Dealer-Direct: The Answer to "But Where Can I Hear It?"

by Marc Mickelson | December 9, 2011

humb through a decade-old copy of any audio magazine, and one of the things you'll notice is that many of the dealers who advertised then are out of business now. It's no news that a prolonged weak economy has hurt retail sales the world over, and perhaps most of all here in the US, where audio dealers in particular have also had to negotiate the perils that Internet selling has provided. Perhaps all of this is ample impetus for a new retail paradigm -- a new way for dealers, who remain the backbone of the audio retail market, to sell equipment. If you doubt the importance of dealers, just consider how you'll audition and purchase new gear if the last dealer closes its doors.

Not a company to sit still -- the long lives of certain of its speakers notwithstanding -- Magnepan has come up with a novel way to help its dealers who toil in today's precarious retail climate. Maggie Dealer-Direct takes a cue from factory-direct, both in name and approach. The idea is that certain models of Magnepan speakers will be sold through dealers with a 30-day money-back guarantee, but Magnepan will drop ship the speakers from its factory to buyers and refurbish any returned speakers. Dealers will continue to be the sales point for the customer by offering product expertise and support and taking care of the financial part of the transaction. They no longer need to stock Magnepan products, however, which cuts their overhead, at least where this one brand is concerned.

Mark Balkowitsch (left, owner) and Eric Doepner (salesperson) of Audio Perfection, the Magnepan dealer covering Duluth and halfway to Seattle.

However, Dealer-Direct's most interesting feature is that it addresses the needs of potential customers without a dealer nearby -- "which is over half the country," according to Wendell Diller, Magnepan's marketing manager. These customers can call their nearest Magnepan dealer, which may be two states away, and buy through the Dealer-Direct program. Speakers will be sent directly to them, eliminating hours of travel simply to hear the speakers.

I briefly discussed the thinking behind Maggie Dealer-Direct with Wendell Diller, who has witnessed the evolution of high-end audio from a unique perspective: his 37-year career in the industry.

Marc Mickelson: You've been marketing and selling Magnepan speakers for nearly four decades. How has Magnepan's business changed over this time?

Wendell Diller: Yes, I am getting old. But did you have to emphasize it with "nearly four decades"? It raises the question whether an old dude can adapt.

The old-fashioned hardware stores and stereo stores (audio specialists) are still around, but they are so few and far between that we can no longer expect the dealer to be the primary means of reaching customers. The surviving audio specialists are hounded by sales reps trying to get their products represented. And if the audio dealer decides to carry the line, which models (perhaps out of dozens) will they demonstrate and display? In the Good Old Days, we had few models and many dealers to chose from to represent our product. We didn't realize how good we had it. . .until it all changed.

Custom install and home theater were boons for some audio specialists, but many audiophile manufacturers were not well equipped to diversify. Fortunately, two-channel has been on the upswing (for a variety of reasons) and some of the Good Old Days are back.

Information in the Good Old Days was so limited that, in looking back, it seems like the Stone Age in comparison. That's the good news.

The majority of our new customers find us from research on the Internet. But, for well over half the population, there is no place to have the experience that Magneplanars can offer. That's the bad news.

MM: What from the "Good Old Days" of high-end audio can we -- press, manufacturers, dealers and consumers -- learn from and adapt to our uses today?

WD: If we (manufacturers, press and dealers) look at the problem from the consumer's perspective, solutions might become apparent.

In the Good Old Days, customers could have the experience. Now, they read about it. The Audio Beat provides extensive show coverage. Your reviewers can sample virtually any high-end goodie that they wish. That is a long way from the occasional Stereophile or The Absolute Sound of yesteryear.

