Advice wanted: Taking over an HiFi Store

[Willem]

?

 

[Keith Conroy]

Dear Forum Members

I'd like to get an hear some advice.
I am based in Zurich, Switzerland. I am in my mid fifties and was recently retrenched. The past 20 years I have been the managing director of various small to medium enterprises in the high tech field including medical electronics with 100 to 250 employees. All business experience has been B2B. Educational back ground is PhD EE and MBA. I have the wonderful opportunity to re-invent myself and I am mulling over some options.

One of them is the opportunity to take over an well established Hifi Store in Zurich city. I visited the owner and his claim to fame is the ability to "match" electronics, cable and speakers. He carries the typical Swiss brands such as Piega, Neukomm, Stenheim and some other imported stuff like T&A, Rega, Cambridge: nothing really too much in the "oligarch hifi" but also nothing that the crowds here would approve of as measuring well for its cost. Fortunately, tube gear is to a minimum but of course he caters to the hipsters and sells them vinyl players.

I quick analysis shows that his long term customers are "typical audiophile", spending around U$10k per system. The current owner and his employees are believers of "you can't measure everything we can here" and unfortunately, he described an episode of switching an Ethernet router . While he agrees that "speaker-room interaction" is important he told me that he tames the system by swapping cables . Also, they have done barely any work on computer audio, don't understand Roon nor REW, and shy away from local streaming as they find it to complex for their customers???

I am wondering, if taking over the store (apparently by only paying off the stock) is at all useful. Of course he has long established relationships with some distributors and local manufacturers and he has a established customer base and store brand name. There are no exclusive rights for brands or territory. My worry is that I would just piss off the current customer base by teaching them too much about Toole, psycho-acoustics, room corrections, Harman curve etc. The ones agreeing would be pissed of that they spent too much in the past, the others would be pissed off at the sacrilege of believing in measurements.

Do you guys think it is worth while or should one alternatively just start from scratch?
What other factors would you consider before making such a jump?

Financially, it is not such a complicated transaction. The owner wants his "baby" to survive past his retirement and I am secure enough that I am not reliant on the store income alone.

Your thoughts are much appreciated, especially from the members who have their own brick&mortar stores.
Cheers

I have spent my working life in audio. Pro Audio, Home Audio & Car Audio. I have been a seller / Dist. /Engineer............Most of the last 20 years have been in engineering. Some of what to do, has to do with the total business cost! I would say bargain on this part of the deal. Brick & Mortar is not getting stronger as a sales channel. Here are a couple issues I see from both sides of the equation. If you don't buy the store & start from scratch they will be your competitor. Also to start from scratch it will take time to build a customer base. Remember each day a new store is open you will have fixed costs. The biggest deal I see is the fundamental direction of the current store runs against some of you audio values. If you can stand 2 fundamental different directions I would buy the store and make small incremental audio science type changes to this store. Then I would set up a 2nd sub-company using Audio Science type criteria. Make this internet only to start. You will be on a tight rope of sorts with your customer base. Since your current audio base will believe in the sonic's of AC cords........Cables etc. Many will go to their grave saying they hear differences. You will still have to sell & support this customer base! Your sub-company will take the different approach which is more Audio Science based. If your customers ask "You can say your trying to please both sides??? At some point hopefully both companies will meet in the middle on direction????????? HOPE THIS HELPS!!

 

[Gringoaudio1]

You still will have plenty of fixed costs. Rent, utilities, insurance, etc.

 

[Goodsounds]

?

