A Path to Reboot: Part II

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Keith Lehmann

By Keith Lehmann

The aftermarket mobile electronics industry still has opportunities to capture new business and become more relevant to the connected consumer.

It is also clear that industry-wide awareness initiatives don’t work.  Also, our products don’t always meet customer expectations and we are not attracting enough new customers to appreciate what we sell.

Funny thing…we have an example of another consumer electronics industry that had been facing the same issues but made significant structural changes in product, merchandising and messaging and is now doing quite well in a relative sense.  Maybe we can learn something…

The home theater business was booming in the late 80’s and early 90’s – just like the mobile electronics business did at the time.  Price erosion, market saturation, better sound coming from video monitors, lack of product innovation and a general “so what” attitude from many consumers caused a severe revenue decline to the point where multiple retailers closed, many brands exited the category and the business was consigned to fail.

Then technology changed.  Wires disappeared, signals were transmitted through walls, setup became easy, sound performance improved, different music became available in different rooms, integration with smartphones became nearly seamless, adding functionality such as home security and automation was a snap…the home theater industry became the “home technology and lifestyle integration” industry.

This did not happen overnight.  But it did happen and it is growing.  Even if you strip out the non-home theater revenue, today this once-failing industry grew over 15% in 2013 and is now more than triple the size of the mobile electronics business in the U.S.  And it is projected to grow again in 2014.

Imagine what will happen when new in-car technologies and new connected consumers intersect with a fresh outlook from manufacturers and retailers to capture a broadening worldwide base of connected consumers.   See more on this topic from Lehmann in coming days.

Keith Lehmann is a 30-year veteran of the consumer electronics industry. Lehmann was most recently Executive Vice President of Kenwood USA Corporation and in charge of the company’s consumer electronics sector for over ten years. Today, Lehmann is a consumer electronics industry consultant and advisor to companies, organizations and media outlets.

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  1. Quite agree with Bob Fields here. Many vendors are selective in distribution and follow programs strictly such as MAP, UMAP, UPP, etc. As well, and I hate to say this, but pricing studies consistently show that discounting often starts with smaller resellers who are trying to make up for other aspects such as selection, outlet convenience, multi or omnichannel retailing or just good service with price. The largest retailers don’t really want to discount, they just do not want to lose customers. It is wrong to conflate a policy of price matching to undercutting per se. Lumping all in big groups is just another form of excuse. Yes, things have changed a lot and will not go back. Millenials shop mobile and have easy access to product and price information. Nothing will shield you from that, so is your business model and practice in shape for today. If not, time to evaluate.

  2. I honestly don’t think the connected consumer gives a damn about audio/video anymore…if you look at teens/young adults today and watch their habits you’ll see that the only thing they are concerned about is having their smartphone in their hand so they can be engaged in social networks. Think they care about sound quality? Nope, they listen to music through a tiny mono speaker or headphones and think that is great sound and they’re fine with that because that’s the way they grew up listening to audio.
    Need to watch a video or use nav…smartphone does that. Why spend money on another device to do something that their phone already does and doesn’t do it nearly as well as the phone? Even if they were interested in upgrading an audio system in their cars, Gen-C doesn’t have money to spend on these things because the economy is in the toilet and they’re mostly lazy slobs who work minimum wage jobs at best…they’re entitled little s*#ts that think the world owes them everything for nothing.

    1. I have heard this argument repeatedly and my personal experience stems from over 2 years selling VW, Ford, Kia, Chrysler prods, Cadillac, and used cars. People still care about sound quality in their cars and trucks. Almost every buyer checks the sound system before buying. At least 75% ask if the vehicle comes with the “premium sound system”. They don’t understand sound quality, but they absolutely want it. It is the aftermarket’s failing in showing the consumer what is possible in the car. (not just thumping bass and crazy loud!)

    2. If that were actually true then why are sales of these at record levels? More people are watching and listening in more places, more of the time than ever. It is how they are reached and serviced that has changed, not their appetite for entertainment or information

    3. “Think they care about sound quality? Nope, they listen to music through a tiny mono speaker or headphones and think that is great sound and they’re fine with that because that’s the way they grew up listening to audio.”

      I agree with the premise that many (if not most) younger people do not know what their music is actually supposed to sound like (and in fact many older folks have forgotten), but that is exactly why a certain brand of celebrity headphones (while not perfect in their reproduction) is at the very least introducing these youngsters to better sounding audio. This is good for all of us in the audio industry and we (MTX) use every opportunity to demonstrate superior sound to the wearers of those headphones (and their friends).

      If you have ever seen the face of someone hearing music the way it is supposed to sound for the very first time, you instantly know you have just changed this persons life! Music is at the heart of everything we do in this business and we in the car audio industry are also blessed with the enjoyment of the automobile as well. Combine the two and you have an experience you can share with your friends and those you love.

