Should Every Home Theater Purchase Be a Big-Ticket Sale?

Professionally, I haven’t been in a pure sales role for over 25 years and, in an odd way, it is liberating, as well as thought-provoking. In the old days, I sold over $10,000,000 in online audio/video advertising, but I also had to run the editorial department, the accounting, the search engine optimization, IT, and so much more. Audioholics President Gene Della Sala knows my pain, trust me. There is a certain beauty of the singularity of only having to worry about how to make the cash register ring, and ring enthusiastically.

Early on in a new project or sales role, it can be hard to establish a sales pipeline, meaning leads that are simmering on route to a sale one day. That is true in my world, as well as in the world of specialty audio. Priming the pump for big commissions can take a few months, some creativity, and a lot of patience. Historically, I have gravitated towards the big-ticket sales, with the attitude that you could make more money selling bigger-ticket items with more profit margin than a higher volume of smaller sales. While there are some guys making multi-million-dollar livings selling condos all over West Los Angeles, my real estate clients (for SEO, and yes, they are thankfully number one or two on Google now) sell homes from $10,000,000 to over $100,000,000 each. The percentage commission is the same as a $900,000 condo in Culver City, but the commission volume pays for the fractional ownership of the jet, and allows said agents to rub elbows with their clients as neighbors as well.

In my new role, I am learning to strike a balance between smaller transactional sales and chumming the waters for the very big boys. My buddy, who helped recruit me, is excellent at big-game hunting and he is on track to earn around one-tenth of a one percent this year. But that’s not the proven way to be successful here and in other venues, as even my mentor will tell you. In baseball, Barry Bonds was a “patient slugger” in that he understood the science of Bill James and Sabermetrics (the concept behind the book and movie Moneyball), which states that no matter how you get on base, when you do, you have drastically increased your odds of advancing and scoring. While Bonds would put a home run into McCovey Cove with frequency when he was playing, he also would take a “hit by pitch” or a walk and smile. He knew the math, and he played the numbers to his and his team’s benefit when he was in San Francisco.

Marketing and advertising boils down to one basic concept, “CPA,” which stands for “cost per acquisition” of client. After selling some of my AV magazines in February 2008 to a publicly-traded company down by LAX, I later got seriously scolded for spending $10,000 on a private jet golf trip to Pebble Beach for myself, my vice president, and a key client who was representing four or five other key clients, who totaled $180,000 per year in sales. We had a blast that December weekend in 2007, and the client was beyond loyal after the trip. During our record year in 2007, he spent more of his clients’ money every month than the total cost of the trip, and that could have continued until the new owners cut off all spending on clients from Day One. I did what I could to keep the relationship going, but I was a founder, and Harvard (literally) MBAs love to run the likes of us out of town – and quickly.

Ask Sandy Gross from GoldenEar, or uber-AV retailer Mark Ormiston from Definitive Audio, how that works after the sale of one’s AV company. Most companies don’t follow the Berkshire Hathaway “we like the company – that’s why we bought it” model. They see a bright shiny toy that is theirs now and they want to play with it, their way, and damned be the consequences. By the six-month mark, my super happy $15,000-per-month client knew that I was gone and that he and his clients weren’t being taken care of, so his spend went to zero.

For specialty AV retailers, I have been thinking about the same balancing act that I am working on now at work. Does one work on smaller, easier-to-install, easier-to-sell deals, or do you go big-game hunting when it comes to clients or projects? Is it a good idea for a dealer to spend $100,000 (out of their pockets) on building out a reference-level theater or audio demo room, while paying rent on top of that? Or do you keep the scope more modest in terms of what you show (assuming you have an active demo at all, because some of the best custom installers that I know don’t).

How the Retail Space has Changed

There are a number of factors that come into play in 2021 AV retail. One of the first includes geography. You can spend an awful lot of money on rent in a moderate to big city as a large-format specialty AV retailer. Is said retail location on a road where you get 10,000, 20,000 or more impressions per day of people seeing what you do? Is there foot traffic, or are you isolated, with even more space but in a more off-the-beat location, so that you can “show” more gear? Today, is it a necessity to show a ton of gear? Manufacturer demands are not what they were like 20 years ago, but it is nice to be able to have an active demonstration to help people build aspirational goals for where they want to go in the hobby, be it audiophile or home theater. Years ago, Sound Ex, in the suburbs of Philadelphia, was beyond successful selling nearly every high-end audio brand out of a run-down house right off the Pennsylvania Turnpike. You could buy a Mark Levinson preamp, an Audio Research amp, and some Transparent Cable, have it all delivered to midtown Manhattan, and get the same NYC discount, but not pay six percent sales tax. On the right sale, the tax factor made all the difference in the world. Towards the end of their audiophile reign, Sound Ex constructed a “build it and they will come” 28-room audiophile emporium, and proceeded to close a few years later. They refused to sell flat TVs. They were stuck in the past but, worse yet, they blew up their overhead and couldn’t recover. Savvy business owners should manage overhead versus “rent as advertising,” along with the opportunity to actually demonstrate product, installation, programming, and ongoing service. Each market would likely have a different “right answer,” if you will.

Headphones are a key product that I think the audiophile retailers truly undervalue. There are dozens of brands, from mainstream juggernauts to mid-size players to little boutique companies, that sell cool headphones. Margins aren’t always great, but the sale is a low-pressure one. If somebody who loves audio comes in to hear your $100,000 Wilsons, they aren’t likely to order a pair every time you play them. Is it reasonable to ask somebody on the way out after a demo if they wanted to hear the best wireless headphones to pair with their iPhone 12 pro? They likely will give it a try and, with a quick trip to “settings,” you are rocking some tunes in mere seconds. Could you get a $300 to $500 sale from it? You sure can, and that sale is the audiophile version of taking a walk like Barry Bonds. You made a small amount of profit, but you’ve actually done business with the client, and that speaks to the CPA model. This is a smart move. You have their contact information. They’ve been comfortable enough with you that they will let you charge their credit card. It is a total win-win and could lead to that massive sale someday later. Who knows?

There are all sorts of other cool items that you could have in a modern specialty AV showroom. Streamers. Portable players. Local (yet relevant) art. Vintage vinyl. Musical instruments. Coffee table books about audio, movies, and other related topics. This doesn’t use up that much capital, but it again helps acquire the clients at a small level, which is a key step in the long term process of closing the big boys.

In the end, the key concept is generating enough demand for your products and/or services. Too many AV dealers think that because they are an “XYZ Audio dealer” that people should beat their door down to buy the products. That is a total fallacy. If you are in the game, you need to be paying to get people to walk through your front door, be it rent, Pay-Per-Click ad campaigns, TV, local ads, partnerships, and/or any other kind of creativity that one can think of. It doesn’t matter if you don’t close every opportunity that comes your way, as long as you make a good impression on them. If you can sell them a little “something-something,” then even better. Of course, we all want to close the million-dollar deal, but there is more than one way to earn the right to those sales and, going forward, the best specialty AV retailers would be well-served taking walks and getting hit by a pitch while waiting for that pitch that you can hammer over the wall and into the ocean. Additionally, making the in-store experience more engaging and more attainable will make your in-town clients more loyal to support your local, small business – and that isn’t a bad thing at all. The rosy future of the specialty AV business beyond 2021 is going to be predicated on a win-win working relationship between the specialty retailer and the enthusiast client.