Starting a new or taking over a hifi brick and mortar store sounds daunting. As a recently retired professor with a gaggle of grandchildren ranging from 9-19 years who has logged decades of time as an autophile, I have the following observations. Children, teens as well as adults including those who are established financially don't care about quality gear or fidelity. They want ease of use and more ease of use. Thus, I'm suggesting that the pool of viable buyers of "real hifi" gear, or even good quality at a good price, is small and getting smaller. Moreover, older adults like myself don't want to be bothered with any tech issues and/or don't want to spend the $ on gear. True Hifi is to music reproduction like the gas combustion engine is to an automobile. It's hear for now and probably always to some extent, but will never realize it's past fame and acceptance. The one caveat is that new tech will continue to find it's way into new and remodeled living spaces. Thus, we will see some cool and good sounding gear hidden in and about the entire living space with costs included in the purchase. Think B&O and Macintosh sound in your Volvo and Cadillac, respectfully. Run, don't walk away from this deal. Enjoy your time with personal hifi and those who share your interests.

 

[anmpr1]

I've known a handful of owners. I don't think any of them kept it up. I remember a letter Peter Aczel received from a dealer, when he decided to start up his magazine. I always thought it was funny, in a sad sort of way. It was a time of 'boutique' hand assembled high-end stuff few could afford. Affordable stuff mostly came from Japan--better quality for less money, but not as fashionable. Certainly a time earlier than product stamped out in a factory no one has ever heard of, half way around the world.

I have no idea how it is, today, for a dealer. I have no idea if dealers are even around, anymore. At least in the sense I remember them. I don't think I would want to go to a hi-fi shop anymore, because I'd probably leave depressed.

____________________________________________
The Audio Critic (1977)

I am 70 years old and have gone through all the rest. I wish you success, but I don't think you will make it, at any subscription price.

Other publishers of such material are from 6 months to a year behind on the product deliver. What good is this?

The large, regular audio magazines are up-to-date, but tell nothing. I have never read a bad report.

I find that most equipment is fair; much too high-priced; a lot of it comes in new and doesn't work; guarantees are limited; nothing stands up. Before a dealer gets delivery on a new item, the manufacturer is advertising a newer model--much better. They can bankrupt the average small dealer, making new models every week.

Don't ever try to get a part. Why did I ever pick this as a hobby?

Bob Miller
Owner,
SAR (audio dealer)
Babson Park, FL

 

[MaxBuck]

A friend of mine had a hifi store for many years. Morphed into a home theater store.

Damn good thing his wife is a money manager with strong 6-figure+ income to offset his losses. He's retired now; she isn't. I'm quite certain their net income has doubled.

 

[anmpr1]

A friend of mine had a hifi store for many years. Morphed into a home theater store.

In the mid-size town I used to live, the only dealer that is still in business (that I know about) is doing full house integration. Home movies, but also stuff like lighting, heating and air. central vacuum, security systems and so forth.

Back in the day they carried Counterpoint, Conrad Johnson, Acoustat, Apogee. Long gone brands. I guess home movies, colorful lights, and air conditioning keep them going. You have to change with times, for sure. None of that is my idea of hi-fi, but I'm not buying anything, either.

 

[fivepast8]

Thank you all for the many feed-backs - a true treasure trove. I was not able to calculate or analyze the customer life time value... a very interesting suggestion. However, I did an analysis of all the figures and luckily for this shop, the margins on snake-oil and all other stuff are similar: my fear that they only survive due to snake oil sales was not confirmed.

Nonetheless, these stores have to sell a lot of "overpriced" high end and this is where the bulk of the money comes from: speakers, amps, dacs, streamers... in this order. This store in particular sells about 3-4 stereo speaker pairs at 30-35k per year and this is about a 20% of their sales. Amps, dacs and streamers are equally overpriced when compared to what ASR considers state of the art. Using their unit sales and matching those to ASR recommended components, I ended up with a much reduced turn-over and thus profits.

However, I must say, that the interaction with the owner was most enjoyable. He was seriously interested in some of the components I recommended and what he admitted is that he simply lacks the engineering back ground to understand any of the technical explanations. He genuinely relies on the subjective description and is not out to deceive/scam his customers.

Instead, I have invested in a commercial business park that houses a variety of businesses (including some petrol heads) and enjoys good real estate returns. It is less fun, but secures my pension. I am continuing to look for my last "job", start-up or possibly a franchise/master franchise: any ideas welcome.

