How healthy is the hi-fi market? One widely reported silver lining of the pandemic was increased sales of anything to do with home entertainment, including hi-fi. Recently, though, inflation has broken out and the stock market tanked. Higher prices all around—from shipping and logistics to necessary parts and raw materials—added pressure from all sides.
How are these factors impacting hi-fi sales? Is the hi-fi buying binge over? To find out, I spoke with several industry folks, mainly dealers and manufacturers.
Among many diverse opinions, there was one thing everyone agreed on: Change is afoot. Elliot Fishkin, owner of Innovative Audio in New York City, put it this way: “It would be naïve to say nothing’s happening.”
There was some consensus on other points, too. All agreed that there has been no sudden, dramatic falloff in sales. “The stock market and inflation are problems to be sure, but they’re not causing a hard stop by any means,” Dave Nauber, CEO of T+A North America, wrote in emailed responses to my questions.
Why aren’t things worse than they are? Inflation is high, the stock market low, and people are returning to work, right? Yes to the first two, but the third? Not entirely. The pandemic may have subsided (fingers crossed), but lifestyles haven’t reverted—not completely. “People again are staying home,” said Greg Hanson of Hanson Audio in Cincinnati, Ohio. “They might be reducing expenses in some areas, but they want their music, TV, to make them feel good instead of going out.”
By many accounts, sales at the higher end are still rising or at least holding steady. “The high end has exceeded expectations; it’s been selling for the most part,” said Mick Survance, owner of suburban Chicago’s Quintessence Audio. “Uncertainty in the market does add a headwind, but it’s felt less at the extreme high end,” Nauber added.
That makes sense: Customers with more disposable income tend to be more recession resistant. “They tend to spend more when the market is up,” Arturo Manzano, owner of Los Angeles, California–based distribution company Axiss Audio, said. “But if they need and want to upgrade, they will.”
Total sales volume has declined at New Jersey–based turntable and analog equipment manufacturer VPI, according to its CEO, Mat Weisfeld, especially at the lower end of their lineup, yet sales of reference-level products have increased. That’s not the whole story of course. Weisfeld mentioned a customer who was planning to buy an $80,000 turntable but decided to buy a $36,000 model instead. Fishkin, too, has noticed some change in purchasing habits at the higher end: “I think there’s some disturbance,” he said. Some customers, he said, have postponed purchases. One customer bought a $330,000 pair of speakers but is holding off on buying other system components because he needed to put money into his business.
What about sales at lower price points? More than one dealer mentioned that a shrinking middle class is affecting hi-fi. Yet several sources who reported slowdowns have seen increased sales of lower-priced gear. Tweek Geek founder Michael Garner, who recently opened a brick-and-mortar location outside Austin, Texas (footnote 1), told me that his sales have been moving more toward tweaks and less expensive offerings. “When the economy is good, I sell more components than tweaks. And vice versa. [Lately] I’ve been selling more gear at lower price points.” T+A’s Nauber noted a general slowdown over the last six months compared to the same period a year ago but added that business remains steady at their higher end and at entry level—which for this German manufacturer starts around $5000. T+A sales are down in the middle.
Here’s one way of understanding current trends: People with high incomes are still buying, and people who would have bought midpriced gear are saving money by buying cheaper stuff instead. The middle of the market has hollowed out.
Importantly, people in the industry view the changes as temporary. “With this tremendous hit, people are giving it a little time,” Larry Marcus, president of Ann Arbor’s Paragon Sight & Sound, said, referring to the recent stock market drops. “More people are taking a pause and seeing where things are at a little bit more than they did in the past.”
Nauber added: “When things stabilize, even for a short period, business picks up, suggesting that it’s more the uncertainty and less whether buyers can afford our products.”
US manufacturers have been facing challenges, contending with parts shortages and high shipping costs. One problem: Products cost a certain amount when they were sold, but by the time the orders are filled, the products cost more to produce, so margins are thinner or even negative. A handful of hi-fi companies have reported layoffs, including Premium Audio Company, parent of Energy, Heco, Klipsch, and the recently acquired Onkyo and Pioneer. In September, Premium announced that it was “right-sizing,” as Jill Escol, the company’s VP of communications, put it in an interview with Strata-gee.com. Sources confirmed that other companies are doing the same.
“Things are tough at the moment,” VPI’s Weisfeld said, citing higher and less predictable parts pricing and delays. Still, he has forged ahead, buying parts and making ‘tables. “I swelled up on supplies. We’re trying to buy as much as we can. … We need to be ready for the orders when they do come in,” he told me.
Quintessence Audio’s Survance has been in business for more than four decades; he has weathered downturns before, he told me: “I suppose something prolonged will have to have some bearing on the industry. These cycles are 18 to 24 months, usually.” But he acknowledged things could be different this time: “We’re in uncharted territory.”
It’s too soon to gauge the full impact of the economic downturn of course. “We don’t know yet,” Fishkin said. “It’s forces beyond us.” Still, some people, including Garner, seem optimistic. “I think audio is really on the upswing, and times are going to be good the next few years.”
Footnote 1: See the January 2023 issue’s Industry Update (p.15) for more on the new Tweek Geek store.
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