MV Pro Audio- An Industry Profile

MV Pro Audio- An Industry Profile

Changing with the times ...

by Chris Loeffler

Where Have All the Cool New Products Gone?

No doubt you’ve witnessed first-hand the dramatic changes in musical equipment retailing over the past 10 years. A lot of those changes have been great for musicians, notably the explosion in convenient online purchasing coupled with free shipping and liberal return policies.

Behind the alluring veneer of one-click purchasing and no-cost freight lies a not-so-subtle truth: Musicians have far less exposure than ever before to new and cool products. Blame capitalism: Unless a product generates a healthy financial return for retailers, it simply won’t make it into music stores. When dealers’ profit margins are reduced by free shipping, no-questions-asked returns, and a seemingly never-ending string of sales, special deals, and price-matches, the pool of products able to support that business model shrinks considerably. Hence the overabundance of familiar, global brands on store shelves, coupled with a definite lack of intriguing, innovative, boutique items.

Certainly the Internet has provided ready access to a host of unique and specialized products and brands—witness the plethora of software developers who sell directly to end users from their Web sites. But it’s a lot tougher to pull that off with hardware, and if the products aren’t in stores, how do you find out about them? How do you test them? How do you compare their features?

Traditionally, it’s been the responsibility of a distributor to generate product awareness—along with handling import logistics, warehousing, sales management, repairs, accounting, and much more. But the economics of retail have changed so dramatically that it’s no longer financially viable for a distributor to handle all these tasks—at least not in a traditional way.

And that’s where the story of MV Pro Audio begins.

Old School Distribution

MV Pro Audio began life 10 years ago as the distributor of Waldorf synthesizers. Waldorf products were ideal candidates for traditional distribution: The company was based in Germany, with no local office to manage US sales. The products were sophisticated and relatively complex, so local training and support was essential. Perhaps most importantly, getting the products into music retailers required having a nationwide team of sale reps calling on stores and working their relationships with the retailers—something that would have been impossible for the Waldorf staff to manage from Germany.

By the time Waldorf began shipping in earnest, the crash of 2008 hit, and retailers circled their wagons, greatly reducing inventory and limiting selection to proven sellers—Yamaha keyboards, Gibson guitars, JBL speakers, to name a few. The rest of the product world was generally relegated to minimal, if any, presence in the store, with retailers ordering lesser-known products only as they were sold to customers, often with the manufacturer or distributor drop-shipping the item directly to the end-user.

While this tactic allowed many manufacturers and retailers to stay in the game, it resulted in a sales environment that is especially challenging for new companies to break into. It’s a classic chicken and egg scenario: retailers won’t carry a new product until there’s demand for it, and manufacturers and distributors can’t create demand if their products aren’t on store shelves for customers to explore.

Manufacturers themselves can be part of the problem. In their desire to establish consistent worldwide pricing, they often presume that musical equipment retailers around the world all make the same profit margins (they don’t), or they overlook the ever-climbing costs of international freight (rising every year like clockwork) and import duties (which can add 5%-10% to the cost of the product). In other words, a manufacturer can get everything priced right for their home turf in Europe or Asia and completely miss the ball for the U.S.

So how does an up and coming designer/manufacturer avoid the pitfalls and get their hot new widget into the U.S. market?

New School Distribution

MV Pro Audio’s solution is to provide a comprehensive menu of sales, marketing, logistic, and business services from which manufacturers can choose to customize their U.S. efforts. Custom packages tailored to the budget and needs of the manufacturer are the order of the day, so a company can look to MV Pro Audio for something as simple as a press release or as multi-faceted as a complete “company-in-a-box” solution, in which MV Pro Audio functions as the manufacturer’s U.S. division.

One big benefit of the “all-in” cooperative model is that key decisions are made by the mutual agreement of both companies. The artificial wall between manufacturer and distributor is eliminated, which immediately puts everyone on the same page with the same goals.

This model was chosen by one of MV Pro Audio’s newest clients, Cordial GmbH, a popular brand of premium audio cables in Europe. Almost completely unknown in the US, Cordial cables have been manufactured in Germany, hand-soldered, and outfitted exclusively with Neutrik connector more for the past 20 years.

Cordially Yours

Introducing a company with a 20-year legacy and 1,000+ products to the U.S. market might sound like a simple task. After all, if the company has grown and thrived for 20 years, they must have figured out a lot of the ingredients necessary for success. And, in fact, Cordial has done just that, having fully defined and refined their product line, their corporate ethos, their manufacturing, and more. But even with all that experience and success, the U.S. presents unique challenges. For starters, competition in the U.S. is stiff, with multiple name brands having well-established dealer and customer loyalties. Breaking through that requires a carefully planned strategy that motivates retailers and excites customers. Concurrently, everyone needs to understand that nothing will happen overnight, so costs must be carefully managed as the products get established.

To this latter point, when the manufacturer and distributor work together as one company, pricing formulas are based on the manufacturer’s actual cost of goods, rather than on a number that’s inflated by the distributor’s profit. That automatically delivers savings at each successive step in the sales chain, which makes it easier to hit the four “touchpoints” of a successful pricing model: the manufacturer, distributor, and dealer all making enough profit to stay in business and support the products, and customers getting quality products at fair prices.

The benefits continue. Advertising efforts are more easily coordinated when the marketing is jointly handled. Stock and inventory levels are more easily managed when the distributor doesn’t have their cash tied up in a warehouse full of goods that won’t get sold until the market is built. Manufacturers don’t ruin their chances of a successful U.S. entry by having established unworkable prices or profit margins. Language and cultural issues can be discussed and adjusted, as necessary, before the brochures and the packaging are printed. And perhaps most importantly, with everyone on the same page from the start, expectations on all sides can be managed—critical for the long-term success of the relationship and the products.

Hot off the heels of a successful NAMM showing, MV Pro Audio continues to actively seek out manufacturers who are ready to abandon the old ways and embrace the new, with a goal of seeing store shelves stocked not just with products from the big guys, but from hip new manufacturers from all corners of the world.

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Chris Loeffler is a multi-instrumentalist and the Content Strategist of Harmony Central. In addition to his ten years experience as an online guitar merchandiser, marketing strategist, and community director he has worked as an international exporter, website consultant and brand manager. When he’s not working he can be found playing music, geeking out on guitar pedals and amps, and brewing tasty beer.