15 Minutes With:: Dean Miller, CEO Lenbrook America
Technology Integrator: You’ve been with Lenbrook America now for two years. What changes have transpired, and how are things going?
Dean Miller: We’ve had a number of very significant changes take place in many areas. Some of the more important ones include:
Product: Since this is a product-driven/technology-driven business, Lenbrook has been investing heavily in this area. Over the past two years we have introduced 26 new NAD products that include multi-source, multi-zone streaming products, high-resolution audio and a completely new range of AVR products. The new NAD VISO Series, which will be expanding quite soon, consists of a range of compact (computer audio) streaming music systems and a range of beautifully designed headphones to include in-ear, over-ear, on-ear, NC/amplified and Bluetooth models.
Our PSB Speaker brand has had 10 new product entries that include several C.I. products, small application and computer audio speakers, and our first entry into the high-end headphone space. I might add that our very first headphone product, the PSB M4U 2, just won the Sound+Vision “Product of the Year” award.
On top of all of this, we are on the verge of introducing an entirely new brand called Bluesound. This product platform consists of a range of products that address the emerging wireless multi-room audio category. From Lenbrook’s background and pedigree, steeped in “high-fidelity music,” Bluesound will offer high-performance, high-resolution (24-bit/192) streaming capability over a truly wireless platform that integrates a host of technologies from sister companies NAD and PSB.
Organization: We spent the better part of our first year putting our team in place and shoring up fundamental systems, procedures and controls, all in an effort to create a stronger foundation from which to build upon and grow. We’ve focused our efforts in market and dealer communications and invested in sales education tools and resources.
Distribution: We have been extremely fortunate to renew relationships with a number of the country’s iconic dealers. Not only getting them back on board, but genuinely partnering with them in specific sales and marketing strategies to our mutual benefit. We have also begun several other new dealer relationships either by targeting very specific dealers or through our relatively new involvement in the HTSA and ProSource industry groups.
TI: You introduced a new merchandising strategy last year, the Computer Audio Showroom. What’s the latest on this development?
DM: The Computer Audio Showroom (CAS) was developed as an education and demonstration room for specialty dealers to help their customers better understand this technology, how to get it, how to store it and transport it, and importantly, how to make it better. We partnered with five dealers to install these showrooms as more or less beta-sites, and I’m pleased to report that all five have gone quite well and in fact, they’re thriving.
For the past several months, we’ve been working on specific refinements to the showroom that include validating the efficacy of each zone (we have completely changed one of the six zones), the showroom messaging, communication and name, and most importantly, coming up with a design that is truly modular and less expensive.
This work is just about finished and we’ll be announcing this new format to our dealers very soon. I expect that we will install somewhere around 12 to 18 new showrooms this year.
TI: What do you see as the role of the AV brick-and-mortar specialist in today’s market? What suggestions might you have for them to compete?
DM: Our industry has undergone drastic changes over the years. The CE industry, like others, continues to evolve based largely upon fundamental technologies, products and distribution. As any industry evolves, it usually consolidates, fractures and fragments, and also creates new opportunities—almost like a law of nature.
The position of the specialty dealer network has been, and will continue to be, strong differentiation with a value-added proposition in the areas of education, product and service. The AV specialist needs to assess their resources and core competencies where they can best compete effectively, efficiently and economically.
By and large, specialty dealers started out selling more sophisticated, higher quality audio products. For many, this was born from their personal passion for music. For many, it was a hobby. This evolved into the audio/video specialist, which evolved into the home theater specialist. Along the way, custom installation was added to the mix.
Today, there are a multitude of niche markets or segments that include all the above and various facets of home technology integration such as lighting, security, auto-drapes/blinds, networking, environmental control and others. These markets can be residential, commercial, houses of worship, boardroom-corporate and/or mobile (cars, buses, planes, trains). The AV specialist has become the technology specialist.
I also want to point out that we have a large number of dealers doing excellent business in two-channel, high-end audio. Things do indeed go full circle.
TI: What are your thoughts about e-tailers and the Internet? Can the specialty dealer compete with them?
DM: Ah yes, the 800-pound gorilla. CE sales via the Internet have increased exponentially over the past five years.
According to the CEA, total sales of CE products in the United States in 2012 just surpassed $200 billion (wholesale value or dealer cost); a new record. Of this $200 billion total, sales via the Internet comprise approximately 25 percent of the total, or somewhere in the vicinity of $50 billion. Conversely, 75 percent ($150B) of total CE sales are not via the Internet. During the holiday selling season, the CEA states that total U.S. sales of CE products via the Internet approached 40 percent of the total. The Internet is indeed a massive logistics marketplace and distribution system whereby people transact business and purchase products.
At Lenbrook, we believe that the product strategy drives the distribution strategy. In this regard, we have certain products within our brand platforms that are appropriate for distribution via the Internet. However, we approach this with tremendous control whereby we authorize an extremely small number of our dealers to sell certain specific products on the Internet.
The pervasive concern of the specialty dealer (or any independent/non-Internet dealer in just about any business) is the sales tax issue. Currently, under federal law, which largely predates the Internet, online retailers are required to collect sales tax only if they have a physical presence in the customer’s state. As such, the sales tax differential can represent an economic pricing advantage ranging anywhere from six percent to 11.75 percent, depending upon the state. For bigger ticket items, this can be quite substantial.
Recognizing this disparity, not to mention the state governmental revenue opportunity, there is currently a bill before Congress called the Marketplace Fairness Act of 2013 that is intended to address this. The bill would force online retailers to collect sales tax. Most see this as “the great equalizer.”
In the most recent Senate vote on the budget for 2014, a bipartisan majority of 75 senators approved an amendment to support sales tax collections on Internet purchases. An identical House bill also has bipartisan support.
In fact, the New York Court of Appeals recently ruled that the state can collect sales tax from out-of-state retailers, rejecting claims by Amazon.com and Overstock.com that the tax law violates the U.S. Constitution’s Commerce Clause.
Let’s face it: It’s a huge amount of money and Uncle Sam needs it. Interestingly, Amazon.com is in favor and supports passage of the Marketplace Fairness Act.
Aside from all of this, there is always going to be some level of activity by nefarious, unauthorized Internet sites and counterfeiters looking to make a fast buck. At Lenbrook, we will continue to vigorously fight against this to protect our distribution supply chain and to protect our brands.
No one said this was going to be easy.
TI: Any final parting comments?
DM: In the end, the great market arbitrator is the customer. They have a very clear way of telling us what they’re going to buy, how they’re going to buy it, and where they will buy it. •