Again to all of you, thank you for your insights and help. It had a major influence on my decision making and brings forward the best that the internet community has to offer.

 

[MaxBuck]

Smart move IMO. Then again, my opinion isn't worth anything.

 

[fivepast8]

Smart move IMO. Then again, my opinion isn't worth anything.

No Max, actually, your opinion and all others are worth a ton, especially, because I asked for it. Unsolicited opinions are like a-holes, everyone has one!

 

[Soniclife]

Thank you all for the many feed-backs - a true treasure trove. I was not able to calculate or analyze the customer life time value... a very interesting suggestion. However, I did an analysis of all the figures and luckily for this shop, the margins on snake-oil and all other stuff are similar: my fear that they only survive due to snake oil sales was not confirmed.

Nonetheless, these stores have to sell a lot of "overpriced" high end and this is where the bulk of the money comes from: speakers, amps, dacs, streamers... in this order. This store in particular sells about 3-4 stereo speaker pairs at 30-35k per year and this is about a 20% of their sales. Amps, dacs and streamers are equally overpriced when compared to what ASR considers state of the art. Using their unit sales and matching those to ASR recommended components, I ended up with a much reduced turn-over and thus profits.

However, I must say, that the interaction with the owner was most enjoyable. He was seriously interested in some of the components I recommended and what he admitted is that he simply lacks the engineering back ground to understand any of the technical explanations. He genuinely relies on the subjective description and is not out to deceive/scam his customers.

Instead, I have invested in a commercial business park that houses a variety of businesses (including some petrol heads) and enjoys good real estate returns. It is less fun, but secures my pension. I am continuing to look for my last "job", start-up or possibly a franchise/master franchise: any ideas welcome.

Again to all of you, thank you for your insights and help. It had a major influence on my decision making and brings forward the best that the internet community has to offer.

Very interesting that you looked deeply into the numbers, and although healthy you still walked away, probably rightly. This and lots of the rest of this thread really make the long term survival of the hi-fi shops I've known and used seem unlikely. What will replace them?

 

[Galliardist]

Very interesting that you looked deeply into the numbers, and although healthy you still walked away, probably rightly. This and lots of the rest of this thread really make the long term survival of the hi-fi shops I've known and used seem unlikely. What will replace them?

It's not just the shops, but what they sell. Increasingly, stereo will be the low end of the market dealt with in mass market stores. Some of the products they sell are already well refined for what they do.
Increasingly, conventional stereo audio products will be replaced by AV equivalents or have to survive in streaming video and gaming while playing music will be a sedondary role. Most people are perfectly happy with mono bluetooth speakers playing background music, they concentrate on other things. The high end will hide in the home theatre installation business. Only the vinyl business is stopping those changes from happening more quickly, as far as I can tell. Home theatre though is dependent on having a house with a dedicated room, so the masses in apartments, which is where increasing numbers end up, will determine the future of audio as we know it today. I suspect that what we know as the large screen TV today will become the centre for audio there, and soundbar based audio will have to come of age somehow. Those markets mean that specialist dealers will morph into selling other products or become installation businesses - the dealer I used for a few years has already become installations only, for one.

 

[Mr. Widget]

Instead, I have invested in a commercial business park that houses a variety of businesses (including some petrol heads) and enjoys good real estate returns. It is less fun, but secures my pension.

Your head won out over your heart. Probably very wise.

Good Luck!

 

[fivepast8]

Your head won out over your heart. Probably very wise.

Good Luck!

Thank you, same to you.

Very interesting that you looked deeply into the numbers, and although healthy you still walked away, probably rightly. This and lots of the rest of this thread really make the long term survival of the hi-fi shops I've known and used seem unlikely. What will replace them?

Well, in my analysis, this business will go the way the sale of computers have gone in the last 40 years. Back then needing advice on peripherals, drivers, SW compatibility. Digitization, transparency and ease of use made buying a laptop as easy as shopping for a hair dryer.... cost came down, utility went up and the numbers sold increased tremendously.