      A driving passion is what has always set the car audio retailer apart from other channels of distribution and by refusing to conform to what the “experts” say we should, the independent has led the way in new technologies and new techniques. Today’s challenges require that same drive as any other day, but sprinkled with the idea that we (retailers and their manufacturer partners) must continue to innovate and evolve as opposed to simply doing the same thing.

      Find a partner that is committed to distribution cleanliness (price integrity and predictable profit) so you can concentrate on the customer experience.

  3. Keith,
    You said what is so true. Manufacturers just want to sell more products then the consumers can buy so the internet is fed by the manufacturers.
    We’ve never had the pleasure of doing business together but you are one of the most respected people in the 12 volt industry.
    Hope that one day we can do business together.

  4. Just a bit of amplification regarding the analogy to the custom home market. The retailer relationship with the customer is at the core of the turnaround in that channel. Retailers I know ,that are successful, also have stores that add credibility to the products offered. I implore my customers to take a look at the way they come to market all the time. The custom home business is also predicated on a deep personal relationship with the consumer, as in order to complete the transaction, the installer is allowed access to their home! In order for the 12 volt retailer to succeed in today’s environment, every consumer needs to feel that they are the most important to the retailer, that the shop is THE place for their car,and that they are in good hands when they drop off the keys.

    The internet will NEVER be able to do that.

    1. Amen Steve! The name of the game is he with the most customers wins. The in-store experience is very important in that regard. It requires a combination of sales skills, product knowledge, a little human psychology helps as well. Treating customers with the true intent of exceeding their expectations each and every time and then delivering on that concept will result in a customer for life who will tell all of his friends, and hopefully Yelp, about the positive experience. This culture has to be present at the store level with each and every employee so the message remains constant no matter who has contact with the customer. I am an old school IASCA competitor who back in the day was heavily involved in sound offs. It required a lot of time and effort, but always paid off for me personally as a sales rep in a retail store. We started down that path 4 years ago in Northern California and I have seen growth at my store since then. Just last week we had water damage to my sound display and couldn’t demo any equipment, however my store manager told a story answered questions and sold a 4500.00 system. At the end the customer said to him, I saw all the trophies in your store and you made me feel comfortable and felt I was in the right place so here are my keys! Yesterday he made another appointment with his other vehicle for another 4500.00 system.
      It wasn’t and still isn’t easy. It requires time and energy, however nothing worth having never is. Roll up your sleeves boys and get to work and you will see results. Make your shop different than the competition, do things they aren’t and execute those differences and you will see results.
      Good Luck!

  5. We need to keep this thread going as it is vitally important to our future. In that vain let’s put a positive spin on this. The glass is half full, sure many have drank from the glass and put nothing back into it, and those people will vanish and those with initiative will survive. We need more ideas in this conversation for this to develoop into anything meaningful. Has anyone looked at the Cinema Car Sound website? Share some ideas with everyone on something that is a positive. The Drive-In Theatre industry is on the verge of
    re-inventing itself and the 12V industry can capitalize on their rebirth. It’s right in front of us!!

  6. The insight is appreciated Keith. As a small manufacturing company we have only a small voice in this industry, but I still feel if enough of us can band together (manufacturers & retailers) we can definitely make a change for the better. Our objective since our conception in 1999 was to bring back support to the retailer that has eroded due to the internet etc. No matter how loud we preach this, we are still a small voice. As Paul said, ” We can only do this in numbers.” Paul, you can count my company in on the band wagon to get a plan of action together. It is time for those of us who care about this industry to work together and support one another.

  7. I worked as a national sales rep for one of the largest household name car/home/everything else company. and the truth about stopping online sales is that it will NEVER be stopped. They depend on those online retailers who kill the brick and mortar guys like SonicSounds, onlinecarstereo and the other amazon venders. ‘
    Those large orders they place are used to get a full container shipped from Asia. Without them buying what they do product would sit for even longer backorder periods and never get to the independents.
    My boss drove a Ferrari because of Sonicelectronics purchasing alone, you think there are any VP’s who are going to give up their ferrari to “solidify” the core? No.

  8. Its doomed, and we have all known this for years, even the cheerleaders are quiet these days.
    Having to get used to making less money every year I wouldn’t know what to do with myself getting a steady paycheck again.
    Sure there are still those purists and enthusiasts who come in and shop local. But these younger buyers just don’t care. Kids these days aren’t even getting their drivers license as soon as possible. Some don’t even want a car.
    I’m trying to leave this industry, I’ve finally given up all hope. 23 years and we’ve reworked this and revamped that, dealer work, custom work, fleet sales all the little side lines to diversify with. We joined MERA, and went to the conferences, sure the ideas were good in theory but harder to practice. We are the last independent custom shop for 50 miles there has been ten others close. All its done is make less money and had to work much harder everyday for less.
    I’m going to use my university degree to go work in a factory somewhere running the same bolts down every day. Sure there are those who will flame me for being negative, but seriously I have wasted my entire life for a car stereo. That’s how I feel, you can say its my fault, we didn’t market ourselves right. And maybe that’s partially true, but I know I’m not the only one out there who dedicated everything to this and cant even buy a house because our income is not reliable to the loan department.

