B&W Latest Audiophile Brand to Expand Distribution, Adding Magnolia

Bowers & Wilkins became the latest high-end loudspeaker manufacturer to rock the specialty retailing world, when it announced Monday that it will begin selling “a significant portion” of its product portfolio through the three levels of Magnolia retail outlets, including Magnolia Home Theater stores in Best Buy outlets.

"It’s recognition of the business environment we're in,” Doug Henderson, vice president of sales and marketing for B&W, told Consumer Electronics Daily. “There’s a clear need for adaptation, and different manufacturers are trying to adapt in different ways. There’s still a core group of dealers that we hope will remain healthy and remain B&W dealers, but we've seen a long list of dealer failures.” He cited as example the demise of Myer-Emco, B&W’s biggest dealer on the East Coast, and Ken Crane’s, the largest B&W dealer on the West Coast.

Henderson also noted that Spirit Sound, historically the company’s biggest retailer in New England, closed its retail operation, prompting B&W to part ways based on its policy against online sales. “We're not going down the e-tail path,” Henderson said. B&W competitor Thiel Audio announced this month (CED July 12 p1) that it’s broadening its online distribution to include Amazon.com. The only exception for B&W is its lifestyle-oriented Zeppelin, Zeppelin Mini and Panorama sound-bar products, which will continue to be sold online as well as in Magnolia Home Theater stores, Henderson said. “We believe quite strongly that brick-and-mortar is necessary to the retail sale and the long-term viability of the specialty audio business,” he said.

In addition to lifestyle products, the 374 Magnolia Home Theater stores will carry B&W’s 600 series and the CM speakers speakers, capping the broader specialty distribution to a $3,000 per pair price point. The six original freestanding Magnolia stores -- two in Seattle, two in the San Francisco Bay area and two in Los Angeles -- will carry the full line, including the flagship 800 series of speakers that top out at $24,000 a pair, Henderson said. Magnolia’s Design Center store in Chicago, along with upcoming Design Center stores in California, will also carry the full line.

Dealer reaction has been “80 percent understanding” amid universal disappointment, Henderson said. “They see us as an iconic specialty brand and there’s some concern that that will change,” he said. “But they understand that the world is not the way it was two years ago, let alone five or 10, and to be a viable brand presence we need to have a certain level of distribution.” According to Dave Workman, executive director of PRO Group, “it’s a sad statement about the state of the industry. B&W held out longer than others, but the specialist channel of distribution has done nothing but lose brand differentiation during the past five years, while others have gained it."

Henderson said a dealer told him, “Either we abandoned specialty or we haven’t.” But Henderson said B&W views the move to Magnolia as refelcting its specialty audio philosophy. Defining Magnolia as a specialty retailer allows B&W to claim a consistent message. “They're just bigger,” he said of Magnolia. “Taking advantage of the 550 million door swings that Best Buy sees every year is a huge number, and that’s a good thing.” Addressing dealer concerns about pricing pressure or a downward shift toward more mainstream product, Henderson said, “From the standpoint of somehow changing the nature of our products or cheapening them in any way, that’s absolutely not the ambition.” He said it’s not Magnolia’s goal, either, since the specialty store needs premium products to separate its lines from the Best Buy lines. “They have their own market position and increasingly it fits with ours to deliver a premium product.” He said Magnolia Home Theater stores have trained sales and support staff along with installation specialists. A Magnolia spokesman wouldn’t comment on whether the B&W line would replace another speaker brand.

The move to higher profile distribution is necessary to the high-end audio business, Henderson said. “There’s a huge problem with irrelevancy these days,” Henderson said. “If the consumer starts to see us as a category that’s not interesting then the whole business dies. If we're not getting out in front of the consumer in an obvious way, we're in real danger of that.” If the move to Magnolia makes premium audio/video more relevant to more people, ultimately that will benefit everyone, he said. At the same time, B&W will continue to manage distribution very carefully. “We're undergoing a full review of our distribution to make sure that everyone who is a B&W dealer is fully supportive and that the philosophy of doing as much business with as few outlets remain intact,” he said, saying other moves the company could have made -- toward regional chains or online sales -- would have been worse for its independent base. “This keeps the playing field level, and I think those that have stepped back and looked at the retail market recognize that the threat is relatively minimal."

Ironically, Henderson sees product as less important to the installing segment of the specialty retail channel than the relationship between custom integrator and customer. He compared the custom market to the kitchen remodeling industry, where luxury brand Sub-Zero is widely available “yet remains an iconic, desirable product.” Henderson added, “If you're in the business of doing luxury kitchen remodels, the fact that there’s a Sub-Zero is incidental to the whole project. It’s the totality of the job and the way the job is handled that’s most important.” He hopes B&W becomes more significant as a brand through increased exposure at Magnolia, “but it will not be what defines our independent dealer’s relationship with their customers as much as in the traditional retail days when it came down to the boxes you had to sell,” he said. “If you're simply hanging a sign saying ‘local stereo shop,’ and don’t take your services much beyond that, the market has already said you're in trouble -- or you're gone."

A custom focus hardly guarantees success in the current climate, either, Henderson noted. Describing the climate as “challenging times from a number of standpoints,” he cited the economy, video pricing pressure and the iPad’s profound mainstreaming effect on the touchpanel market. “The best dealers will survive with tight financial controls, they'll find ways to elevate people’s experience from a product and customer support standpoint and by defining themselves as distinct and better,” he said. “It will be awfully hard to be somewhere in the middle.” --Rebecca Day, Mark Seavy

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Marantz has signed a new agreement with Best Buy’s Magnolia expanding distribution of Marantz products to the more than 300 Best Buy stores with Magnolia departments, Marantz parent D&M Holdings confirmed at our deadline. Previously, Marantz goods were available only through the seven Magnolia standalone stores that Best Buy operates. “For many years the Marantz brand has been sold through custom integrators and independent AV specialists,” D&M executive Bob Weissberg told us in an e-mail Monday. Adding Marantz to the Best Buy stores with Magnolia departments “will bring the additional retail exposure for the Marantz brand and provide a great solution for Magnolia customers in search of premium level audio components,” he said. A Best Buy spokesman declined comment. It remains unclear how deep an offering of Marantz products the Magnolia departments will carry. But retailers we canvassed said they assumed it would be broad selection. To make room for Marantz, Magnolia will drop Onkyo, retailers said, though Onkyo and Wal-Mart executives couldn’t be reached for comment to confirm that. Prompting Magnolia’s decision to drop Onkyo was Onkyo’s decision to sell through Wal-Mart, retailers said. It’s not clear when Onkyo products will begin appearing in Wal-Mart stores. Bestbuy.com still had a selection of Onkyo gear for sale when we checked the site Monday.