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Why The Hi Fi Industry Is At A Wi Fi Cross Roads

By David Richards | Tuesday | 21/05/2013

The consolidation of the Audio Products Group consumer division into Melbourne based Qualifi could be the start of a radical shake up of the Hi Fi industry in Australia with the very top end of the Hi Fi market becoming more niche than what it currently is and the middle to bottom end of the Hi Fi market being all about wireless, content systems, connectivity and smart marketing.

It could also result in further mergers or acquisitions as the industry is forced to rethink their go to market strategies.

In the case of APG vs. Qualifi it did not make sense that two separate distributors sold products for Japanese company DMG who manufactures several brands including Denon, Marantz and Boston. Ironically Boston was missing from the list of brands that are being switched to Qualifi, who are now set to expand their consumer electronics offering.

DMG products that were being manufactured in the same Asian factory were being shipped to different distributors in different cities, both companies had duplication administration and sales costs and both distributors were selling to the same retailers. 

The reality is that Hi Fi is changing, receivers and docks are yesterday's technology, Apple killed off the dock market when they moved from a 30 pin plug to a lightening connector at the same time that manufacturers were starting to roll out new wireless technology that allowed consumers to communicate with speakers over a wireless network. 

Content that can be accessed via a smartphone, tablet PC or TV can now be sent to a multitude of devise outputs, some consumers simply purchased a pair of headphones to listen to content stored on their smartphone or tablet.

Receivers that for many consumers were complicated and hard to operate are being replaced by easy to use technology such as the Sonos wireless systems which can be configured in minutes and do not need cables.

Several years ago when content went digital the Hi Fi companies were slow to accept that digital would be the future, now they are scrambling to marry top end sound technology with the latest in compression and wireless technology. The new Dynaudio speakers are a classic example of what can happen when a Hi Fi company gets a marriage right. 

Having said that, Dynaudio still needs to go down the last mile and deliver an application that allows content to be streamed to their speakers without the need to plug in a device.

The true Hi Fi enthusiast is still out their buying their gear as recent sales figures testify, but the real problem lies in who will sell the top end gear, and can they make a living selling periodic systems to aging consumers who want yesterday's sound technology?

The new Hi Fi customer wants to walk into a JB Hi Fi as opposed to shopping at the likes of Eastwood Hi Fi, they are not frightened to spend $700 on a pair of headphones and they appreciate quality. 

Style and looks is set to play a key role in the future of speakers which for a while consumers were trying to hide because of problems associated with cables. 

During the next 18 months we will see an explosion in new wireless Hi Fi gear as just about every mass brand manufacturer moves to deliver a new generation of speakers. Brands like Jamo are already delivering a new style of speaker but what they have to get right is the software that delivers zone management and easy access to streamed content.

Simply having a wireless speaker is not going to be enough, Sonos has proved that by initially delivering a simple speaker that could be accessed from a very expensive controller, then along came the smartphone app and easy access to streaming services. 

Then came a powerful subwoofer, now we have a soundbar which when hooked up to a wireless network and a TV can be easily turned into a 5.1 channel sound system by wirelessly linking them with a pair of Sonos speakers. 

Consumers love this technology and are prepared to pay a premium price to get it.

And here in lies the problem for the Hi Fi industry. 

Traditionally Hi Fi brands are sold by distributors, who are not necessarily the greatest of marketers, they also layer in an additional cost resulting in sound gear being expensive in Australia.

Today it's all about parity pricing and wafer thin margins, it's also about consumers being able to research online what the price of the same gear is overseas. To be successful mass Hi Fi brands have to invest more in marketing which means generating volume sales to fund the demands of retailers who today want merchandisers in store and big brand advertising in the marketplace. 

It's also about having the right gear at the right time as Hi Fi becomes as much about fashion and having the cool factor as it does about delivering great sound.

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