    1. Mike, I closed my business of 37 years in 2012. It was the most painful thing I ever did. I know your frustration. Mine stems from the lack of leadership in the 12V industry. Because the opportunities today are even bigger than in the heyday 90’s. But nobody wants to step up and do the things that need to be done. There is life after 12V. That’s the good news. The bad news is I still miss it.

  9. I applaud your initiative in voicing this position. I too have felt the need to rally our industry members around a cause, even a small cause, that would hopefully move our industry back into relevance in the minds of a broader consumer base. If I may add to your perspective, it will take a grassroots effort to achieve that objective. If we look around the answers are out there. I would enjoy opening a dialogue with anyone and everyone that feels the urgency to start “now” down that path. I have begun that journey and invite everyone to contribute a small part to a unique marketing intiative.. Please visit http://www.cinemcarsound.com

    1. I have been shouting from the mountain for many years about an organized industry effort to save aftermarket 12V. And I agree it must be a grassroots effort because the manufacturers will not do this even if it will ultimately profit them as well. Two words; Store Accreditation. Guarantee the consumer a positive, professional experience before ever setting foot in your store and you are halfway there. Store Accreditation.

      1. I believe store accreditation is a good step. For it to work we must tell our story and to that end we need a means to do it. Cinema Car Sound is one path.

  10. We are all in for Change….
    Unless the Major manufactures stop the bleeding of online sales.
    Whats next is mobile Pc with Audio touch screen dash units and Usb as well as OBDII connection to current automobile computer systems.
    All this stuff is available now, you just have to know what your doing to make it work and be smart enough to find the programs to make it operate. SSD’s drives make it boot in no time and it can work like your home Theater system in many respects even like your home automation system.
    Its the next step in Automotive electronics the dealer is not offering. Also with Voice to text it can all be done hands free. read and compose e-mail make a call watch tv on the rear screens out of the drivers view play 5.1 surround multi zone sound add the support of a dash mounted Rear view and side view’s give you a dash cam forward and rear view and record outside the automobile. Even broadcast this online for view outside the car.
    As well as Anything a Computer can do thats connected to the internet.
    Now to get big Aftermarket companies to get onboard with this and make units that can be sold widespread and installed by the average installer.
    But keep this out of the big box stores and off online retailers hands. As well as Protect that market to specialty markets for now.
    With current items you can buy now all this can be done including internet in a big city with your normal cable tv company, you can even watch cable tv without the cable connected to your car.
    (you will pay a data plan for this)

    1. Control distribution? What a concept!!. Take a lesson from Harley Davidson years ago when everyone had to wait close to a year to get one.

      Take the hit now when the economy is slow, or take the big hit later when there are no independent dealers left. Maybe Apple will develop a way to install online! Jus’ sayin’ 🙂

      1. A precious few foreign and domestic manufacturers have caught on to the value of controlled distribution. The Asian companies have a different view and probably always will. The real challenge is in getting independent retailers to understand it, and support the suppliers that support them.

      2. Don’t group every manufacturer in the same category! At CES2013 MTX took control of its distribution and now only does business directly with the retailers and with retailers who follow the Universal Pricing Policy. Retailers have no fear of price shopping customers or showrooming with MTX products as they cannot be found online at a cheaper price. Additionally, beginning CES2013 all mobile products have a 5 Year warranty! MTX made the investment and has followed through with their commitment to retailers.

  11. Good post Keith. Innovation is key to our industry and the tools are available. Auto makers see an even bigger future for electronics and with so many vehicles in the field the opportunities are there. Note that SiriusXM is getting a lot of new subs from used cars. The consumers are interested if the solutions are there.

  12. Well put. Thank you for giving a voice to the concerns all of us in this channel have, and creating a call to action that we can sink our teeth into.

  13. Well said Keith. And 100% true. I would only add that the installation skills and the overall experience at store level must be a part of the equation. Good to hear from you sir!

    1. Kevin, with all due respect to our long term friendship. Our “industry” needs less dialogue and more action. Action happens best by movements of leadership. Unless members of industry band together for the unilateral good, the spiral continues. The mess we’re in can only be solved with the leadership from the top of the “food chain”. Now.let’s figure out… who are the leaders?!

  14. Thank you Keith, for saying what needed to be said for so long, speaking the voice of the real industry, the ones who continue to exude the passion for what we do to sustain our livelihoods. I’m on board for a plan of action. Who else is going to jump on this band wagon? We can only do this in numbers.

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