So I applied the same analysis. The best customers spend 30k on speakers, 10k on amps, 4k on DAC, 4K on Streamer thus around 48k for the system with 12k profit margin.
Better utility and sound can be had with Genelec 8361 and GLM at 8k and thus only 2k profit. In order to make it work, I would need 6x customers, not accounting for the additional loss of upgrade hungry Audiophiles returning to look for better sounding cables .

So the real threat to these businesses is excellent utility from the likes of Sonos going all the way up to Genelec, D&D and Kii, and transparency from the internet, especially ASR. Once audiophile voodoo is dispelled, margins are thin, unless you add much value (installations).

Gaining market share in a shrinking market is the fastest way to go bankrupt unless you can dominate the entire market and have muscle to buy all competitors. What does not work is to wait for them to fold. Thus, I also do not believe in Brick&Mortar shops. Inventory in this small shop alone is 500k! (turning less than twice).

It's not just the shops, but what they sell. Increasingly, stereo will be the low end of the market dealt with in mass market stores. Some of the products they sell are already well refined for what they do.

Correct, I reached a very similar conclusion.

I still think, especially in Switzerland, most people would like to hear the speakers before buying and that means that most things available online cannot be in the line up for the store. Thus, a hybrid model may work: a competitively priced online store with small show/listening rooms scattered around geographically. Franchising may work here and the small listening rooms could be a franchisees living room, listening on appointment only, everything managed via a nice e-commerce backbone. B to C hybrid requires costly upfront advertising for brand awareness.

 

[Robert C]

Richer Sounds is absolutely a hi-fi shop. Yes, they cater to a wider range of customers beyond the hi-end boutique of KJ West One, but one can absolutely purchase a hi-fi from Richer Sounds. They sell items that have received favourable reviews on this site. You're more likely to come away from Richer Sounds with an actual hi-fi (by ASR's standards) than KJW1.

Richer Sounds is also, by all accounts, a good employer. A rarity in the UK. In November 2013 Julian Richer announced to the press that, upon his death, he would bequeath 100% of the firm to a trust co-owned by employees of the company.[3][4] In May 2019 Richer, then aged 60, announced that he had transferred ownership to employees by passing 60% of his shares to a trust,[5] as well as separately paying each of his over 500 employees, excluding directors,[6] from his own pocket a thank you bonus of £1,000[7] for every year of work, a total of about £4 million, as the employees had worked for an average of 8 years each. Richer Sounds is an accredited holder of the Fair Tax Mark[21] for transparency over tax disclosures and the amount they pay, and a part of the Living Wage Scheme,[22] set up by the Living Wage Foundation. Founder Julian Richer backed their Living Hours program, which seeks to curb zero-hour contracts.[23] Richer Sounds is also one of the few UK companies that exceeds the gender pay gap. Women earn £1.03 for every £1 that men earn when comparing median hourly pay. Their median hourly pay is 3% higher than men’s.

 

[Descartes]

Dear Forum Members

I'd like to get an hear some advice.
I am based in Zurich, Switzerland. I am in my mid fifties and was recently retrenched. The past 20 years I have been the managing director of various small to medium enterprises in the high tech field including medical electronics with 100 to 250 employees. All business experience has been B2B. Educational back ground is PhD EE and MBA. I have the wonderful opportunity to re-invent myself and I am mulling over some options.

One of them is the opportunity to take over an well established Hifi Store in Zurich city. I visited the owner and his claim to fame is the ability to "match" electronics, cable and speakers. He carries the typical Swiss brands such as Piega, Neukomm, Stenheim and some other imported stuff like T&A, Rega, Cambridge: nothing really too much in the "oligarch hifi" but also nothing that the crowds here would approve of as measuring well for its cost. Fortunately, tube gear is to a minimum but of course he caters to the hipsters and sells them vinyl players.

