Should You Buy an Audiophile Store? 

For 20 years, there have been some faint voices discussing demographic issues that the audiophile hobby has, mainly being the fact that the hobby is nearly all-male and predominantly supported by Baby Boomers who are now aged into their 70s. Much like the Oldies Station on the FM radio plays the music of the 1970s, 1980s and even some popular 1990s fare, their demographic has gotten notably younger. The whole editorial premise of FutureAudiophile.com is smoothing the transition between the way things have always been, dating back to the late 1960s, in the audiophile hobby, to what things will be like in the coming years when original audiophiles realize that they might not want to always invest $20,000 in a stereo preamp as the next step in their journey. Many older audiophiles are selling off (or auctioning off) their fully-realized audiophile systems for powerful but less expensive systems. That’s not because they don’t still love the hobby, but the practice of being an audiophile does require a lot of time, space and especially money.  

Audiophile dealers or audiophile salons have always been a big part of the way that the hobby has grown over the past 50 or so years. Saturday afternoon at the stereo store was often a place of congregation for audiophiles, dating back decades. New components were installed and played with a unique urgency. Intense conversations were often had between audiophile customers, which built meaningful levels of community. Audiophile dreams were born and, many times, real money was spent. Today, good audiophile stores are sadly harder and harder to find. The average age of the owner of these stores is also getting a lot closer to that of “retirement,” often without a clear succession plan that would pass off these hubs of all-things-audiophile to a younger generation. In some cases, the sons of the almost exclusively male-owned audio stores have taken over. Other audiophile retail locations have closed with their leaders’ departures. Much like second-generation Chinese-Americans, who often are fantastic students who attend topnotch universities, don’t come back to run their parent’s restaurant with a PhD in Electrical Engineering from MIT, many younger people are passing up the often lucrative position of running (or starting new) audiophile stores. Much like Boeing needs younger and more diverse people to help them make Dreamliners (as well as to want to actually fly them), the audiophile business needs both younger and more diverse people to want to invest in an audiophile system, as well as run the retailers that so eloquently sell them. 

Should Floundering, Old-school Audiophile Stores Stay in Business?

A hardcore economist might suggest that a little economic Darwinism is in order for this argument. From a tough guy’s perspective, if a stereo store can’t stay in business, then perhaps it shouldn’t be in business. From a different outlook, is saving a few bucks on tax or buying online worth not having a local dealer that floors well-respected gear? That’s a high price to pay in order to save a few bucks. Local dealers are helpful with trade-ins. They can facilitate repairs (and often loaners) and other setup and/or service. For audiophiles looking for the absolute best in music playback system performance, travel has become more and more part of the hobby, and that is logistically tough and always costly. Without local audio dealers, the need to travel is even stronger. 

Build It and They Will Come Has Never Worked in the Audiophile World, Ever!

The concept of building the world’s most fantastic, over-the-top showroom with tons of overhead is a concept that has been tested in the audiophile world for decades now. And every time, it has pretty much been a failure. Overhead is a killer, and while just the concept of having each and every product of many excellent brands is tempting for audiophiles who want to sample everything that the hobby has to offer, it is also stunningly unprofitable.

Christopher Hansen Ltd. in Beverly Hills (where I cut my teeth in the early 1990s) was one of the all-time best uber-high-end audiophile stores. When the old Rolls Royce building closed on Olympic Boulevard, Hansen was able to take Indonesian investment money and build the most gorgeous, elegant and well-stocked audiophile store in America. By 1994, even with a pair of the new $67,000 (yes, they were that “cheap” back then) Wilson Audio Grand SLAMMs on display, the store closed its doors. 

SoundEx just outside of Philadelphia was also one of the top-grossing dealers in America, as they could offer the same healthy discount as Manhattan audiophile stores, but also save consumers almost 10 percent savings in tax. When SoundEx decided in the mid-1990s to move from a rundown home jam-packed with any and every A-list brand in audio over to a gleamingly new, 26 demo-room building that found concepts like the newly-launched (at the time) “plasma TVs” unlikely to sell, but had every possible cost-no-object audiophile component and system on display. They went out of business in short order after opening their beautiful but foolish new retail location, as they didn’t understand their place in the audiophile retail market, and were stubbornly unwilling to pivot after making a massive logistic mistake.