Before responding to this, I got off the phone with Jim from Tulsa, Oklahoma. He remembers the stereo stores they had in Tulsa back in the '70s and '80s. They are all gone. Magnepan had three dealers in Oklahoma at one time. Now, there are none. He is interested in Magneplanars (1.7s) due to all the Internet buzz, but there is nowhere to hear them. Dallas and Kansas City have his closest Magnepan dealers. Our economy is hurting. Few are willing to travel long distances for an audition based upon a few rave reviews. I expressed my concern for Jim's dilemma, but I had nothing to offer him.

So, what are the manufacturers supposed to do so Jim can experience the speakers for himself? Open their own stores? We don't have the resources of Apple or Bose.

MM: Did you have this idea [opening your own stores] in mind with Magnepan's Dealer-Direct program?

WD: As a very conservative company, we watched from the sidelines for many years as other high-end companies tried various strategies to compensate for the loss of specialist retailers.

Custom installers were a popular option. I listened to the viewpoint of both the manufacturers and the high-end dealers. Wow, were they both describing the same reality? There was a huge disconnect.

Big-box stores and regional chains are another option chosen by some. Splitting the product line was an attempt to have it both ways. But it doesn't work very well according to the high-end dealers.

Adding mail-order houses is another way for manufacturers to split their product line and try to get more exposure. Again, a bad idea. Dealers resent being the showroom and doing the demo for someone operating out of a warehouse.

Factory-direct is a no-brainer, right? Everyone is on the Internet and it is very easy to place an order. The manufacturer eliminates everyone, including the mail-order house.

As with any factory-direct or mail-order purchase, the decision process is often based upon the opinion of others. If there are a lot of good reviews and not too many complaints, well. . .maybe I will like it. Sure, a consumer can return the speakers or amplifier if they don't meet his needs, but it is no substitute for the experience one can have in a high-end store.

Magnepan has had the MMG program for sixteen years. It is not really "factory-direct" in the usual sense. The dealers now have the option to sell the MMGs with the same terms and conditions as a direct sale from Magnepan. It is the equivalent of passing out appetizers in an upscale grocery store. It has been a success story for Magnepan. The Maggie Dealer-Direct program is a different angle from our MMG program. I have to admit, it still is not a substitute for the experience at a good audio specialty dealer. However, it accomplishes some things that no other program has done.

At one time, we had a dealer in Duluth, Minnesota. They went out of business in 1999.

Now, it is unlikely that a customer will make the four-hour round trip to visit our Minneapolis dealer. However, if our dealer (Audio Perfection) can let him try one of our models in his home for 30 days, the next time he is in Minneapolis, I would hope that he would stop in at Audio Perfection and put faces to the names.

Mark and Eric at Audio Perfection know a lot more about Maggies than any mail-order salesperson. So, if a Duluth customer wants to buy mail-order, who better to service the customer than Audio Perfection? Magnepan will be their shipping and receiving department -- and we'll refurbish the speakers if the speakers don't fit the customer's needs. We are assisting our dealers to reach out and make friends in areas that we cannot reach in any other way. With Maggie Dealer-Direct, Magnepan is taking the risks and providing the support which dealers can not do on a large scale.

But, there is more. Audio Perfection is packed full of high-end goodies. They cannot be expected to display everything from every manufacturer that they represent. Maggie Dealer-Direct will allow customers to experience Magnepan models that our dealers cannot fully support. Dealers will often allow a trusted customer to take home an expensive demo amp or speaker for the weekend for a home trial -- on the basis that it will be promptly returned undamaged. We are starting small and cautiously, but if this is successful, I can envision how Audio Perfection could have nearly our entire product line available for demo to a huge market area. Imagine if other high-end manufacturers were to adopt this program. Why would you want to call an 800 number and order a high-end product from a salesperson that certainly would not have Mark or Eric's experience?

MM: What has the reception been to the Dealer-Direct program? What feedback have you received from dealers?

WD: It is too early to say for certain. Initially, I consulted my Wise Old Men Council of dealers while I was shaping the concept and they all approved. We are hoping that it will be so successful that other high-end manufacturers will adopt the concept.

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