Anatomy of High-End Audio Dealer Startup – Part I


Do audio enthusiasts really care about what goes on behind the scenes—the trials and tribulations of a would-be HiFi dealer? If so, read on…


Anyone who’s read my About Page will understand my motivations for starting Neal Audio, and so I’ll forgo that. Instead I’ll focus on some early challenges in my quest to develop into a dealer that I would be happy to work with as a consumer.

Of course a consumer’s needs are often different than that of a dealer, yet they are certainly intermingled in some important ways. As a consumer, at the top of my list has always been: price relative to performance (what I also call competitive performance quotient), reliability, support, matching, warranty, brand history, and dealer trust. All of these I consider to be equally important; missing any one of these elements was likely a deal breaker for me.

As a consumer, at the top of my list has always been: price relative to performance (what I also call competitive performance quotient), reliability, support, matching, warranty, brand history, and dealer trust.

Even before delving into the expanded dealer criteria for brand selection, just these initial consumer-oriented elements required some due diligence on my part. Making the Neal Audio cut meant a lot of research, testing, and many long conversations with other dealers. It also meant actually calling support numbers of some manufacturers in order to find out how they handled such calls. While this may seem a little over the top, consider that some reputable, highly regarded brands that get sycophantic love on the audio forums sometimes botched this simple test miserably, usually by failing to answer their phones repeatedly.

Further Down the Expanded Brand Selection Rabbit Hole

Just as my my priorities don’t always reflect that of other consumers, this is even more true of dealer differences. Some just want to sell audio trophies and that’s their business. Not me. And by setting the bar high, chances are quite good that my customers will appreciate the careful consideration given to my lineup.

As a dealer, my list also included those same things I required as a consumer, except dealer trust becomes manufacturer representative trust.

As a dealer, my list also included those same things I required as a consumer, except dealer trust becomes manufacturer representative trust. This can be established either quickly—or not. Some brands were ruled out immediately simply because I didn’t trust the rep and never will. In this regard, it’s very much like a consumer interaction with a dealer. Trust is typically earned over time… yet like with all relationships, an early bad experience can leave one indelibly soured.

Some manufacturers flat out told me no—but maybe in the future. This is understandable, since some people don’t want to accept the risk associated with taking on a new dealer that isn’t yet established. Yet if the rejection was delivered in a way that was demeaning or dismissive, then that brand is off my list now and forevermore. For those that delivered the bad news with class, that’s also remembered. One rep politely told me no, then after meeting me quickly changed his mind. It’s his initial handling that left me open to the brand.

On top of all of this, a brand of interest had to meet other criteria:

1) Is it sold down the street? Why get into an adversarial position with other local dealers, especially when so many products are available? It’s my wish to maintain friendly relationships with other dealers and it begins by being free from potential points of contention.

2) Is it sold directly by the manufacturer? Direct selling puts dealers at a distinct disadvantage, since buyers can get special discounts and lenient return terms.

3) Is it sold on any of the online marketplaces? This presents price competition, especially as it relates to interstate shipment since customer’s may wish to avoid sales tax on high ticket items.

4) Is it deeply discounted by other sellers? The margins aren’t very high when one takes into consideration overhead… shipping, failures, inevitable damage, and orphan products (new versions come out effectively making current stock less desirable). That’s one reason why so many have failed in recent years.

5) Does the brand hold its resale value? So often they don’t, and like it or not, dealers are often competing not only against other dealers selling the same product, but deeply discounted used products in the marketplace.

6) Does it have brand recognition? Some lines I carry must have some cache in the marketplace. If every brand I carried didn’t, then this would cause a problem gaining marketplace traction as a fledgling dealer.

7) How was my experience with the demos? One brand that I had intended to carry had numerous reliability problems across different models, and this was a deal-breaker. It didn’t matter how many accolades were awarded in the various Funny Papers (how I’ve come to refer to audio review magazines).

8) Do the brands play well together? Matching components is critical in high-end audio with a single system as a consumer, yet from a dealer perspective the brands must enhance each other more broadly and at similar price points.

9) Made in America. Great deference was given to brands that are made in the US, which is why most of my brands fall into this category! Made in America means American jobs.

My business model caters to local buyers who favor my expertise and service, and so I’ve chosen manufacturers that value this same model… giving some measure of price stability in the dot com era.

Notice how the first five elements on my list deal with pricing and competition. In this, I’m aligned with the consumer. If you’ve ever purchased high-end gear only to find out it’s value has declined precipitously in a short period of time, you can appreciate this approach. This also helps customers wishing to trade up in the future. Also notice how in the remaining elements—in all of my chosen criteria—there’s a very good chance that a discerning listener will find my dealer priorities likewise aligned with their own.

When each of these issues are considered, the brands that made it onto my line card contributes to what I believe is the best lineup possible in the Scottsdale area, or any area for that matter. And as a consumer, there’s plenty to love.

The Music is the Trophy