Very few AV retailers are like Definitive Audio in Seattle. Their Bellevue, Washington location is the closest example to a build-it-and-they-will-come success story. Historically, under its past management, Definitive Audio was not only the nation’s best specialty AV retailer, but it was exceedingly well-run and well-managed in ways that other audiophile stores couldn’t dream of. They had high overhead, but were very professional in their management acumen. They were also diversified into other industry categories well beyond their strong audiophile roots. Definitive Audio was an audiophile powerhouse, but they also did far more business in Crestron and other custom installation. They also have a commercial division for tech industry installations. They had a maritime division and, considering who one of the big four companies in their area is (Amazon, Starbucks, Microsoft and Boeing), they also had an aviation division. This level of diversity allowed them success when pretty much everybody else who tried to go big, failed. The failure of Tweeter is likely the poison that keeps Definitive from expanding to a national chain, but if they ever get ambitious, there are many major market cities that would thrive with a Definitive location. 

Can an Audiophile Salon Survive Without Doing Some Custom Installation?

Most customers aren’t audiophiles. Most don’t care about our quirky hobby or want a system that you and I would kill for. More than likely, they want good-looking 4K UHD television and the associated gear to make their music, movies and streaming result in a great experience. Smart home systems are appealing, too, but are very labor-intensive and often require sophisticated programming, contractor’s licenses, and more. 

Can an audiophile dealer make money selling video monitors and Sonos gear that come very light on profit margin? Some do. Accessories also help boost overall profit margins, but the return to low overhead is key. Selling audiophile components is an easier path to profit and success, but having a good CI (custom installer) division is a good way to diversify an audiophile retailer, as many of the top audiophile salons have learned over the years. 

Will an Audiophile Store Ever Get the Memo About Video Gaming?

The video game industry is bigger than movies and music COMBINED today, and will likely double both of them by the end of the next five years. Kids flock to ROBLOX, Fortnite and other gaming franchises, and spend on gaming PCs, specially-made optical keyboards, and ultra-fast clicking $300 gaming mice, as well as large, fast refresh-rate monitors. They are young, enthusiastic and willing to spend to get the Nth degree of performance. They also love music, yet there isn’t one dealer that we know of in the audiophile world that is selling car simulators, airplane simulators, video gaming suites or has anything like that on display at their showrooms. Perhaps they need to take a brief look at the median age of their client and ask if they are positioned for long-term success, or if is there a new way to bring in people who might spend on tech, including a starter audiophile system? 

Is an AV Retailer a Good Business to Buy Today?

A respectable AV dealer in a solid location with its overhead under control can be a wonderful investment, and a business that can reasonably kick off a few millions of dollars of revenue yearly. Online tech-based businesses tend to sell for roughly two times top-line revenue. Retailers don’t get such a great multiple, thus an audio store can be had for a song by a savvy younger investor with a little creative financing. 

One Florida-based store that would be considered a safe bet for the “all-time best store” list went through some internal issues and, out of a divorce, it sold for $40,000 total. That dealer went on to be a juggernaut in its South Florida market again today. Ultimately, this retailer kept true to their audiophile roots with a very serious audiophile room with bleeding-edge products but they also were fully entrenched in custom installation as Crestron, Control4 and Savant dealers. If you have money and want cool toys, they have you covered, and they’ve thrived for decades since that low-cost acquisition.

Owners of today’s best audiophile salons are often looking for that “right guy” to come in and ultimately take over. Price and terms often aren’t the driving force in a seller’s motivation so much as continuing to service the client base, community and keeping the party going. The profit margins in the audiophile world can be generous (especially when you put your support behind your key brand partners, who often reward their best dealers with even better pricing, terms and margins when you sell through on their products successfully). Overhead is a bitch and should be carefully managed. Labor costs are higher in every corner of the United States (globally, too), which impacts costs. Insurance isn’t any less money in a recently inflationary economy, either. High interest rates also impact the cost of flooring demo products. With that said, many audiophile companies will help with beyond-lenient payment terms and generous profit margins. In the right situation, there is a lot of money to be made from one of these small businesses without a lot of grief. Moreover, playing with stereos is something that we do for fun. Making a solid six-figure living in the process is a pretty juicy perk that some will take advantage of in the coming years. Now is the time to start having said conversations, however. 

