Denon to Begin Selling Direct to Consumers Via Internet In October

MAHWAH, N.J. -- Denon will begin selling direct to consumers via its website in early October, Jim Caudill, CEO of D&M Holdings, told Consumer Electronics Daily at D&M’s headquarters Tuesday where the company held press briefings about its recent organizational changes. The move is in response to changes in the way consumers shop for electronics, Caudill said, and mirrors a direct-to-consumer website that sister brand Boston Acoustics has in place for its speaker line.

The sites will be separate, and the company will determine whether to adopt the same kind of model for the Marantz brand later on, based on results from the Denon site, Caudill said. Kevin Zarow, vice president of sales for the Americas, covering the Boston, Denon and Marantz brands, said the Marantz line is different from the Denon brand because of its heavy focus on the custom installation market. Executives didn’t comment on our questions about whether the entire Denon portfolio would be available through its direct site, or what steps the company plans to take for additional customer service and support.

Denon has discussed the plan with several key retailers “who understand that the way consumers are changing their shopping behaviors” makes finding ways to communicate with them and increasing the marketing message important, Caudill said. The direct site will be for the “certain percentage of the population” that wants to have a direct relationship with companies, and in that sense Denon is following moves by firms including Bose, Sony and Panasonic that have direct purchase options with consumers. Caudill maintained that the direct-to-consumer segment is “not an important part of our business model,” he said. “We're not in the direct retailing business. It’s not what we do as a company,” he said. Instead, the site will be more about spreading the brand message, he said. Denon will offer sales tools it uses on its site to dealers and provide store locators, he added. The company’s preference “is to drive customers to our distribution,” he said.

Caudill outlined Denon’s three-pronged distribution strategy, comprising big box retailers, the specialty AV channel including custom installers, and Internet retailing. He emphasized the importance of specialty retailers in helping to position the brand “the way we would like it be positioned” and providing a knowledgeable sales force that can “articulate what Denon is about.” The company wants to continue that positioning going forward, he said. There are “absolutely no plans to change our distribution base at all,” he said.

Growth is an important part of the new strategy at D&M, with several of the areas in the portfolio being “maturing categories,” Caudill said. “We have to think more aggressively going forward,” he said. The one obvious category the company is working “extraordinarily hard on” is headphones, he said, but he wouldn’t elaborate on other categories for competitive reasons. Eventually, he said, the headphone business is likely to span all brands, but “we're not at a stage to outline that for our distribution partners,” he said. “We clearly view headphones as a great growth category applicable to most if not all” of D&M’s consumer brands, he said. He said there’s currently no plan to exit any categories. “We're constantly thinking about what’s the right allocation depending on where the category is in its maturity curve,” he said.

D&M sales are divided fairly equally among North America, Europe and Asia/Pacific, with China offering significant growth opportunity, Caudill said. The company recently opened an office in China, he said. Under the new structure, D&M hopes to leverage global engineering talent to capitalize on new technologies, he said, and will have dedicated resources in each region led by a vice president of product marketing. The company is in the process of hiring for the role in North America, Caudill said.

D&M has reorganized over the past year, shifting from a holding company with eight companies operating independently to one with three “strategic business units” that share common technologies, branding channels and distribution, Caudill said. Each unit is headed by a president who’s accountable for driving collaboration and technology-sharing across the three businesses: consumer, professional and automotive OEM. He observed that the disparate parts of D&M prior to the restructuring worked as “silos, afraid to acknowledge challenges and unable to leverage processes” such as component purchases, technology knowledge and third-party partnerships. He cited Apple’s AirPlay technology as an example, where each company had to work separately with Apple rather than in a centralized way. In the consumer group, President Tim Bailey is responsible for ensuring that McIntosh, Denon, Marantz and Boston Acoustics share “a cohesive technology plan that’s well-coordinated within the business unit,” Caudill said. “That’s a big shift from how it used to be when the brands operated as individual business units,” he said. Goals are to bring better products to market faster with more focus on user needs, he said.

D&M also hopes to leverage manufacturing costs and supply-chain management through centralized global operations, Caudill said. “If we buy a lot of plastics or different types of components, we will now have a resource in place that can help leverage that,” he said. The end result for customers should be D&M’s ability to do “a better job of filling customer orders on time with the right quantities in a more consistent way than the company has historically,” he said.

Caudill spent 20 years at Black & Decker prior to joining D&M in August 2010, and he brought in another Black & Decker veteran, Bailey, to be president of Denon’s consumer division, based in Kanagawa, Japan, a new post overseeing the McIntosh, Denon, Marantz and Boston Acoustics brands. Caudill underscored Bailey’s experience in brand management and marketing, “something we're trying to enhance at D&M."

The new structure is an outgrowth of Caudill’s experience at Black & Decker, and he spoke of a “forward-looking path toward a higher level of collaboration.” One of the strategies he brings from Black & Decker is to put in place a dedicated person for each region who “wakes up every day thinking about feature-benefit mapping versus the competition’s, understanding the competition’s cost base and technology, understanding regional trends, how consumer preferences are changing and spending time at retail to interact with retail partners and end users, he said.

Caudill stressed the need for a new corporate culture and mindset revolving around collaboration and transformation. He said embracing change is an important part of the new D&M. “The audio world is changing rapidly,” he said. “Even in the last 12 months there are cloud services and digital media that are approaching the industry far faster than most anticipated,” he said. “We have to have an appetite for change,” he said. “We constantly have to be looking forward to see how the landscape is changing to best position the company for long-term success versus constantly looking back and reflecting on what made us successful to this point,” he said.

Looking at D&M’s current portfolio of consumer brands, Caudill said the core businesses are audio video receivers and hi-fi products. Headphones are indicative of the way “a new generation is consuming audio, and they're consuming it in different ways and more frequently,” he said. “We've earned the right as some of the industry’s best audio brands to be a leader in that change process,” he said. “If we spend all of our time thinking about what made us great, I'm not sure we'd be able to identify the market trends that would help us participate as the market changes."

Four long-term top executives, including Bob Weissburg, president of sales and marketing for the Americas, have left D&M over the past 6 months. Caudill acknowledged that any time a new leader steps in to “solidify a new direction and instill disciplines that didn’t exist there, you're going to get some level of change.” Some of the changes were anticipated and some weren’t, he said. He added, “I'm comfortable with where we're taking the company.”