Re: Exile and other "non-internet" brands

Well, you've asked an interesting question, one that I've had to
consider as my intent is to open a brick-and-mortar store of my own if
the online sales justify it. But first: Yes, it sucks for the
brick-and-motar stores that someone would come in, have a listen, and
then come to me for the purchase. It also sucks for me that I have
averaged about 200 hits, per day, with zero advertising costs, but
certainly haven't made 200 sales per day. Some number of those people
were pricing my goods, taking into account shipping costs, time waiting
for the components to arrive, and the lack of one-on-one, face-to-face
help, and they've went to a brick-and-mortar to make their purchase.
Life's a bitch.

Now, for the new-and-improved business model. Obviously, if I had it
all worked out, I'd charge for my knowledge and make my money as a
consultant. But, part of it has to be to follow the automotive sales
industry. One of the largest automotive groups (the largest privately
owned group) has long operated very differently from the rest of the
industry, and they've thrived. While publicly traded groups, such as
Sonic and Auto Nation, have had to own 400 or more dealerships to hit
the $10 billion annual sales mark, the third largest company has hit
that number with less than 100 dealers. They did it by realizing that
they weren't selling cars, cars are more-or-less a loss leader these
days. This group makes it's money almost solely in service and F&I
(finance and insurance).

A large brick and mortar can offer services that I simply cannot --
credit, installation, even repair. Warranties will have to become a
much bigger slice of the profit pie. Sort of like Xerox isn't in the
copier business, it's in the cartridge business, brick-and-motar stores
will have to make their money by perfecting the sales of tacked-on
items, while decreasing their mark-up on individual components
significantly. There is no reason why the brick-and-morars cannot be
more competitive with my pricing, anyway. If I take 30%, then they
could take 50% and really be pretty close to me in pricing, except on
the most expensive items. If, rather than taking 100%, or 150% mark
up, they took a more reasonable amount, and got excellent penetration
on extended warranties, interest on credit accounts, installs, and the
like...well, they'd be alright.

A lot of the problem that brick and mortars have is in customer
service. They are selling extremely complex products to a consumer who
often has no idea what they are doing. Most of these retailers behave
in a very condescending manner which makes non-audiophiles/electrical
engineers, extremely uncomfortable. Why is, for instance, a Pyle worse
than an Alpine? Many consumers who just want good sound but don't want
to go back to college to get it, are more comfortable reading reviews
online, and buying from me, because they know I won't snear at them as
they are buying the $70.00 Sony XPlod. That's an easily rectified
situation on the part of the physical retailers, but it does involve a
change in philosophy from believing that they are providing excellent
products to an informed consumer, to believing that they are offering
the products that the customer wants at a fair price. Circuit City and
the like sort of get this, but they go to the wrong extreme, and offer
zero technical assistance in most cases (in my experience).

Obviously, there was no quick way to answer this question. But, the
physical retailers will have to accept that, 1) they don't sell car
stereos, they sell expertise and services -- they must learn to
monetize the expertise and find more services to offer (extend more
credit, offer installation *assistance* for a fee, whatever). 2) All
things being equal, their customer service should be far superior to
mine, they have the wonderful capability of looking their customer in
the eye and physically showing and explaining components, a failure to
capitalize on that opportunity is like sending me a check. 3) Above
all, the industry will have to become more-and-more segmented.

On that third point, we agree. As you've said, we should all be
finding our niche, our own products, look for the diamonds in the rough
and help those companies build their name in exchange for exclusive
deals (yeah, I realize the neccessity of exlusive deals, I'm only
opposed when I'm shut out. That's not hypocritical, it's business).
One of my ideas was to work with small companies which are still
manufacturing in the United States, even if that means working with
guys building amplifiers in their basements. Nationalism never goes
completely out of style, and here in the Midwest, I could drive a good
amount of service to a physical location just from having a selection
of American made goods, even if they wound up purchasing something else
from me. I'd be working in the interest of my market (helping keep
American jobs in America, and all of that), and my customers would
support me for that (hopefully). My particular plan may, or may not,
be workable or good. That's not the point, of course; the point is
that I'd find my niche, something that would be difficult for anyone,
online or off, to intrude on and suppliment that by offering various
and mind-boggling arrays of add-on services and warranties and finance
options, all in an effort to squeeze every potential cent out of each
sell.

The little mom and pop stores, by the way, don't really stand a chance.
Between mega-stores and online stores, there's really no room for
someone with $20,000 in inventory and a suite in a strip mall to do
much business. They'd be better served by closing shop and moving
online (there's surprisingly little competition in cyberspace), or
looking for investors to expand their capabilities. They could, and I
just thought of this, consider going into partnership with larger
outfits to operate as a sort of boutique outlet...a "Wal Mart
Neighborhood Store" sort of approach, for those opposed to dealing with
big huge concerns, but also hesitant to shop online. The partnership
would offer them the funds to expand services, while also keeping them
from being crushed between the bohemoths and us predatory online
concerns;). Consolidation, it's the wave of the future.

By the way, Mosfet, when are you going to offer your marketing
expertise to me, pro bono? I am a struggling entrepreneur, after all.

.

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