Some Parting Thoughts on AV Retailers for the Future…

The importance of having one or more good audiophile dealers near you is high. As a hobbyist, it is hard to justify traveling to get exposure to more and more exotic audiophile gear. This is why U.S.-based shows are so popular with some audiophiles. You can travel to AXPONA (Chicago), Capital Audiofest (Maryland – not far from Washington, D.C.) the Tampa show, and Pacific Audiofest (Seattle), as well as a new show in Dallas. There is T.H.E. Show, which is pretty small, but near the John Wayne Airport in Orange County, California. There is even a tiny show near Oakland, and these are only some of the audiophile events in a current year. Getting in a car, train or airplane can give the audiophile great exposure to new and exciting audiophile products. With that said, coming home to a dealer who has a vested interest in your audiophile system and overall system experience is a true luxury. Consumers need to know how to support said dealers, and dealers need to return the favor. They days of “pulling a Pretty Woman,” as some well-known audiophile stores in New York City became famous for in the 1980s, isn’t going to cut it today. It shouldn’t have even been a thing in Manhattan (or anywhere) in the past, but that’s water under the bridge at this point. The audiophile hobby needs to keep working on being more and more inclusive if it wants to survive the pending demographic sea change that is mere years away from reality. 

An audiophile retail store is like a good bookstore, but a far better, more profitable business.Retailers that sell books are few and far between because of Amazon, but when you find a good one, you understand the value. Record stores have the same effect on the community, but suffer from the need for high-volume sales because of the low per-sale dollar volume and often low profit margins on books or music. Audiophile gear doesn’t suffer from that problem, as it has ample profit margin and, we hope, a loyal, willing customer base. Diversifying the audiophile retailer business model to include other, more attainable or aspirational purchases like collectable vinyl, well-curated coffee table books and/or a collection of modern high-performance headphones can hedge against the inflationary pressure that many varied businesses face today. 

Most older audiophile store owners suffer from the “you can’t teach an old dog new tricks” problem, but the truth is that, in a few months, a savvy and motivated new owner can start by fixing an audiophile store’s website. I’ve helped at least a dozen AV dealers get to (or close to) number one organically (locally) on Google, as that SEO challenge isn’t that insanely hard. Creating an email list for the clients in a modern CRM like Zoho or Salesforce.com might make some septuagenarians’ heads explode, but it isn’t really that hard, and then you can communicate with your current clients in ways that easily pay the monthly bills. Lowering overhead is the longer-term trick, which isn’t insurmountable. Commercial real estate is one of the most beat-up categories in the economy today. Walk up and down the Third Street Promenade in Santa Monica and see that roughly 30 to 40 percent of the higher-square-foot-cost retail locations are notably empty. That goes for other retail spots not in Santa Monica tourist traps, thus you are likely going to be able to either renegotiate one’s current lease for a longer-term renewal, or move to a new location that likely comes with some needed “build-out” money amortized into your next five-year lease costs that could help a new owner create a retail environment that is truly in tune with the future and the needs of the future audiophile (see what I did there?)… 

In the end, there are a few wonderful business opportunities sitting out there for somebody who might be going through a midlife crisis, or for someone who loves music and technology who wants to make their passion into their living. Even if a dozen soon-to-be entrepreneurs learned of said opportunities and acted on them, the hobby (at least in this country) would be much better off as a business. There is a solid six-figure payday out there for anybody who’s interested. There are people like me (and many others) who are willing to help as consultants. There are countless audiophile brands, many of which we would all consider A-List, willing to open you as a dealer. The world is your oyster, if you are interested…

Tell us about your experience with your local retailer? Can you think of one near you that you (or somebody) should buy? Would you invest in an audio store or is this a crazy idea? Comment below. We will approve comments as they come in, as all comments are moderated on FutureAudiophile.com because of trolls.