garrard and Tannoy fed the BBC, the cinemas and the recording studios, and also began to supply the domestic market. Upmarket shops like Imhofs (which started the Tottenham Court Road hi-fi conurbation) started to appear. On one side salesmen in suits and dem areas took advantage of the newly allowed hire purchase (aka ‘the never never’); on the other the component shops also started to sell finished goods. A hobby and a marketplace were both created.

The distribution chain in those days was very different to now. A manufacturer designed and made a product, and appointed a wholesaler (or more than one) to carry out retail distribution. The wholesaler’s reps then took the product around to sell to the shops. So the products had a three price structure: wholesale price; trade price; and retail price, and the manufacturer fixed the price the retailer sold it for. This was called retail price maintenance. It created a very stable market with much lower profit margins than today: the wholesaler made 10 - 20%; the retailer 20 - 30%.

The system suffered two major shocks in the 1960s. The first was the ending of retail price maintenance in 1964; the second was the appearance of Japanese products on the UK market shortly thereafter. The big initial winners were the wholesalers, who could sell to anyone they wanted to at any price they wanted, and if a manufacturer refused to supply them it could be sued. The other main winners were the component shops, which morphed into big discount houses: small companies like Laskys, GW Smith and Comet expanded and to a significant extent took over the retail side of the industry.

The specialist hi-fi magazine market expanded dramatically. What Hi-Fi, Hi-Fi Sound, Hi-Fi Answers, Hi-Fi Choice and Practical Hi-Fi provided stiff competition for established magazines like Gramophone and Hi-Fi News. Then the oil price increase at the beginning of 1974 had all sorts of implications for UK hi-fi manufacturing and the marketplace. One immediate result of the ‘oil shock’ was a three day week, but in the general election that followed, Labour came to power. Chancellor Healey introduced a budget that involved massive VAT price rises for electrical goods, but deferred them for three months. A year’s worth of hi-fi was therefore sold in those three months, followed by an appalling slump. This played right into the hands of the large Japanese brands, which cashed in by diverting stock intended for other markets, whereas the much smaller UK brands simply couldn’t cope, and suffered in the aftermath.

A number of new and youthful British brands emerged in the mid-1970s, including Linn, Naim, Rega, Exposure, Meridian, Creek and Arcam, plus Michaelson & Austin (the roots of Musical Fidelity). Most succeeded in spite of the Japanese competition, helped by some clever marketing, especially from Ivor Tiefenbrun of Linn Products and Julian Vereker at Naim Audio. Although these two initially worked together, success and growth meant that they eventually operated independently. One reason for the success of these newcomers was that traditional retailers, struggling in the face of discounters, needed the high profit margins from exclusive products that were not available to the discount houses.

The 1980s saw several significant events, including the gradual development of a new retro market for valve amps, a recession affected the early 80s, CD arrived to challenge the turntable in the middle of the decade, and Absolute Sounds started to create a so-called ‘High End’ market in the UK, beginning with big American muscle amps.

Another recession blighted the early 1990s, though the emergence of home cinema provided a sideline that looked as if it could become important. (In practice this has now effectively become a separate market, as has the multi-room installation scene.)

Key developments, initially of MP3 coding and subsequently Napster file-sharing, effectively stopped the growth of the hi-fi industry, leading to a slow decline which has subsequently accelerated. Since then, youth has largely turned its back on hi-fi, and hi-fi enthusiasm has become almost as maligned as train-spotting. The arrival of the iPod (and subsequently the iPhone) brought an increase in personal and portable listening that is essentially on-line based, leaving the rump of the hi-fi market to older but mostly also richer customers (because of escalating property values).

Come right up to the current decade, and the elephant in the room is still very much the home computer. However, at last the hi-fi enthusiast can find and talk directly to other hi-fi enthusiasts, and no longer has to rely on sometimes misleading information from retailers and magazines.

Although the industry is declining, the buying power of individuals has tended to increase, and the so called ‘High End’ market has therefore expanded. However, the prices of these high end products is a real problem, as there’s really no justification for the price increases that have happened over the last 10 to 15 years. The reason behind it is the aforementioned decrease in the numbers of customers alongside an increase in individual customer wealth. The margins involved are becoming like jewelry for the present industry: distributors 30%, and retailers 50% (of retail price, as they have to be compensated for fewer sales).

The magazines are dying, partly because of internet competition and partly because there is not the numbers of readers or available advertising to keep them going. Some even seem to be like supercar mags, for people to look at the pictures and read about things they can never afford.

So what will happen when the present hi-fi market finally dies and just a small rump of enthusiasts remains? An obvious first call will be that all the hi-fi in circulation from the good times is now available secondhand. The secondhand market is now far bigger than the new market, as a recent visit to the Tonbridge Audiojumble amply proved, and although prices are going up, bargains can still be found. Some retailers try to operate in this market, but tend to price themselves out of it. The king in this marketplace is eBay, and although it can be a pain, I think the service they give to enthusiasts is mostly brilliant.

Another increasing trend is the DIY market, which is becoming prominent again just like in the 1950s. This is a good thing, as these people will develop and introduce new products, and new companies will emerge. But how do they find and sell to customers? This may well be where an ‘underground’ marketplace emerges from the hi-fi forums,

New product is being offered on a sale or return basis, sales are coming, and small, new enthusiast companies are appearing. And by selling directly to the customer, much of the overpricing problem is solved. No distributor, no retailer, no advertising; just good prices on products that you can borrow to try in your own system. It would be very nice if this business could be linked or tied together in one place for the benefit of the customer.

Another forum bonus comes in the organisation of what are normally called ‘bake-offs’, where enthusiasts usually gather at a member’s house and compare equipment that they own, or just bring new music for everybody to enjoy. These events should be encouraged, and the results tend to be written up on the forums as comparative reviews. Members are also encouraged to write their reviews and opinions of an item, good or bad, when they buy or try something new, which is something that tends to scare the industry’s vested interests.



Future possibilities outside the traditional hi-fi industry therefore include:
Secondhand (via eBay etc.)
Direct sale (via forums, eBay, amazon etc.)
DIY enthusiasts
Social network of Bake-Off shows etc.
Loan schemes of new products

The main independent UK forums include:

HiFi Wigwam
Pink Fish Media
The Art of Sound
Hi-Fi Subjectivist
The Audio Standard
and others.

Plus Web-Mags like:
The Ear
Andrew Everard
Hi-Fi Pig

BOX
Bob Pyle Comments:
I cannot contemplate a world in which we information hungry audiophiles will have to trawl through mountains of guano in blogs on the web to get anywhere close to obtaining advice and opinion based on the solid foundation of experience. I for one won’t relish the day that my research has to be undertaken in this style. Visiting hi fi dealers, exhibitions and reading first class publications like HIFICRITIC is what adds to the pleasure of expanding one’s understanding of our hobby. I can understand that the clientele of outlets like Richer Sounds would visit blogs for ‘advice’ but die the hard Audiophile…?

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