I quick analysis shows that his long term customers are "typical audiophile", spending around U$10k per system. The current owner and his employees are believers of "you can't measure everything we can here" and unfortunately, he described an episode of switching an Ethernet router . While he agrees that "speaker-room interaction" is important he told me that he tames the system by swapping cables . Also, they have done barely any work on computer audio, don't understand Roon nor REW, and shy away from local streaming as they find it to complex for their customers???

I am wondering, if taking over the store (apparently by only paying off the stock) is at all useful. Of course he has long established relationships with some distributors and local manufacturers and he has a established customer base and store brand name. There are no exclusive rights for brands or territory. My worry is that I would just piss off the current customer base by teaching them too much about Toole, psycho-acoustics, room corrections, Harman curve etc. The ones agreeing would be pissed of that they spent too much in the past, the others would be pissed off at the sacrilege of believing in measurements.

Do you guys think it is worth while or should one alternatively just start from scratch?
What other factors would you consider before making such a jump?

Financially, it is not such a complicated transaction. The owner wants his "baby" to survive past his retirement and I am secure enough that I am not reliant on the store income alone.

Your thoughts are much appreciated, especially from the members who have their own brick&mortar stores.
Cheers

I would start from scratch, and design what you want, selecting brands that back-up their products with solid engineering data!

 

[JRS]

DSP, Subs, room treatment, (give them flat, extended bass and they will be friends for life) world class speakers across price bins, high value electronics for the sensible crowd, ne plus ultra for the insensible, and a system balance 70% to 80% speakers/20 to 30% for the rest. Starving college students always find money for gear and many will still be customers when they have $$ so have a salesperson who speaks the language. I agree with the set-up and consultation; back in my more foolish days, I was an audio junkie, but the owner of the high end store never took 5 minutes to ask about the environment in which these items were placed, listening volumes, to what extent video was a thing--in other words took little interest in my experience as a consumer. I did appreciate he sold things like Counterpoint, NAD, Luxman as an alternative to Krell, Audio Research, Wadia, Classe etc.

I might also reach out to audio clubs if any in the area, and bring in dealer reps for product demos--always fun even if its Klipsch. And try to become a seller for some beautifully engineered product: Mola Mola, Trinnov, DEQX, Perlisten, YG Acoustics, Lyngdorf. Tone Winner, Monoprice in the budget rooms?

Just a few scattered thoughts. On several occasions I thought about selling ultra-fi (if only for the savings on my own gear, like the addict who pushes to pay for his own habit), but decided I was just too ethical. But there is some great well engineered product out there, not just snake oil, and the demand for exclusivity seems inherent to a large portion of rich folk, may as well give it to them, just don't peddle the lies. Also a big deal in my mind is the week end loaner program. What fun that was.

 

[dasdoing]

Better utility and sound can be had with Genelec 8361 and GLM at 8k and thus only 2k profit. In order to make it work, I would need 6x customers, not accounting for the additional loss of upgrade hungry Audiophiles returning to look for better sounding cables

I am not a seller, but it's pretty obvious to me that selling is NOT about creating a win-win situation, but rather you seduce the money out of the costumors pocket. lol
Have you thought about being a representative for Genelec and sell those to the stores?
Or you open a specialized store where you could potentionaly have custumors coming in from the whole city, not just locally.
Are there any stores where the whole Genelec line can be auditioned allready?

 

[Deleted member 60987]

Hifi stores are a dying breed. Unless he owns the real estate I wouldn't touch it with a bargepole.

Yeah, there used to be one, one town over. Now there seems to be a handful in the state when I look. But a city could probably support something like that. Especially a rich one like Zurich. Banking money.

 

[CleanSound]

I'm toying with the idea of opening a shop when I retire (many many years from now). Reading this thread is depressing. It is depressing because you all painted a clear picture of how depressing it would be to own a HiFi shop.

At least this thread had an happy ending where the OP came to his senses and invest in something else.