- The HCE Video Series
It seems I’ve been having this conversation a lot lately, and that conversation is one over dealer markup versus Internet direct sales. It’s no lie, Internet direct sales or dealers have created a marketplace that seems to favor the consumer. When I say “favor” I mean these Internet direct businesses are seen as saving consumers money. In doing so these Internet direct businesses have inadvertently (or not so inadvertently) “vilified” brick and mortar dealers and/or the manufacturers who still support them. On the flip side, there is somewhat a movement underway in this country for folks to patronize local and small businesses. Mom and pop hi-fi and home theater stores would definitely qualify as local or small businesses. These shops’ actual service to their customers notwithstanding (some provide no service whereas others are exceptional) survive on the so-called markups or margins that exist within the products they sell or represent. So on one hand consumers want low prices but on the other they also want to support the little guy, so what is an enthusiast to do? First off, one must understand or dispel the myth that Internet direct sales are in some way different from physical brick and mortar ones.
I recently had a conversation with an online retailer who was trying to convince me that their product -no it was NOT Emotiva -was the same as another manufacturer’s -only they sold theirs for half the price. They claimed their product was the same because half a decade ago it was once made in the same factory. The product’s point of origins was neither here nor there for the real point was that I should’ve automatically gotten behind their product rather than their competitor’s because their product simply cost less. First, and just to clarify, I wasn’t for or against anything, I judged each product on their own merits and chose to ignore price. However, since this Internet direct retailer/manufacturer insisted upon making price part of the discussion, I humored him. He insisted that because his product was half the price yet produced similar results the other product should be immediately discredited and his product be declared the “winner.” I found no logic in his argument for the very product he chose to compare himself to didn’t even exist in the same space -that is to say it isn’t available for sale online, but rather through dealers. Therefore, he was essentially asking me to chastise or penalize the manufacturer for supporting small business. Which I thought was a crap thing to do.
Look, I’m not made of money as I’m sure many of you aren’t either, but I’m not about to throw someone under the bus because they support local brick and mortar stores. I may not always see eye-to-eye with brick and mortar but the majority of these local and small businesses aren’t bad, nor are they run by bad people. These are folks who survive (emphasis on survive) on these margins -they’re not getting rich. And when I explained this to the manufacturer he seemed to grow more frustrated, which lead me to believe, that like the brick and mortar dealer, he too was just trying to get by. So rather than appeal to his sense of fairness I offered up a mathematical argument, one void of emotion at all.
It went something like this.
Product A sells for $500 and is sold via an Internet direct model, meaning the customer believes he or she is paying $500 for the item’s true value and not a penny more. Product B sells for $700 and is sold through traditional brick and mortar stores. Now, I know that product A and B are not the same -comparable but not the same, but for the sake of this illustration let’s assume they’re the same thing. To the consumer, product A appears to be the better value, for it’s $200 less than B. You’d be right to think that A was a better value than B, provided A and B were truly the same. However, if product A were to be sold via a traditional dealer then it (A) would cost the same as B or more. That isn’t to say that product A therefore doesn’t have any markup -it does, arguably the same or more as B, it just isn’t shared with a dealer but rather the manufacturer or importer directly. But it’s important to understand that the makers behind product B aren’t sitting there twisting their mustaches in a darkened room with a kitty on their lap thinking of ways to screw their customers -they aren’t. Why? Because they themselves aren’t making any more or less money than the maker or importer of product A. In truth they’re making the same -arguably they’re even making less. Yes, it sometimes costs the manufacturer of product B money to support their dealers -especially in a world that now has to contend with virtual dealers and/or Internet direct sales.
The point is, neither side is right or wrong it just is what it is. As a paying customer you have to understand that when you shop at a physical store, part of the cost of buying something there goes to footing the bill and supporting the livelihoods of those who’s store you just patronized. By purchasing “locally” you’re supporting two businesses, the original manufacturer and the local dealer. With Internet direct sales you’re potentially only supporting one -the Internet direct retailer themselves. Again, that isn’t to say one is better than the next, it just is what it is. But it is unfair to chastise those who would be in support of product B over A because you don’t want to pay for someone else’s livelihood, but yet in the same breath fight for the well being of small businesses. It’s hypocritical.
There is room for both, and if nothing else the presence of Internet direct dealers helps keep brick and mortar “honest.” Internet direct companies arguably also help thin the herd when it comes to eliminating “bad” brick and mortar dealers, but it doesn’t make them (Internet direct companies) better. There is room for everyone, if nothing else, Internet direct retailers and their “lower prices” do help bring new enthusiasts into the fold. But rather than rallying against those whose businesses are a little different, we should be looking into ways that we can work together. After all we all trying to progress the same hobby -a hobby that will live and die by the strength and unity of its fans, and not in who charges what.
As always I thank you all so much for reading. Until next time, take care and stay tuned…
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