By Many years ago, I worked for a company selling products both direct to qualified OEMs – original equipment manufacturers – and to authorized distributors. For the direct business, an Original Equipment Manufacturer purchased component parts to use in the manufacture of their products and then sold to consumers. There are many examples, but an automobile comes first to mind. Car companies buy all the parts used in the manufacture of a car – components such as oil pumps, fuel pumps, radiators, batteries, tires and more. The company assembles the components as a finished automobile, and then sells the car to a dealer. The dealer in turn sells the car to a member of the general public. Most of the products we consume are manufactured and distributed in this manner. For the most part, so are all the components in an audiophile stereo system.
Because this business model is so incorporated into our buying DNA, doing anything differently is seldom even considered. This is how we purchase major appliances like refrigerators, ovens and dishwashers. In fact, it is the basic premise behind just about everything we purchase during the course of a normal day. However, just because this is how things have been done traditionally manner does not mean the average consumer would not like to upset the apple cart and do the unthinkable – buy direct.
How Does All This Apply to Audiophile Components?
Most audiophile manufacturers buy the components parts of the products they produce from specialty manufacturers. They buy transformers from companies that design and make transformers and little else. Each individual part of a piece of stereo gear comes from a supplier that specializes in a particular product. All of these individual parts are purchased from outside suppliers and, together with work done in-house, assembled as a power amp, preamp, loudspeaker, music streamer, or whatever. The audio component is assembled, packaged, then sold to an authorized dealer. The dealer in turn works with the end-use consumer and, once sold, the piece of stereo gear’s journey is complete. Well, complete until it maybe one day becomes part of the used marketplace.
Why This Business Model Works for Audiophile Components …
There exists an almost symbiotic relationship between a dealer selling stereos and the general public consumer. When this works to perfection, consumers develop a relationship with a dealer and a high level of mutual trust is established. Dealers are trusted to give sound and meaningful advice, to guide system-building goals in a unbiassed and honest manner, and to extend a fair and equitable discount for the products purchased. They are almost always willing to provide a high level of service and support after the sale. The role of the consumer is to allow a fair profit margin and, perhaps most important to the average dealer, to be a loyal customer as much as possible. I cannot think of a dealer who is not angered by a customer who comes in, spends hours listening to something, asking all sorts of questions, negotiates a price, and then buys used online. Dealers put up with this practice, but in no way does it mean they willingly approve of their customers doing so. Audio gear has been a dealer-to-consumer business model ever since the high-performance audio hobby has existed.
What is the Appeal of Buying Audiophile Gear Direct?
This is a pretty easy question to answer. Price, or at least the expectation of a discount. Cut out the middleman and the price often goes down. We all want a better price, a lower cost, to write a smaller check, or whatever may make our desired products less expensive. We want to save money and spend less. In my former business life, I once had a significantly large customer who asked the company that employed me if they would cut me out and receive my sales commission as a discount. My supplier told them to become a direct account would actually trigger a price increase. This was because of the additional cost of sending a factory person down on a regular basis and to do all the services a local rep provides. This answer pretty much ended the cutting me out fishing expedition by my customer. I didn’t blame them for looking to save money. In fact, I wasn’t even worried when I found out what my customer had done. That’s what sales contracts are for, but it does illustrate a point: we all want to save money and, if we feel buying direct can do so, irrespective of any negative aspects, then we are fully on board.
Are There Any Downsides to Buying Audio Gear Direct?
This depends on what you actually consider a downside, or a negative circumstance in buying direct. There are a few you may see, and here are some of the more common pitfalls:
- The consumer will basically be paying the full list price. Some manufacturers may give a discount off list price, but most do not. Certainly most dealers who will work with a client in establishing a business relationship have a willingness to be cost-competitive. Most manufacturers, on the other hand, will allow a 50 percent or more trade-in value for a newly-purchased component for replacement. In other words, buy an amplifier, pay full price and, when a new version of the amp is released at an almost certainly a higher price, receive partial or maybe full credit for the original purchase price as a trade-in value for the new amp. This will provide a new amp at a lesser outlay of money, because the original purchase covered a significant portion of the total cost. This total cost being, of course, full retail price.
- The consumer is relegated to one manufacturer for a particular product. If an amplifier, preamplifier, DAC and phonostage are all purchased from one manufacturer in this manner, the manufacturer is almost guaranteed the replacement business for an indefinite period. As consumers, we buy primarily on price and the prospect of the original purchase price being applied to the cost of something new is hard to ignore. Manufacturers want consumers to become indebted from a price standpoint, so that continued business from the customer is assured.
- Manufacturers only sell one brand. Dealers, on the other hand, sell multiple brands. A dealer can likely sell a consumer an amp by one company, a preamp by a second company, and a DAC by a third. Manufacturers have only one toy in the box.
- Manufacturers cannot provide the same level of personal service as a dealer. Dealers can answer questions on all sorts of gear. They can make reasoned recommendations on compatibility between various brands. They can make suggestions on issues such as compatibility – for instance, will this solid state amp work well with this tubed preamp? This is especially important when the consideration is having an amp, preamp and DAC by three different companies. A dealer is far better equipped to answer these type of questions than is a manufacturer.
- A good dealer can deliver and install a new piece of audiophile gear. Manufacturers are not remotely equipped to offer this level of personalized service.
Which Are Some of the Audiophile Manufacturers Currently Selling Direct?
- First to mind is PS Audio. Our industry friend Paul McGowan enacted this direct-to-consumer sales policy approximately a decade ago. All of PS Audio’s dealer networks were eliminated and the direct-to-consumer model began. To the surprise of many, PS Audio has made this method of distribution work since its inception. Customers seem to be generally on board with this method of buying. On the other hand, I noticed recently on the PS Audio web site there were listings for refurbished gear available. This is one of the other aspects of selling direct: something must be done with all the trade-in gear. From an outside perspective, PS Audio seems to be making the buy-direct thing work.
- Another notable company selling direct is Cary Audio in Raleigh, North Carolina. Founded in 1989, Cary Audio has been a very popular manufacturer of tubed equipment. Like PS Audio, about eight or 10 years ago, they switched to a direct-to-consumer model. While I cannot say this with certainty, Cary Audio seems to be doing quite well with a no-dealer-network business model.
- Legacy Audio also sells direct and has established itself as a very reputable brand of audiophile speakers.
- I once owned a speaker system sold by a company called Ohm Acoustics. To the best of my knowledge, this New York manufacturer has always sold direct. The Ohm Walsh IIs I once owned were a nice set of speakers in their time. They were even omnidirectional. Too bad stupid me got crazy one day and blew the tweeter out of one of them. I was young, what can I say.
There are also those who depend on the Internet for brand recognition. These would include, but are not limited to, Tekton Design, Odessey, Orchard Audio and Peachtree Audio. There are also companies like Schiitt Audio, which has a primary distribution method of selling direct online, but they also sell through Amazon and, internationally, through dealers. Buckeye is another one. There are so many that it is hard to count.
What Are the Conditions of Buying Audiophile Gear Direct?
- First and foremost, it must be understood that buying direct will almost certainly mean paying full price. Any discounts will come on the next-generation component by means of a trade in value.
- Be prepared to only be able to discuss the manufacturer’s brand. There is little need to discuss a competitor’s brand. On the other hand, the availability of speaking with management and actual designers of the equipment when buying direct is certainly advantageous.
- The purchased product will be shipped, and the buyer will be responsible for setting up the new equipment and figuring out how it is used. No one will come in to deliver, set up, and explain the nuances of how the new piece of kit works. Again, however, most manufacturers have a customer service function to assist a buyer with any problems.
- If a very close relationship with a dealer exists, it may be tarnished somewhat when the dealer learns what the customer is doing.
- Conversely, if a high degree of brand acceptance and loyalty to a manufacturer exists, buying direct can be a very efficient and simple way to obtain new gear. It is also possible that a manufacturer may send a demo sample to be evaluated in the home before purchase. In this way, the consumer is able to verify the value before writing the check. No matter what, manufacturers want to sell their products, and if they can do something in a direct sales model to aid in this effort, they will.
Final Thoughts On the Direct-to-Consumer Buying Model …
Let’s face it, regardless of what anyone may think of buying direct, either positively or negatively, this is a now permanent part of how audiophiles obtain new gear. We can find out about new companies that sell direct from the Internet, from product reviews and even from the recommendations of fellow audiophiles. Just because buying direct has, in fact, upset the traditional audiophile apple cart, it certainly does not mean a fair price on a highly-welcomed piece of audiophile equipment cannot be obtained. In fact, the companies that have gone full speed ahead in this business practice seem to be doing quite well. There will always be audio companies in financial peril. Just look at MBL in Germany, which was near insolvency before being purchased by a Chinese company. Now they have available capital and can continue in business. They sold almost exclusively through a dealer network.
Just because our general temperament is to buy in a more traditional, manufacturer to dealer to consumer type of arrangement, in no way is it an exclusive buying practice. I, for one, am a big supporter of the dealer business model. I think a strong audiophile dealer brings a lot to the conversation. But there is also a cost to doing business with a dealer. And if that cost may be offset by a manufacturer that is willing to entertain a different practice of selling gear, then I am all for that as well.
The bottom line is, in order for any of us to have and enjoy an audiophile stereo system, someone must design it, someone must build it, and someone must sell it to us, the consumer. In our world today, disposable income, the very funds most likely used in the purchase of a stereo system, must be available and used for our auditory indulgences. It is really very simple: we want a nice-sounding system we can enjoy, and one of which we can be abundantly proud. Whether that happens because of the dealer just down the street, or the manufacturer half a country away, it’s acceptable either way. At the end of the day, how we get an audio system is far less important than enjoying the system we have. Once the check clears the bank, sublime musical enjoyment is much more important than to whom the check was written.
